I've not been paying attention: making tax digital??

[KatyMac]

Sorry i havent been paying attention to this but separate filing for each income stream?

So I make & sell and I teach and i lecture under one name

& I teach, do, lecture and create under another

So ill have to do 2 returns instead of 1 - is that right? Not one for teaching, one for making and selling etc

What is the cheapest app I have to buy to make this happen (after 2028 I think?)

I'm hoping I can find some free software and just input my invoice amounts into that instead of my current excel spreadsheet, press a button 4 times a year to send the info to HMRC and that will be it.

I use Xero for one of my jobs at the moment and I really don't need all that functionality (or the cost!). Will we have to link it to a bank account as well to show payments coming in because I use a combination of my personal bank account and paypal at the moment.

It's income and expenses to be input. No tax adjustments. Then the self assessment is done as normal and hopefully mostly there.

If you have a sole trade and a property business you would do an entry for your sole trade and a separate entry for your property business each quarter, then a tax return as normal.

You should be able to get a quote from Xero or QuickBooks for not much per month, or the company a pp mentioned above.

But double and triple check the turnover requirements first.

Just typed a hopefully helpful post but MNHQ have hidden it

It’s 4x a year and a final submission, just basic figures as I understand it for the quarterlies.
I do DH’s books, with accounting software like freeagent, you link your business bank account/ paypal etc. so any transactions show up almost in real time.
DH gets paid either by bank transfer or in cash as he’s a Tradesman, if it’s over £150 he insists on bank transfer.
His expenses on debit card and my wages show up on the bank feed, so I match them to the right category, that’s all that’s needed digitally, although I do upload photos of receipts to the debit card transactions.
For bank payments, I match his invoice numbers to the bank payments under the ‘sales’ category.

For cash, customers rarely want an invoice ( they get official gas paperwork) so I put it through my virtual cash account as ‘sales’ .
Any expenses paid in cash are manually added with receipt pics.
You can link your hmrc tax account and send your tax return direct , it fills in the details as you go so it just needs a check over before filing to make sure all the categories are correct and things like pension contributions and married allowance need to be added in.

I find it very easy and I’d never done bookeeping / tax returns until DH went self employed 3 years ago.

Until now I’ve never seen the need for a separate business bank account as I rarely have more than about 30 transactions per year. Virtually all other transactions are purchases via my credit card, and that won’t change.

It seems crazy to have to pay for a business account, plus the MTD software and/or an accountant, just to be able to file my exceedingly simple tax return.

I only collect payments for my business 3 times a year - school terms.
I'm not sure how that's going to link up with submitting MTD 4 times a year.
We also have a lodger who pays monthly.

I'm going to use the free software from QuickFile I think, but holding off until I absolutely need to.

Doesn't the lodger’s rent fall under the rent a room exemption?

Will you breach the thresholds, that is what to check first.

I'm in a similar situation to this. I collect six times a year (school half terms) but with a big gap in the summer. I normally record when I do the work, though, not when I get paid (only really matters when it is around April time, when it matters which tax year it's in!). I keep a paper notebook where I record the work by date, and each month I can transfer it to an excel sheet. I would also like just to submit the total income to date at whatever point I have to, and then work out my expenses at the end of the year (they are mostly yearly things, like work from home expenses, etc, or things that have monthly subscriptions like Zoom or insurance, although there is also the occasional book, piece of software, stationery supplies etc, which I normally print out from my amazon account that the end of the year!).

I guess it probably won't matter if you don't include all the expenses each time as long as you submit the income, as long as you can do a proper return at the end where you do account for all of that.

I don't have a business account either, just a savings account that I'm paid into, and from which I transfer money to my current account each month or as needed.

I could really do without all this hassle! But I think I will be over the threshold last year, though probably not this year. All the software I've looked at is expensive and does far more than I want it to or need. I just send emails with how much people owe, and don't really need anything else.

from 6/4/26 it’s only sole traders with turnover over £50k that are affected. From 6/4/27 it’s over £30k. 4 returns plus a final one. If you have rental property it’s another 4 qtrly and then this also goes on the final one as normal. Another govt job creation scheme. Freakin’ stupid idea.

So with the income from the lodger, which goes over the Rent a Room Scheme amount, how will that work?

I think that providers are going to make a lot of money out of this. What a nightmare for a low income sole trader - apparently the government intends to include even people with a turnover of under £20K in the next couple of years. And of course they can't be bothered to produce some free or low cost software for us to use. Instead we're left to deal with the sharks, and will probably end up moving from product to product with all the problems involved, as prices go up. There's some guidance here, which I don't find at all reassuring: Making tax digital for income tax | Low Incomes Tax Reform Group

Mettle is a totally free business bank account which comes with freeagent accounting software, also free. We’ve used it for 3 years now and it hasn’t cost a penny.
With Mettle, you can also create different savings pots, I use one for putting aside the tax bill. Because Freeagent keeps a running tally, you know at a glance how much tax will be due, so you can save accordingly.
You don’t need to pay an accountant, if you run your own business, you should be able to use software and do it all yourself.
Mixing personal banking and business transactions is asking for trouble imho. It’s practically begging hmrc to come knocking, especially with their new AI overwatch.

