The Making Tax Digital scheme has hit its fair share of roadblocks since it was announced. It was left out of the Finance Bill earlier this year to much surprise. The chaos of the General Election had also thrown it up in the air.
The most recent development came in an announcement from the Treasury last week. The Making Tax Digital scheme will officially be delayed for some until 2020. Given the current progress of the scheme, this has not hit many with surprise, with some speculating that the whole thing could be dropped anyway.
What is Making Tax Digital?
Making Tax Digital aims to see all businesses report their taxes digitally on a quarterly basis. The scheme is still going ahead but for those working with smaller profits, you won’t have to do anything until 2020.
For now, the scheme will only apply to companies that have hit the threshold for VAT at £85,000. This means that while a lot of people will still have to go ahead with the original plans, many will be given a bit of extra time to prepare.
This delay has been hailed as good news for many who thought that the scheme was overly ambitious and too much too soon.
Some companies are going to struggle to implement this new way of doing tax that could see them having to invest in equipment and training. There has been a lot of discussion and disagreement about how much MTD is going to cost the average company so no one’s entirely sure.
It’s thought that the smallest companies are going to have to change and invest the most due to not having the most up to date systems. So the delay addresses this concern that many SMEs and microbusinesses have.
A pilot scheme has got the go ahead for VAT companies to start at the end of 2017. This will then be rolled out on a wider scale by spring 2018. All companies over the threshold will have to digitise their tax by April 2019. If you are below the threshold, you will still be expected to comply with MTD by April 2020.
“The government will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020”, the Treasury said.
What does this mean for freelancers?
As most freelancers will not be hitting £85,000 a year in profit, it means you’ll have more time to get ready for Making Tax Digital. You will still need to change the way that you do tax by 2020. While that’s a few years off, you’re probably best getting it all sorted before then so it’s one less thing to worry about.
Are you keeping up to date with the latest MTD developments? Are you going to find switching to digital tax difficult or will it be no different? Let us know your thoughts.