Making Tax Digital for Income Tax - bad news for small business!

[@SmallBusinessToolbox]

Hey folks! Please could you share this article to spread the word about MTD ITSA and how damaging this could be for UK small businesses: smallbusinesstoolbox.uk/making-tax-digital-income-tax/

[@northeastcorals]

Basing thresholds on turnover rather than profit has always boiled my piss as some very small or part time business like my own can have very high turnover to profit ratios. I can easily turnover 50k in a year to hit the "qualifying income" threshold whilst only making around 10k profit, while some consultant with almost no expenses might be earning 48k profit but won't hit the threshold. Some years I don't get much spare time to run my part time business so I may only make a several grand profit but still turnover the 30k which would mean 5 returns. It just wouldn't be worth the time & hassle for that much money. It usually takes me a couple of weeks to sort out my annual return, theres no way I could do that 5 times per year & paying an accountant to do each one would wipe out to much profit so I honestly think I'd just jack in the business if they bring it in as I reckon most in a similar position to mine will which would mean HMRC will loose that tax & everyone is worse off. Yet another genius plan.

[@SmallBusinessToolbox]

Yup - totally agree with all that!

[@nomadprints]

Thanks for the heads up Andy. I'd heard nothing about this. As ever, I'm so grateful we've got you to guide us through it all.

[@SmallBusinessToolbox]

No worries! Hopefully the can will continue to be kicked down the road, but at least you have heads up. 😁

[@Flat-Five]

Thanks for the information, Andy. This seems like it will make an utter complicated mess for me, personally. Like you, I have a KZbin business and with that income from various sources. I just use a spreadsheet too which helps me organise everything most logically and clearly for myself so I can see how much I made and from what each month. Some income (like youtube payments) come in with a month delay, some even more and so I don’t know exact figures until after this new 1 month submission deadline! I don’t use cash basis btw. But the most annoying issue for me is that I have income in part in USD so naturally I wait until exchange rates are better before converting it to GBP. Doing that, I can easily report on tax return and have my own records neat and tidy and know the exact amounts I have earned in GBP. This new ‘system’ will mean now reporting average exchange estimates which which will be inaccurate and messy.

[@SmallBusinessToolbox]

Yup. Total nightmare!

[@tyremanguitars]

they are doing this to try and make money from fines and make it as unappealing as possible to go self employed.

[@SmallBusinessToolbox]

Yup, and my cynical side would say they're paving the way for other stuff too.

[@michaell8835]

This is insanity. MTD for vat was a nightmare and didn’t work properly to start with, caused me so much grief. Seemed like a backwards step anyway as my old version of Quickbooks used to feed directly to HMRC anyway (but they switched that ability off, and I had to use bridging software from a ‘copy and pasted’ spreadsheet). The whole 5 times a year thing is going to be a nightmare. Can’t help but think that the turnover threshold will be £0 in just a few years. I’m getting fed up of the way tech is going, we had a sweet spot about 5 years ago, now going too far.

[@SmallBusinessToolbox]

Yup, totally agree!

[@jakematic]

This could cripple most of the little guys. I thought IRS was nuts, they’ve got nothing on HMRC !

[@SmallBusinessToolbox]

Yeah it's crazy! Paves the way for other stuff I suspect. 🤔

[@maddiem5921]

oh god, this is terrifying! My humble income streams and currency complexities are already confusing enough that I need an accountant, but there's no way I can afford to pay them 5 times a year!

[@SmallBusinessToolbox]

Yup, crazy! Accountants I've spoken to have no idea how this will work.

[@MagikMan643]

@@SmallBusinessToolbox Central Bank Digital Currencies and the end of other payment methods, would be my guess.

[@saltymemesmith]

I had a thriving online business self employed, once I hit that £85k threshold the VAT destroyed my income. I went from £17k annual profit to about £5k. I believe I've to wait 12 months before deregistering for VAT.

[@Xofttam]

They need to raise the 85k limit, I persoanlly stay under it for this very reason, if I go over it I will only make less money because I am so close to it. If it was stopping me making loads more then it would be silly not to but for us just at the threshold it's only going to ruin us if we hit it.

[@rodp2310]

Well said Andy. For a sole trader who is also a buy to let landlord that will be nine returns per year as the BTL figures require separate quarterly submission - if they are VAT registered also that is 13 returns per year. If the same person also runs a small ebay shop that’s another 4 returns a year. If they also get KZbin ad revenue they are up to over 20 returns per year for someone with maybe less than £100k turnover and maybe £50k profit. Plenty of time left over to actually earn a living after all that admin. 🤣 if the proposed system were to be inspected like a new build property I think the verdict would have to be ‘ABSOLUTELY SHOCKING’. Keep up the good work. 👍

[@SmallBusinessToolbox]

Yup, it's crazy. Hopefully there's sufficient kickback by 2026, but it was nearly rolled out in 2024 and nobody knew about it. 🙄

[@rodp2310]

@@SmallBusinessToolbox As an accountant the push back to 2026/upping the £10k threshold announcement was the best Christmas present ever. A single 10 month deadline is not long enough for some clients - imagine 5/9/13+ 30 day deadlines each year - at maybe £100 late filing penalty each. Retirement or the lottery is my only hope. 🤣

[@ivantate]

I already have to pay an annual fee for bridging software to submit VAT returns that I never needed before. Basic spreadsheets are fine for my accounts.

