Tax return blues - would a bit of solidarity help?

[ATOMIC SUPLEX]

The intention is for the whole process from capturing the data in your bookkeeping software through to submission of the final results to be digital with very little human intervention.

At the moment, you could keep a carrier bag of paperwork and then summarise all this on the back of a couple of envelopes, add up the totals and then input those summarised results onto HMRC's website. HMRC don't like that as they think it's prone to errors. The reality is that if you've just got 12 sales invoices and a handful of expenses you're just as likely to end up with the right result as if you had software you paid £50 a month for.

This is me. . . except all my invoices and expenses only exist in the digital realm rather than on paper. Probably only six invoices to add up and five or six expenses to take away.
I'm going to be pretty fucked off if I have to pay £20 to wade through some software four times a year just to punch those numbers in.

I agree that this probably great for bigger businesses, but won't they have been working on systems like this already?
Surely they need to figure something different for smaller one man self employed operations like myself?
I have no problem in adding invoices to a HMRC cloud as they come and hitting a 'go' button four times a year.

 

[nick]

To give a slightly more positive spin. I have finally girded my loins to log in to my personal HMRC ID. Pleased to see that the web site is again an improvement on previous years: in one place I can now access my NI / Pension history, review and request changed to my PAYE coding as well as (not today though) do my Tax return.

FWIW I am adopting a wait and see policy on MTD.
I am an accountant, but in fields far related from tax, so my knowledge is based on my professional exams decades ago plus corporate experience in my early career.
All of my tax activities (personal tax, my company when I was outside IR35, treasurer of a charity with a few hundred k annual income ) are performed on good old Excel: It does what I want and no more, I can use my background to make sure it is robust and balances (double entry rocks baby). I also use the same sheets to prepare annual accounts for Charity com / Companies House etc.

I am (perhaps incorrectly) going to assume that I will not be forced to buy any further software, but in time there will be bridge solutions to feed Excel into MTD returns - albeit they may need a level of technical knowledge.

In many respects I am in the same boat as Atomic suplex: I have no need/interest in adopting a dedicated accounting package

 

[teuchter]

If the concern is that people don't add up their invoices & expenses properly, I don't see why it can't simply be added to the existing tax return forms you currently fill out. That is, instead of typing a total into a box, you put in all the individual invoices, and the forms add it up. Doesn't seem like anything complicated to program.

There's already (optionally) something like this for bank interest I think - you type in amounts for each of your accounts and it adds it up (although I've got a feeling it doesn't then automatically put the total into the relevant bit of the form).

 

[Leafster]

I hadn’t realised how big the changes for MTD were going to be, and the impact on the self-employed - it seems to be the equivalent of RTI for PAYE which was a huge change for the payroll industry.

Good luck everyone!

As an accountant in practice I had to deal with RTI for PAYE for my clients, Pension Auto-enrolment, MTD for VAT and now it's MTD for Income Tax.

 

[Leafster]

This is me. . . except all my invoices and expenses only exist in the digital realm rather than on paper. Probably only six invoices to add up and five or six expenses to take away.
I'm going to be pretty fucked off if I have to pay £20 to wade through some software four times a year just to punch those numbers in.

I agree that this probably great for bigger businesses, but won't they have been working on systems like this already?
Surely they need to figure something different for smaller one man self employed operations like myself?
I have no problem in adding invoices to a HMRC cloud as they come and hitting a 'go' button four times a year.

You're right, slightly larger businesses run by the self-employed probably already use this sort of software. If they are VAT registered they will have had to be MTD compliant for VAT for some time which is why I am familiar with the likes of Xero and FreeAgent. For most of them, the cost of the software, whilst unwelcome isn't too costly. This type of software has slowly evolved so that it is (or will be) compliant with MTD for Income Tax. As a result, traders already using compliant software won't see too many changes. They will have to get their heads around the quarterly reporting aspect and possibly doing adjustments to the figures every quarter rather than once a year. But, they won't have the steep learning curve with a complete change in the methods they use to record their business activities.

As I've said, the software packages I use do have a cut-price version for freelancers but even this isn't considered cheap by everyone. I have to say, some of my younger clients automatically think of using software to maintain their bookkeeping, bill their clients etc. so for them, they don't think twice about the monthly fees.

There are other options out there including using spreadsheets and bridging software (as nick mentioned) but, for my clients, we've either needed something more or haven't needed to address MTD for Income Tax as it hasn't been made compulsory. With HMRC kicking the can down the road even further, I haven't yet needed to investigate these options.