To all of you who think it’s all a big hassle, what will you do if they reduce the VAT registration threshold down to £20k or £30k ?
There have been major rumours about this possibility in accountancy forums.
I don’t think a very low threshold is likely but can easily imagine it coming down to say £50k.

@BorgQueen have you read anything on the forums about how accountants might price their services under the new system? I currently pay for Quickbooks Online, and for the preparation of one return a year.

On accounting web, lots are saying it won’t be worth their while for the extra work, unless the client uses automated accounting software and it’s a simple matter of pressing a button.
I think they fear ‘paper’ clients giving any old figures for the quarterlies and having to unravel it all for the final submission.

I'm very worried about them reducing the VAT threshold. I don't know how I'd survive, if I had to put my prices up by 20%. I think I'd lose a lot of clients, but at the same time, I don't think I could absorb a 20% loss, either. My income is just around the 50K cut-off so it would be really complicated for me, and quite a disaster. I really hope they don't. It's terrifying. Do you think it would start right away, or would there be a lead in time where we get used to the digital tax stuff first?

I really don't want to change my bank account now that the clients have my details, but I guess I could if needed, that wouldn't be the end of the world. I'd just like some simple software that would let me enter the earnings for the quarter or something. It is still complicated for me as my income is based on school half terms, but as long as I can enter what I have earned in those months, and square it all up at the end, I guess it's OK (private tutor).

Also are these thresholds based on takings or the actual income minus the expenses, pension etc? It's hard if you're around the threshold, but I could put more into a pension or something for the years (like last year) when I had a good year and might be above the threshold, whereas other years (like this one) I'll probably be well below. So I don't know if I'd have to be VAT-registered or even what it would mean. I get that I'll have to do the digital tax within a year anyway, so might as well start that if I can find some simple software for returns next year. The VAT thing is so worrying though.

I know, DH’s average charge is £80, to hike to almost £100 just isn’t feasable. He prides himself on fair prices but he couldn’t absorb that 20% .
He already works pretty much part time and would have to work even less, he’s planning to retire in two years anyway.
It’s mad that it’s Turnover, not profits that dictate Vat Registration.
DH can easily have £20k in expenses.

Oh no, if it's turnover that's even worse. I couldn't even use pension or something to bring it slightly below the threshold. I wonder how it works if good years are just above, and bad years are well below - you can't register some years and not others!

How can we hike prices by 20% and keep enough clients, especially if (as in my case) there are others offering the same service part time who wouldn't be over this limit and could charge much less (many of them already do - people who tutor after school with a few pupils, who don't make their entire living from it, etc). I'd have to try to absorb the price increase myself or lose too many pupils, but then I'd need even more clients and wouldn't be able to fit them in. I don't know what I would do or if I could realistically continue.

I tried to work out what I'd have to 'officially' charge so that I'd absorb half of the cost and charge the parents half of the cost - i.e., increasing my prices somewhat, but the official cost would be less than I charge now. But then using that amount, I might not even be over a thresold, if it's 50K. And it would depend which year they used to determine it as well. Last year (ie the taxes due this Jan) was a good one, but this coming year won't be as good. It would all be such a mess. And parents will also hate it if it starts happening with all their children's music teachers, tutors, etc., and they'll end up cutting back too.

Needing to register for VAT is calculated on a continuous rolling 12 monthly period, not a set annual period.

I’m worried about the keeping digital records , my business ( food retail) very much relies on paper invoices , and as we have daily deliveries of fresh produce/ bread etc, I’m talking about 40ish invoices a week ! I think 2027 is the date for my income bracket so this year I ditched Sage 50 accounts ( after 25 years ) and went for Xero to give me time to adjust.Spent the first month doing it properly for MTD, forwarding digital invoices, photographing or scanning paper only ones, and my work load has quadrupled 😳.
For now I’ve given up and will only do it when I have to, it is a massive burden on small businesses like mine, some of my suppliers are small and work using handwriting invoices, will be time consuming and expensive for them too 😢

If vat threshold changes, this might be a better option for a business like yours

https://www.gov.uk/vat-flat-rate-scheme

Thanks, I've tried to read through that, and am thoroughly confused! I'll have to try again in the morning. I suspect I'll have to get an accountant now too, as well as software costs, and I think it's all just going to be unaffordable.

I don't really have costs of goods. I deduct a fixed amount for working from home, and a very small amount (in the hundreds) for the odd bit of resources, professional fees, and random things like that. But nothing else. It's all just services via teaching, so it sounds like flat rate wouldn't apply.

I'm not sure how the 12 month thing works either. I can't charge VAT one year and not the next, so it would again be me having to absorb all the tax rise myself, maybe increase the total price I charge parents a bit to help, but then in years where I didn't charge it, it would be far too low, so some years I"d be technically charging it and other years not. Admin nightmare, and also unaffordable to take that sort of salary cut when I'm just about surviving with variable income and high cost of living myself. It's a real nightmare. It's a shame, as lots of services to children aren't provided via schools or health services and parents need to pay privately, but if this sort of work has to charge VAT now too, it will reduce access.