Sole traders spend roughly 9.5m hours doing their tax returns according to a survey from 1Tap.
In the run-up to the self-assessment deadline, the Receipt Bank expenses app division commissioned YouGov to examine the burden that the tax system imposes on sole traders.
The survey found that 45% of sole traders spend five hours or more completing their tax return, with 22% reporting that their return took more than 10hrs. 1Tap estimated that if these patterns were projected across the UK’s 4.2m sole trader population, they are spending around 9.5m hours on their returns.
The findings are a timely reminder of how things stand a year before this group is scheduled to transfer across to the new Make Tax Digital (MTD) quarterly reporting regime.
In common with estimates from IRIS, Intuit and the ICAEW, the 1Tap research found that a majority of sole traders do not use technology to prepare their accounts or tax submissions. More than three-quarters (78%) of survey respondents did not currently use software to compile cost and expense figures, and 87% did not rely on software to compile their revenue figures.
The survey found that just under a third of sole traders (63%) completed their tax returns themselves, but fewer than one in 10 traders are using software tools to do so.
This poses something of a challenge for the sector, their business advisers and HMRC when MTD comes into play, as unincorporated traders will be expected to use digital software to file income and expense figures quarterly from April 2018.
1Tap Receipts was devised by Receipt Bank to address this functionality gap by letting traders capture smartphone images of their expenses and invoices that can be transferred to their advisers’ accounting and tax systems.
“The process of gathering up carrier bags full of receipts and spending hours manually inputting data into a spreadsheet is time consuming and takes them away from what they want to be doing: running their business,” commented Receipt Bank founder and chief technology officer Michael Wood.
Three-quarters (76%) of respondents in the survey take time out at least once a month for financial management, with 17% doing so on a daily basis. According to Wood, MTD will be a spur to encourage sole traders to operate in a more streamlined way.
“Our [1Tap] customers are telling us they like to have an up-to-date view of their expenses and are habitually checking in to make sure they are informed. Making Tax Digital will make this much easier, giving sole traders access to much more current data than what the current annual tax return process provides,” Wood said.