Another thing to consider for those who use an accountant is that the old 'carrier bag job' or its digital equivalent of a zip file containing all the documents electronically does take longer to work through as opposed to a well kept set of records on software so there's often a trade off between paying for the software and a lower accountancy bill.

 

[Leafster]

FWIW I am adopting a wait and see policy on MTD.

I think that's a wise decision. Software providers including those producing bridging software are all jostling for position at the moment. Just looking at the software providers I have experience with they keep changing their offerings and pricing so who's to say what will be best when MTD for Income Tax is finally mandated.

If you have other reasons for using software then go ahead and make the decision now, if not, just put it off until closer to the MTD of Income Tax introduction.

 

[UnderOpenSky]

My partner had a nightmare with Xero's support when she was having problems. But then I support clients with Quick Books at work and can't say they are much better.

 

[Leafster]

If the concern is that people don't add up their invoices & expenses properly, I don't see why it can't simply be added to the existing tax return forms you currently fill out. That is, instead of typing a total into a box, you put in all the individual invoices, and the forms add it up. Doesn't seem like anything complicated to program.

There's already (optionally) something like this for bank interest I think - you type in amounts for each of your accounts and it adds it up (although I've got a feeling it doesn't then automatically put the total into the relevant bit of the form).

From a tax advisor's point of view, you don't want to give any more information than is necessary to HMRC as it will only confuse them.

From HMRC's software developer's point of view, any changes risk their systems falling over as they haven't really been funded properly or designed coherently. It's a struggle to keep all their existing separate systems talking to each other * and adding other functionality will only make it worse.

* Anyone with experience of RTI for PAYE will know that the data HMRC's officers see on their systems isn't always consistent with what the employer sees on their HMRC account and that isn't always consistent with what their advisor sees from their agent's account! Effectively, there are three different systems which pull data through at different times so it's rare for them all to agree.

 

[Leafster]

My partner had a nightmare with Xero's support when she was having problems. But then I support clients with Quick Books at work and can't say they are much better.

Sadly, Xero support isn't as good as it used to be but like you say the other providers aren't much better.

I can usually sort out any problems with Xero for my clients although I recently had a problem which took a long while to resolve. It involved MTD for VAT. HMRC kept blaming Xero and Xero kept telling me the software was working properly. Eventually, after many hours of phone calls to HMRC and support messages with Xero we got to the bottom of it. Someone at HMRC had deleted a submission manually which they shouldn't have done and that was the cause of the problem.

 

[AnnaKarpik]

What will it mean for people like me then? Will I have to buy my own software or get an accountant?
I have had no information about it other than what I have seen on this thread, so I can imagine it would have been a bit of a surprise (and therefore the aforementioned clusterfuck) to quite a lot of self employed people.

The only benefits anything could bring to me would be to simplify the current form, make more of it automatic, easier to understand and integrate the payment element better.

VAT has already gone over to MTD and for that a few bridging software options came out. They cost money - naturally - but about as much as a low end bookkeeping subscription. In effect, you put your numbers into a spreadsheet, upload it into the software and send it off and it wafts away to HMRC.

 

[nick]

What is the likelihood that HMRC will produce some sort of spreadsheet template for MTD submission?

As of today, if you are doing a gift aid reclaim, the claim form is a spreadsheet (.ODS Open format I think:meaning most / all spreadsheet programmes can use it), with an associated, very strict, instruction set on the way in which the data should be entered, and lots of cell/ data protection and validation

 

[ATOMIC SUPLEX]

VAT has already gone over to MTD and for that a few bridging software options came out. They cost money - naturally - but about as much as a low end bookkeeping subscription. In effect, you put your numbers into a spreadsheet, upload it into the software and send it off and it wafts away to HMRC.

I'm hoping they will come out with something free?
Even a low end bookkeeping subscription is overkill for my returns needs. Even now I can supply a detailed breakdown of each invoice / expense on the submitted HMRC form if I want to, but I don't need to.
It's just really really annoying. Extra work, extra cost, no benefit.
I guess I have a couple more years before I worry about it. . . . workwise, there is probably more I should be concerned with.

 

[billy_bob]

Are we on some kind of standing order to Leafster btw? I can't remember signing up to anything - but then, if I was more financially efficient I wouldn't have started this thread in the first place so it's possible I did so without reading the small print...

