With 74% of copywriters in the UK being self-employed, Making Tax Digital (MTD) will certainly have a huge impact on the industry – but how much do you know about the UK government’s initiative for a new era of digital tax? Here are the main facts about what MTD is and how it will affect you.
The end of the tax return
Making Tax Digital is the government’s initiative to bring the UK’s tax system into the digital age. Instead of submitting a yearly tax return, most self-employed taxpayers will be obliged to update HMRC in ‘real time’ about their business finances through some form of digital tax software.
You may have noticed already that you have access to a digital account with HMRC and this will be at the heart of the forthcoming changes. Through your digital tax account you will:
- be presented with a complete picture of your business’s tax affairs and be able to manage all your tax liabilities in the same place, at the same time
- submit your financial information to HMRC in as close to real time as possible, preventing any overdue tax or repayments owed to you from building up
- have clarity about how much tax you owe, avoiding any surprise tax bills at the end of the year
MTD is already underway!
The consultation response has been published and legislation is currently being drafted with an announcement expected before the end of the year. By April 2017 a beta for the initiative will begin and in April 2018 MTD will begin for sole traders with annual sales over the VAT threshold.
In 2019 MTD will kick in for sole traders with annual sales between the minimum MTD threshold of £10,000 and the VAT threshold. Check out FreeAgent’s Making Tax Digital guides and resources to find out more about the timescales and how it will affect you.
Exemptions to Making Tax Digital
HMRC has confirmed that the ‘digitally excluded’ and charities will be exempt from MTD. The digitally excluded are defined as those who cannot engage with digital accounting software for reasons of:
- remoteness of location
- ‘any other reason’
However, with the majority of respondents to the Pro Copywriters Survey 2016 stating that they find new clients through their website and social media, it appears that the majority of the UK’s copywriters are not digitally excluded and therefore will not be exempt.
Preparing for digital tax
If MTD applies to you, you’ll have to use digital tools, such as accounting software or apps, to keep records of your income and costs by April 2018 or 19 depending on your business’s annual sales. If you use spreadsheets to manage your accounts at the moment, you’ll also have to make sure that they meet MTD’s technical requirements by the above dates, most likely by combining them with software in some way.
Although Making Tax Digital will be a big shift in the way most of the UK’s self-employed and freelance copywriters manage their finances there are a lot of benefits, mainly:
- always knowing where you stand when it comes to tax with a real-time calculation of how much you owe
- having access to your business’s tax info online in a single place
- being able to plan and budget more effectively
- What do you think of Making Tax Digital? Let me know in the comments.