Unsurprisingly, when asked about the current tax system, self-employed workers agreed that it needs to be simplified. In fact, in a survey conducted by GoSimpleTax, nearly a third of people said that clearer guidance was needed that people could easily digest. This ranked higher than paying lower taxes (26%).
Collectively, we understand the need for taxes, it’s the just the way HMRC goes about collecting revenue that causes the biggest headache and makes impending deadlines, such as next month’s self-assessment tax return, a thorn in the side of businesses.
The good news is, HMRC and the Government appear to be listening. Last month, consultation closed on ‘the tax administration framework: supporting a 21st century tax system’. The aim is to create a roadmap that will set out the Government’s direction of travel for reform of the tax system over the next 10 years. Yes, that’s 10 years; this is no quick process, but the fact remains that focus is being placed on a system that many small businesses and sole traders believe is unfair to them.
At present, it is just a commitment by HMRC to produce a roadmap for future consultation and analysis and how it works with stakeholders. However, details on what those reforms will be in still unknown. One thing is clear is that the Government currently has no plans to move the end of the tax year from 5 April. But there are changes already on the horizon.
In just over two years, self-employed workers and landlords will be required to carry out real-time quarterly reporting known as Making Tax Digital.
Nearly half of those self-employed people surveyed by GoSimpleTax said they were unaware of the changes to the self-assessment process. However, it is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. In essence, self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024 – keeping digital records and providing updates to HMRC.
The direction of travel is quite clear. Whether we are moving quickly enough for small business owners and self-employed workers is unclear. For now, it’s just over one month to go until online self-assessment tax returns need to be filed and that process remains the same.
Mike Parkes is Technical Director at GoSimpleTax – the online tax return and self-assessment software.