 

[Tooter]

Their online product Quickbooks Self-Employedi s just crap so avoid it.

That's what I use

I used to do all invoices In word, keep invoices in month and year folders with an excel document summary and then go through my statements and work out the expenses etc before inputting the data into self assessment gateway.

I have to say to most of the people panicking about using MTD compliant software, for me it has simplified the process greatly, just doing everything from creating invoices and marking expenses in real time is much easier and I'm sure more accurate. Not much to worry about, there are plenty of online training, workshops and documentation to help you pick it up. It's definitely worth watching some YouTube videos on your chosen software before jumping into it in April if you choose to do so.

I have noticed that not all transactions sync properly from my bank, the majority is there, I presume this will get better over time. I started using it last April so come next tax return I'm hoping it will be much easier to submit everything.

Regarding the submitting data multiple times over the tax year I presume this is linked automatically in the software Leafster or do you have to manually do it?

 

[Leafster]

Are we on some kind of standing order to Leafster btw? I can't remember signing up to anything - but then, if I was more financially efficient I wouldn't have started this thread in the first place so it's possible I did so without reading the small print...

Just pay a little extra into the server fund.

 

[Leafster]

That's what I use

I used to do all invoices In word, keep invoices in month and year folders with an excel document summary and then go through my statements and work out the expenses etc before inputting the data into self assessment gateway.

I have to say to most of the people panicking about using MTD compliant software, for me it has simplified the process greatly, just doing everything from creating invoices and marking expenses in real time is much easier and I'm sure more accurate. Not much to worry about, there are plenty of online training, workshops and documentation to help you pick it up. It's definitely worth watching some YouTube videos on your chosen software before jumping into it in April if you choose to do so.

I have noticed that not all transactions sync properly from my bank, the majority is there, I presume this will get better over time. I started using it last April so come next tax return I'm hoping it will be much easier to submit everything.

Regarding the submitting data multiple times over the tax year I presume this is linked automatically in the software Leafster or do you have to manually do it?

QB SE may work for you OK but it was somewhat limited for what my clients needed.

If you have any volume of transactions to deal with then software is definitely the way to go. Today I've been using Xero for a client's VAT Return. With the help of their AI software I've analysed around 200 purchase invoices, analysed around 250 bank transactions. I need some more info from the client but I should have incorporated 90 days worth of analysed daily takings and matched a further 100 bank transactions. All done in about 5 hours.

With the quarterly submissions I suspect they'll be much like the VAT Returns. After you've processed everything for the quarter, you review it and then press a button to submit the summary information to HMRC.

 

[ATOMIC SUPLEX]

I have to say to most of the people panicking about using MTD compliant software, for me it has simplified the process greatly,

Sounds good

Not much to worry about, there are plenty of online training, workshops and documentation to help you pick it up. It's definitely worth watching some YouTube videos on your chosen software before jumping into it in April if you choose to do so.

Oh no wait. Now it sounds like a lot more work. I literally had to add up about six invoices and submit the total. Now I have to find some software, pay for it and do on line tutorials???

 

[Tooter]

Sounds good

Oh no wait. Now it sounds like a lot more work. I literally had to add up about six invoices and submit the total. Now I have to find some software, pay for it and do on line tutorials???

As has been said it depends on your situation if it will work for you, for six invoices a year maybe it's not necessary. Similarly if you don't want to learn anything about it then don't bother...

I do 5-15 invoices a month to various clients only now rather than dicking around with word/excel I create them in the app on my phone/edit a previous one and just mark when they are paid. It handily tells me when invoices are overdue and can send automatic reminders.

On my bank transactions I swipe left for a business expense which is automatically put in the right deductions category or right for personal expense. I can store photos of receipts or invoices to individual transactions.

When I drive somewhere for work I can automatically review every trip via GPS on my phone or enter a start and end location and it very accurately records the mileage.

With a little bit of learning, I have just found it much easier than previously, won't be the same for everyone I'm sure.

 

[Tooter]

Edit: deleted duplicate post!

 

[ATOMIC SUPLEX]

As has been said it depends on your situation if it will work for you, for six invoices a year maybe it's not necessary. Similarly if you don't want to learn anything about it then don't bother...

My point is that I will have to bother. We will all have to move over to these things whether I deem them necessary or not.

 

[muscovyduck]

One of my mates phoning around asking for help, wants an accountant, I told them to sort this months ago, I don't even think they've registered as self employed yet. How likely is it they'll get this sorted on time?

