Digital tax remains confusing for large portion of small businesses

Nearly half (43 per cent) of micro-business owners and freelancers don’t know what Making Tax Digital is, a study finds.

UK freelancers and micro-businesses still need more information about the government’s plans for digital tax, according to new research by accounting software provider FreeAgent.

The study shows that 86 per cent of respondents who know what Making Tax Digital is do not feel at this stage that they had been provided with enough information about the plans, which would see small businesses having to keep digital financial records and provide quarterly updates about their tax to HMRC.

However, FreeAgent also finds that businesses who know about tax digitisation are generally positive about it, with 45 per cent saying the plans would make their life easier while just 20 per cent say they feel digital tax would make things harder for them.

Ed Molyneux, CEO and co-founder of FreeAgent says that Making Tax Digital will be one of the biggest changes made to the UK tax system for generations and will start to impact businesses from as early as 2018.

‘But it’s clear from our research that many micro-businesses still require more information about what tax digitisation actually is and how it will potentially impact them,’ he adds.

There has already been some confusion in recent months about how the micro-business sector will be affected by digital tax, including stories about how businesses will need to file a full tax return every three months, Molyneux says.

‘However, the reality is that when micro-businesses are well-informed about the changes, they are actually quite positive about them, with only a small minority of people we polled saying that they felt Making Tax Digital would make their life harder.

‘Although this new consultation is certainly a step in the right direction towards helping micro-businesses understand more about tax digitisation, there is still a lot of work to be done. I hope that we see even greater clarity over the plans in the future so that micro-business owners feel fully informed and, hopefully, more positive about the benefits that digital tax can provide for them.’

Further reading on digital tax

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