What do small businesses really think of Making Tax Digital?
As Making Tax Digital (MTD), the government’s initiative for a fully digital tax system, moves on to the next phase, just how prepared are the small businesses that it will affect? To find out, we asked the people that look likely to be impacted first – the UK’s small business owners and freelancers. Here are the results:
Update: The scope of Making Tax Digital for VAT will expand in 2022. VAT-registered businesses with a taxable turnover below £85,000 will need to follow Making Tax Digital rules for their first VAT return starting on or after April 2022.
Making Tax Digital for Income Tax Self Assessment will be introduced in 2024. It will require self-employed businesses and landlords with annual business or property income above £10,000 to follow the rules for MTD for Income Tax Self Assessment from 6th April 2024.
MTD for Corporation Tax is expected to be the next phase in the initiative. However, HMRC has advised that MTD for Corporation Tax rules won’t come into effect until at least 2026.
84% think there's a lack of information
20% of the UK’s small businesses and freelancers have not yet heard of Making Tax Digital and 84% of respondents feel that the government has not provided enough information about its plans for MTD. Despite the majority of the UK’s unincorporated businesses being required to use some form of digital tax reporting as early as next year, our survey highlights that many are still unclear about what will be required of them or the potential impact it could have on the way they manage their finances. Just 4% feel they have enough information about how MTD will impact them.
41% feel positive about Making Tax Digital
Our survey also found that 41% of small business owners feel positive about MTD and 27% of respondents think the new digital tax legislation will make running their businesses easier. A minority of 14% feel that MTD will make their life harder.
The full results
How do you feel about Making Tax Digital - the UK government's plan to digitise tax by 2020?
|I feel positive about it||41%|
|I don't know what Making Tax Digital is||20%|
|I'm not sure||15%|
|I don't have any opinion either way||13%|
|I feel negatively about it||11%|
What impact do you think Making Tax Digital will have on your business?
|I don't know||29%|
|I think it will make running my business easier||27%|
|I don't think it will have an impact either way||21%|
|I think it will make running my business harder||14%|
|I don't have any opinion on it||9%|
Do you think the government has provided enough information about Making Tax Digital and how it will affect small business owners like you?
|I don't know||11%|
Preparing for impact
Although a lot of businesses surveyed feel that MTD will have a positive effect on them, many still don’t know enough about digital tax or the impact it will have on their financial reporting. MTD will undoubtedly be a major shift in the way that all UK businesses manage their finances and as the government provides more information it should become easier for the UK’s small businesses and freelancers to prepare.
*Total sample size was 701 owners of UK micro-businesses with fewer than 10 employees. The survey was carried out online between 15th December 2016 to 17th January 2017.