NEWS EXTRA
MAKING TAX DIGITAL: WHY YOUR TRADE CUSTOMERS ARE CONFUSED
As the rollout of Making Tax Digital for Income Tax Self Assessment (MTD ITSA) gathers pace, builders’ merchants are increasingly encountering a familiar issue at trade counters and account desks: confusion.
FROM SOLE TRADERS and subcontractors to small landlords, many trade customers are unsure what the upcoming changes mean, whether they apply, and what, if anything, they should be doing now. While merchants are not there to provide tax advice, they are often among the first to hear their customers voice concerns or assumptions about MTD.
That places builders’ merchants in an important, if informal, position: helping customers recognise uncertainty early and signposting them towards clear, reliable guidance.
Growing awareness gap From April 2026, MTD ITSA will require eligible individuals to submit quarterly digital updates to HM Revenue and Customs (HMRC) . In theory, this move towards digitalisation should bring efficiency and improved record-keeping. In practice, many trade customers remain unclear about whether the rules apply to them at all. A common assumption among sole traders and landlords is that if action is required, they will be contacted by their accountant, or HMRC. Others believe that simply using bank-linked accounting software means they are already compliant. Neither assumption is a safe one. Accountants are facing their own capacity pressures as MTD approaches, and approaches to client communication vary widely. For customers who only engage with their accountant once a year, a lack of communication can easily be interpreted as confirmation that no action is needed.
Builders’ merchants have long been a trusted, day-to-day point of contact for the trade. Conversations about pricing, accounts, and credit naturally lead into wider discussions about running a business — including administration and compliance.
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alone may not answer all tax questions, and N ormalising the idea that asking basic questions early is sensible. Simple signposting helps customers avoid unnecessary costs and prevents assumptions from becoming habits. Importantly, this approach protects both parties. Merchants remain within their remit, while customers are directed towards independent, authoritative guidance.
As a result, merchants are increasingly hearing phrases such as: “I think I have to do something quarterly now,”or “I’ll wait until my accountant tells me.”
These comments often reflect uncertainty rather than clarity. For merchants, recognising that distinction is key.
Tax reporting One of the most persistent misunderstandings around MTD ITSA is the belief that automation removes the need for judgement. Modern accounting platforms are highly effective at capturing bank transactions, but transaction capture alone does not equal correct tax reporting. Many trade customers receive income that does not reflect taxable profit without adjustment. Typical examples include; Subcontractors paid net of tax under CIS, Mixed-use personal and business bank accounts or Expenses paid outside the main business account. A bank feed cannot identify tax already deducted, private use, capital expenditure, or other adjustments required under tax rules. Under MTD ITSA, quarterly updates may still be submitted using unadjusted figures unless the individual understands what needs to be reviewed.
The risk here is not avoidance, but misunderstanding.
Why quarterly reporting increases risk
Under the existing annual Self Assessment system, errors may only occur once a year and are often corrected before submission. Quarterly reporting changes that dynamic. If a customer misunderstands how their income or expenses should be treated, that same mistake may be repeated multiple times before it is identified. Over time, small inaccuracies can compound, increasing exposure to incorrect submissions and further down the line potential penalties — even when the customer is acting in good faith.
This is why early understanding of whether MTD applies, and what it requires, is so important.
The realistic role for builders’ merchants Builders’ merchants are not tax specialists, and customers do not expect them to be. However, merchants do play a crucial role as trusted partners to the trade. The most effective support merchants can offer is not advice, but signposting.
This might include Encouraging customers to confirm whether MTD ITSA applies to them before committing to software or new processes, highlighting that bank-linked software
Why independent guidance matters One of the biggest risks around MTD ITSA is customers taking action without first confirming whether they are in scope — or what is actually required of them. Free, independent guidance allows customers to establish that baseline understanding before making decisions. It avoids the perception of sales-driven advice and helps customers feel confident that they are getting objective information.
Sometimes, the most valuable step is simply encouraging customers to ask: “Does Making Tax Digital apply to me?” Answering that question early can prevent unnecessary software purchases, reduce repeated reporting errors, and support a smoother transition for those who are affected.
Builders’ merchants are well placed to help bridge that gap and look after their customers - not by advising on tax, but by recognising confusion, encouraging clarity, and pointing customers towards reliable support.
Digital reporting is coming. For trade customers, understanding must come first. Free, independent email guidance is available for taxpayers asking one simple question: “Does Making Tax Digital apply to me?” BMJ •
info@mtduk.co.uk
www.buildersmerchantsjournal.net March 2026
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