In a bid to make self assessment more simple and easy for freelancers, HMRC have been planning to bring in a new tax system.
It's called "making tax digital," which would see an end to paper tax returns (as everything is sent online) so it can be done more efficiently.
Will this actually happen though? Many experts have claimed that millions of the self employed are not ready for the digital revolution just yet, and for many of them, freelancers included, it will just result in confusion and mayhem.
The new tax system is due to be implemented on a national scale by 2020, although a few insider sources have told the media we could be seeing the first few people using this system by 2018.
That's right. If you are a freelancer and like the idea of making tax digital and a more simplified process of doing your tax return, then you don't have long to wait.
So what exactly is going to change? Millions of people already do their tax return online...isn't it just similar to that? Apparently not. The main change is submitting a tax return quarterly instead of once a year.
I can hear groaning among the freelance community at the thought of doing this, but according to the government it is going to be really simple and will make it quicker to get your tax done.
Even better, the new tax system is going to be more automated, which means you won't have to inform HMRC when your circumstances change...they will already know important information and your account will instantly be updated.
Are they going to be spying on freelancers to get this information? Well, according to HMRC themselves...they will "automatically use the information it holds, along with new data from third parties, to populate the digital accounts."
I'm sure there is not going to be an invasion of privacy here. I think what HMRC are trying to do is join everything together digitally, so that when you have a change of employment, open a new pension account, change your savings, and things like that...this is automatically updated in your tax account.
Another change, and something I think is a good idea, is the ability to link accounting software to your tax account, so that freelancers can instantly have everything already worked out and will simply have to click "send" on a quarterly basis to give HMRC a tax return.
Of course, there are people that argue doing a tax return 4 times a year is just too much and for those who are not very good with technology, well, this whole making tax digital is going to be confusing.It very well might be, but we have to give it a chance.
Let's wait to see it introduced first, because if you ask me 2018 might be a bit early. They should definitely have the system in place by 2020 though.
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