Just got the letter from HMRC. We're both self employed but our tax isn't complicated - an annual statement from investments, a spreadsheet for rental income, and one for the business with a line for each outgoing invoice and one for each receipt (numbered, in a heap). Outgoing invoices are word documents. Not VAT registered. All cash accounting - no need to actually prepare accounts. No reconciliation to bank accounts.
A few hours of data entry in winter, enter onto the HMRC site and we're done.
This looks like we're going to need to keep up with this quarterly and pay for commercial software. I've run a small VAT registered Ltd co/and a CIC and used MYOB and then Quickbooks and then Xero. Xero was the best but it's not cheap - it's very hard to stay in the lowest tier (only 10 bills a month - there are going to be more small expenses than that) and suddenly you're paying £400 per year.
If you're dealing with VAT I get it, but it's coming to sole traders at 50k turnover/30k and then 20k in the next couple of years.
Has anyone looked into this yet and found any really simple, low cost, software? My very quick search showed that there seemed to be a few 'keep using Excel and link it to HMRC' products. But trying to use cheap/free software can be a nightmare as it becomes unsupported and you end up transitioning to something new. It feels like there is a gap for a really simple product for non-VAT registered sole traders who are cash accounting.
This looks like we're going to need to keep up with this quarterly
Why? I just do a SA at the end of the year. If you're VAT registered then yes quarterly but not otherwise.
suddenly you're paying £400 per year
Quickbooks online would cost you £19/month. But I've just changed to FreeAgent as it's, well, free with my NatWest account and it does recurring invoices (which nearly all of mine are) while QB wanted me to upgrade to another package to get the same thing.
Hmm, posted once and it disappeared. I looked into this 6 months ago. FU from start to finish was what struck me. There will be many 1000’s of people caught out by this. From the list available from their software list, 4 of them are saying ‘free’, the rest are paid for. From viewing it a while back, the free versions are not too clever, or need other SW to make them work. Maybe there is a Linux app somewhere out there?
The list is HERE if you havent seen it. What SW Co. is going to be making a totally free version? They are in the business to make money, so I cant see any option but to buy the SW, though , hopefully, I’ll be proven wrong in a years time when it is in use.
Up until now, bridging software was the answer and I THINK it still counts as MTD ready. I use Anna money and upload my Xls sheet to their site and they send it to HMRC on my behalf, they charge about £4 per upload and then I pay HMRC directly.
For now I’m paying £10pm for QuickBooks on a deal via my accountant and will probably continue with their lowest tier once the deal ends. I’m not impressed that I’m pretty much forced to pay for software I don’t really want for my simple affairs, HMRC should have created a means of submitting the data without third party involvement
Been coming for years, far harder to avoid when its quarterly and online - blame all the fraudsters over the years.
Bit of a pain. My accounts are simple enough. Taken me a while to get a reasonable system but takes very little effort. I've read through some of the blurb on the gov website and on various commercial sites extolling the benefits but none of them really apply.
Current plan is to stay under the first year threshold and wait and see. Either it'll be chaos and the plans will change or it is moderately ok and I can copy those have a good (ideally free) system.
Interesting that Lloyd’s underwriters are due to be exempt.
Luckily my sole trader income is substantially below the£20000 threshold. Or perhaps not!
HMRC should have created a means of submitting the data without third party involvement
If they did that then they would have to support it which would cost loads. Much simpler to restrict the ways the data can get in and offload the support to companies being paid for their service.
A complete utter pain in the arse for me. My accountant currently gets a pile of bank statements every year and sorts everything for me. My IT skills are minimal, I don't understand spreadsheets, I'm at the point of slowly winding down my joinery business with a view to retiring over the next couple of years. I might just sneak in under the turnover threshold for 2025, but £20K next year? It's enough to make me stop now or join the cash economy, either way the exchequer loses out.
Brightbooks is free and can handle VAT etc.
It's not amazing but i use it for it's simplicity and pay a tiny amount to get the freebie logo removed.
Brightbooks is free and can handle VAT etc.
Would that be compatible with the new Digital Income tax then? It isnt on the list, but I have no way of knowing if they use a standard output for HMRC submissions, or is it a custom output just for HMRC?
Thanks Rone, I haven’t seen that one before. Looks promising.
Don’t forget the 50k threshold is total turnover not profit across sole-trade and any rental properties.
April 2026 will be bad enough but the year after when the threshold goes down to 30k will be the real test.
Im an accountant and most of our clients will therefore be ok but there’s a large group of unrepresented businesses that will be badly hit by this
that’s VAT. I’ve mailed to ask about income tax. It looks ideal - pleasantly simple though I’m a bit nervous about something with no revenue stream at all. (It’s an online service, they’ve got hosting costs, they’re providing some level of support)
Yes Brightbooks are a bit steady. They did eventually do the vat upload so I'd imagine they will do the other stuff. I will ask them.
Not much incentive when your software is no charge. Lol.
