The upcoming changes will require self-employed people with a turnover over £50,000 to file tax returns more often through the new Making Tax Digital system, according to multiple reports. This system, introduced by HMRC, shifts tax filing to a more continuous process throughout the year, similar to how it works for full-time employees, though tax payments remain once or twice annually as before. The MTD system applies to sole traders, landlords, and those earning income from self-employment or property, or both.
It is designed to improve the tax reporting system by enabling real-time updates of income and expenses, reducing errors, and eliminating the traditional once-a-year tax return. Under MTD, self-employed workers will no longer file manual records and must transition to digital-friendly systems. Currently, only higher-income earners need to prepare for the change in April, but over the next few years, millions of other freelancers will be required to join the new system.
Any freelancer with a turnover over £50,000 will likely have to move to the MTD scheme unless exempt. Exemptions from joining MTD include individuals without a National Insurance number, disabled people receiving the blind person’s allowance, those with care relief earning income from property or self-employment, and limited companies. The phased rollout timeline for when freelancers with lower turnovers below £50,000 must join remains unspecified, and it is unclear how many self-employed individuals are estimated to be affected by the initial threshold.
For compliance, freelancers can choose to sign up for an MTD service themselves or hire an accountant or bookkeeper to do it for a fee. ANNA provides a fully automated system to assist with the MTD transition, though the costs or fees associated with using such MTD-compatible software or services are not detailed. The specific penalties or consequences for failing to meet the April deadline have not been confirmed, and it is unknown how HMRC will ensure the transition does not disproportionately impact vulnerable groups, such as those with disabilities or limited digital access.