 

[ATOMIC SUPLEX]

One of my mates phoning around asking for help, wants an accountant, I told them to sort this months ago, I don't even think they've registered as self employed yet. How likely is it they'll get this sorted on time?

Registering? No chance. Unless things have changed since I registered.
As I recall you have to do it before hand, how could your friend have given the places they worked for their UTR without registering?

It's been a while, but I seem to remember making some sort of mistake when I first became self employed. I had to do a few things retrospectively. I think I might have been fined £100 or maybe just had to pay the interest I owed. HMRC were quite good about it. I think there are a lot less staff these days though, and especially this time of year.

 

[muscovyduck]

Registering? No chance. Unless things have changed since I registered.
As I recall you have to do it before hand, how could your friend have given the places they worked for their UTR without registering?

It's been a while, but I seem to remember making some sort of mistake when I first became self employed. I had to do a few things retrospectively. I think I might have been fined £100 or maybe just had to pay the interest I owed. HMRC were quite good about it. I think there are a lot less staff these days though, and especially this time of year.

I don't think they've registered but this is what I feared. They're panicking a lot which makes it more difficult to sort out (as well as why they've left it this late to sort out).

I suppose they should register, get their paperwork together, then get to an accountant to sort it out from there and do the retroactive stuff?

 

[nick]

Not a tax adviser but..
1) get them to register today. As (I think) you know, they need to get posted a code - this takes time.
2) They can start gathering records etc while they wait for the code to appear.
3) one step at a time - just tell them. not too ignore it, it isn't going away

Bowing to those with superior knowledge, but...
If they miss the deadline of 31 Jan, and are unable to come up with an acceptable excuse, it will be a £100 fine (think increases for continued non compliance) - which isn't a lot in the scheme of things. There will be interest on late tax payments, but it is not credit card/ bank loan levels of interest rate.

Just don't ignore it

 

[nick]

And in other news - made a first pass at my return last night.
the draft calculation shows I owe 8,500 which is surprising as I am predominantly PAYE for 21/22.

got a couple of weeks to double check and see what happened (suspect they may have given me a duff tax code)

 

[Chilli.s]

I suppose they should register, get their paperwork together, then get to an accountant to sort it out from there and do the retroactive stuff?

I think if they register now then at least attempt to put some preliminary estimates into self assessment then theyll probably avoid any fines

 

[muscovyduck]

I think if they register now then at least attempt to put some preliminary estimates into self assessment then theyll probably avoid any fines

Cheers. So frustrated with them but can fully empathise at the same time

 

[ATOMIC SUPLEX]

I suppose they should register, get their paperwork together, then get to an accountant to sort it out from there and do the retroactive stuff?

How much do they actually need to submit? Do they need an accountant? When I did mine retroactively I just made one quick phonecall to the HMRC to check and did the self assessment.
Not sure you can fill anything in before you get your UTR can you? Unfortunately your friend probably needs to check exactly what they need to do by calling the HMRC. Unfortunately there might be a long wait on that at the moment.

 

[muscovyduck]

How much do they actually need to submit? Do they need an accountant? When I did mine retroactively I just made one quick phonecall to the HMRC to check and did the self assessment.
Not sure you can fill anything in before you get your UTR can you? Unfortunately your friend probably needs to check exactly what they need to do by calling the HMRC. Unfortunately there might be a long wait on that at the moment.

They seem to have sorted it out, they're now a lot less stressed after requesting their UTR and realising the process is a lot simpler and more friendly than they thought. I think they were imagining it'd be like the benefits system or something.

I assumed they needed to submit for the sake of trying to get a mortgage but they've earned so little it won't make a difference. Now they've realised this its a lot more simple and the pressure's off

 

[wemakeyousoundb]

I don't think they've registered but this is what I feared. They're panicking a lot which makes it more difficult to sort out (as well as why they've left it this late to sort out).

I suppose they should register, get their paperwork together, then get to an accountant to sort it out from there and do the retroactive stuff?

found this info:

When do I need to register as self-employed?​

According to HMRC, you should register at the earliest opportunity. However, there's a deadline. Legally you need to register by 5 October after the end of the tax year in which you became self-employed.

For example, if you started your business in July 2021, you'd need to register with HMRC by 5 October 2022.

Ideally you wouldn't leave your registration this late. If anything goes wrong and you're unable to register by the deadline, you could find yourself with a very large tax bill.