However I like simple and it's simple. My accounts are very straightforward .
that’s VAT. I’ve mailed to ask about income tax.
Could you follow up with their answer, if you get one? Thanks.
PITA for me, any additional costs I incurr will be passed on to tenants. As happened with energy reports (no tenant has ever asked what rating they have), electrical safety and potentially landlord registration.
Sad really, my tenants are already struggling financially and pay nowhere near the market rates, and are going to be hit with more charges.
I ll tell them to write to their mp.
Seems the new Income Tax reporting is currently only for Sole traders. As a partnership it doesn't yet apply to us (though I have had to do my VAT via a 3rd party MTD program for a couple of years.) . So an easy solution for all you sole traders is to add your spouse as a partner in the business?? Might defer the problem for a year or 2? 😉
@alani
no reply after a week which confirms my worries about free software.
Thanks for trying.
Bump on this. I sat through a very dull HMRC webcast that didn't tell me anything I didn't already know. I've just had a look at the software list on HMRC and surprised how many of the bigger companies havent got their software ready for this yet - Xero, Zoho, Quickbooks still have most income tax stuff 'in development' which doesn't inspire confidence. They're expensive as well.
The ones that look interesting to me right now are
1) Excel income tax filer. Bridging software - keep using a spreadsheet (though not sure we have a working copy of excel right now - have been using Google sheets and Numbers)
£40 a year
https://absoluteexcelincometaxfiler.co.uk/excel-income-tax-filer/
2) Clearbooks. Has a free option, but also a £5 a month option which has support and allows you to customise invoices.
https://www.clearbooks.co.uk/making-tax-digital/
3) Freeagent did the usual bait and switch thing - it's really £90 first year and 190 after that.
Has anyone got any further with their research or any warnings or recommendations?
Just skimming through
Is this effecting people who are PAYE , but have to do self assessment too, or just small business folk?
ta
Yes, anyone doing self assessment, but if/when you need to start depends on the level of your gross non-PAYE income.
Oh... there's an extra concern since this thread started... the government are looking at making it obligatory to use MTD compatible software for yearly submissions as well, which looking at the current state of the software landscape would/could be a very negative move. That's something to watch, in future you might be below the threshold for quarterly submissions but still have to move to compatible software for your year end submission.
Freeagent did the usual bait and switch thing - it's really £90 first year and 190 after that.
'Tis free if you bank with Nat West. I swapped to it earlier this year basically because it sends out invoices automatically for me while Quickbooks wanted more money than was necessary for my [now] pretty simple requirements.
Excel income tax filer. Bridging software - keep using a spreadsheet (though not sure we have a working copy of excel right now - have been using Google sheets and Numbers)
If it just requires a spreadsheet in .xlsx format, LibreOffice is free and will save in .xlsx
have been using Google sheets
Will also export as an xlsl file
I'd assumed it linked to Excel with an api or something rather than being a file export and import - that adds options.
How do you need to set up your Excel file - does it effectively require you to arrange it in a 'standard' format (ie like a set of accounts)? These things are rarely simple to try out without actually committing to them and using them
"Don’t forget the 50k threshold is total turnover not profit across sole-trade and any rental properties."
Is this 50k threshold adding up all various business revenues ... between my wife and I, we typically have 4 small pots that, sometimes, in total get to that figure, sometimes don't!
Is this 50k threshold adding up all various business revenues
I would expect so, but don’t know for certain. e.g. I run a sole trader business, but occasionally get some PAYE or CIS Contract work - they all go down on my tax forms as total income.
And, for software, Sage have said they are giving out some free software for small traders. I havent looked into it yet to see what the deal is.
And, for software, Sage have said they are giving out some free software for small traders. I havent looked into it yet to see what the deal is.Sage MTD
I'm always dubious when they don't have a single clear page with pricing. As I said upthread, all these services try to tempt you in with 'free' or big discount only to end up much more expensive once you work out what you actually need.
The free tier doesn't include invoices which seems a minimum requirement to me - if you're not managing them through your accounting software you're effectively entering/creating them twice. So it's actually £7 a month after the first discounted period.
If you need VAT then it's Sage Accounting Start which is £15 a month. But strangely something I found online suggests there is NO upgrade path from individual to Start. Which could easily be a major hassle for some people in future.
Also, while most of the online stuff I've seen specifically mentions 'MTD for landlords' Sage doesn't. And if you're self employed AND a landlord you effectively have two businesses. Not clear whether Sage Individual supports this. [Update - looking at this it seems they definitely don't and weren't much help when someone was asking about it - https://communityhub.sage.com/gb/sage-accounting-and-individual/f/making-tax-digital/250420/soletrader-and-landlord-trying-to-get-ready-for-mtd )
(on the other hand Sage is a big operation so you'd hope they'd be around long term).
[If it seems like I'm making a fuss about which product, it from history of running a small ltd company and doing all my own accounts. Transferring between accounting systems is a proper pain and I ended up doing it a couple of times as companies took each other over or left the UK market....