The poll of over 500 owners of micro businesses with under 10 employees found that 43% do not know what MTD - digital tax accounts - actually is, while 86% thought they have not received enough information about the proposed switch to having digital financial records and making quarterly tax updates to HMRC. The survey was conducted by cloud accounting software developer, FreeAgent.

However, the research also found that those businesses who knew about tax digitisation were generally positive about it, with 45% saying the plans would make their life easier while just 20% said they felt digital tax would make things harder for them. Overall, only 8% said they felt negatively about digital tax.

Ed Molyneux, CEO and co-founder of FreeAgent, said: ‘MTD will be one of the biggest changes made to the UK tax system for generations and will start to impact businesses from as early as 2018. But it’s clear from our research that many micro-businesses still require more information about what tax digitisation actually is and how it will potentially impact them.

‘However, the reality is that when micro businesses are well-informed about the changes, they are actually quite positive about them, with only a small minority of people we polled saying that they felt MTD would make their life harder. Although this new consultation is certainly a step in the right direction towards helping micro-businesses understand more about tax digitisation, there is still a lot of work to be done.’

HMRC is currently consulting on the detailed plans for the rollout of digital tax accounts with the first tranche of small businesses and indvidual taxpayers set to go live by April 2017. There will also be a £10,000 exemption for the smallest businesses and sole traders who will not have to comply with the digital tax accounts filing system at HMRC.

Essential reading

Read more about the Making Tax Digital consultations and developments