Simply Business - Insurance for your business

Call Us0333 0146 683
Our opening hours
Knowledge centre

Self Assessment overhaul: what 'Making Tax Digital' means for the self-employed

2-minute read

Self Assessment overhaul: what 'Making Tax Digital' means for the self-employed
Josh Hall

Josh Hall

6 September 2016

'Making Tax Digital' might sound less than exciting, but in fact this new set of government proposals look set to completely overhaul the way that Self Assessment taxpayers deal with HMRC.

The plans, now in the consultation stage, will significantly change your interactions with the taxman. So what’s going on?

Going digital

The most major proposed change in the MTD consultation is the long-promised shift to a digital-only tax system. As the government says: “The way you interact with the tax system is changing. From 2018 it will become increasingly digital and most businesses, the self-employed, and landlords will need to use software or apps to keep their business records.”

For those who submit tax returns or keep records on paper, this represents a big change. In practice, it means that those taxpayers will now need to use accounting software such as Xero, Free Agent, or Clearbooks, and submit returns through HMRC’s revamped online portal.

  • Find out more about business insurance

Regular reporting

Some weeks ago, there were rumours that the government would be introducing quarterly tax returns. The idea was met with anger from the small business community, and a petition opposing it received tens of thousands of signatures.

In fact, the proposals are slightly more nuanced than expected. The government is proposing a change in the basis period system, which would see self-employed people moving to a similar regime to that seen for companies. This could in theory mean that tax is reported and calculated on a three-monthly basis, rather than annually. The government is also proposing that tax is calculated monthly for those in receipt of Universal Credit.

Capital expenses

Another major change could be seen in the ways in which capital expenses are offset against tax. The proposals would see 100% relief given immediately on assets that depreciate, the major exception being cars.

Late payment penalties

The proposals also include changes to the fine structure for late tax payments, putting the charge up from five per cent to 15 per cent of the unpaid bill if you fail to pay after 12 months.

Exemptions

Making Tax Digital, then, is clearly more than just the ‘digitisation’ of the tax system. In fact, it’s a pretty radical set of changes that impact many different parts of the regime.

However, there are some exemptions. The most important is for those with an annual income below a new £10,000 threshold. However, the so-called ‘digitally excluded’ will also be exempted – this covers those who can prove to HMRC that they are unable to use the digital reporting systems, for example because they live in a rural area without broadband.

We’ll be bringing you more on Making Tax Digital as the scheme progresses.

What do you think about the plans and how do you expect them to impact you? Let us know in the comments.

Ready to set up your cover?

As one of the UK's biggest business insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?

Start your quote

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

Find this article useful? Spread the word.

Share
Tweet
Post

People also liked

Landlords could be targeted in new capital gains tax raid.

19 November 20202-minute read

Landlords could be targeted in new capital gains tax raid

Landlords could be hit by another massive tax raid, as the Office of Tax Simplification outlines its recommendations for an overhaul of…

Read more

Keep up to date with Simply Business. Subscribe to our monthly newsletter and follow us on social media.

Subscribe to our newsletter

Categories

Popular articlesBusiness resources from FarillioGeneral businessGuestInsuranceLandlordLandlord resources from FarillioLegal and financeMarketingNewsOpinionProperty maintenanceTradesmanCovid-19 business support hub

Address

6th Floor99 Gresham StreetLondonEC2V 7NG

Sol House29 St Katherine's StreetNorthamptonNN1 2QZ

© Copyright 2021 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.