[@SmallBusinessToolbox]

Check out 100PcVATFreeBridge - works great for us!

[@Billswillstill]

Hi. Great video. Do you know if a state pension counts towards the annual " business or property income of more than £50,000"....i know its already taxable income and thats fair but its deffo not a business nor property income and to my mind should not count towards the MTD thresholds. I enjoy working and my taxes go towards the states coffers, but if my pension forces me over the 50k threshold and puts me on this daft scheme a year earlier then ill retire and HMRC and the Government will not be wringing any more income tax from me and most likely from the other thousands of self employed pensioners like me The whole plans plain daft, a hinderance not a help to the small businesss who are the backbone of the British economy.

[@james1976-nov]

Well it looks like im going to de register my small gardening business then. There's no way i can afford an accountant and i certainly cannot do any of that kind of digital work... I can hardly work a self return of once a year...

[@rita_limao]

wow did my first tax return as a sole trader this year and they are already planning to change. Feels bad

[@1MinuteGaming]

Do you have a video on how to find a good accountant? There's so many of them, some charge as little as £20 per month or as much as £300 per session. Many of them have mixed reviews on google too. It's my first year and I only made a few hundred over the allowance.

[@gailbaker81]

Cheers...my head is boggled.😂 This has helped massively..❤

[@SmallBusinessToolbox]

No worries!

[@Zdlifestyle]

This is awful ! I am have only been self employed for about 3 years - and only just realised that my tax return was quite easy and I have been paying my accountant! I love spreadsheets! I have just designed a snazzy little one whereby you can see all of your income for the months and expenses / and it updates as soon as you input items. This new tax digital thing- even to me sounds like it is just a way to make more money / can’t we complain! And lol meat happened to the Post Office after installing software- I still get confused with the self assessment 🙈 so god help me 🙈😂

[@robthurlow1347]

This will cripple the small business I have started up too fill in the gaps in my month on month off main work schedule unless I can scale it very very quickly to become vat registered and limited which is gonna be very hard.

[@SmallBusinessToolbox]

You've got a couple of years and hopefully the can will get kicked down the road again, but it's coming!

[@Xofttam]

I run my business using spreadsheets too. Am I right in thinking that once this comes in i will be able to use bridging software to submit to HMRC and continue to use spreadsheets as i do now?

[@SmallBusinessToolbox]

Hopefully the whole ridiculous project will get canned... but yes hopefully there will be bridging software for spreadsheets but as yet unknown.

[@adrianssolutionsgwm]

Your wrong that m t d for vat was easy, I, (vat reg sole trader) used microsoft works an xmasl list easy spreadsheet for 25 years. To learn excel with addon took 2 years of real graft (im70). when the new stuff comes in I will shut down.

[@JingleBaza]

the music is a bit melodramatic

[@SmallBusinessToolbox]

Well the subject is quite dramatic!

[@BlessedByAlMighty]

If u don't do it what will happen?

[@SmallBusinessToolbox]

I suspect same as if you don't fill in a normal tax return, interest followed by fines followed by court.

[@BlessedByAlMighty]

@@SmallBusinessToolbox but if the person leaves it as it is and doesn't do anything, nothing will happen?

[@Jules_Pew]

They tried to do this with VAT and that got shelved, so the online return is a ghost of what they really wanted - ie the ability to snoop through your records at any time. As some companies only bill once a month, I can't see that, with such a short deadline, the accounts submitted will be accurate. Even large audits are expected to check transactions at least 3 months past year end to ensure that everything is in the right place. I think the government want everyone to incorporate their businesses and is pushing legislation to that end like landlords and mortgage interest. Bet they haven't even thought about the cost of added server space HMRC will need to maintain this.

[@SmallBusinessToolbox]

Yup - exactly! I have no problem with digitalisation, but it has to serve a purpose for the business. 👍

[@outoftheburrough]

& they can barely deal with what they currently receive correctly and in a timely manner 🤣 Insane is definitely the word for it Andy

[@SmallBusinessToolbox]

Exactly! 🤔👍

[@brianhewitt8618]

Thank you

[@coolmonkey619]

Duck this I'm retiring before this nonsense

[@SmallBusinessToolbox]

I think a lot of folk will!