Self-employed issued 10 day payment warning – as HMRC tax overhaul criticised
HMRC shared plans to alter how the self-employed manage and pay their tax costs as the Government plans to overhall the entire system. The changes, coming into force in 2023, will mean freelancers and small businesses will be taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year.
“It actually changes one system for another equally complex system, with the additional requirement for accounts to be apportioned in order to fit with the new system.
“HMRC suggest that the new system will prevent many thousands of errors every year, however it is likely to generate at least the same volume of errors as the current method.
“In reality HMRC’s proposal is not a simplification, it is purely about aligning payment dates for Making Tax Digital, which they are forcing upon self-employed people from April 2023!”
While it remains to be seen how the changes will impact freelancers, self-employed workers have been warned they have more current tax obligations to concern themselves with now.
“Every self-employed worker is expected to make these payments, unless they earnt less than £1,000 in the previous year or more than 80 percent of their tax was deducted at source through PAYE.
“To double check what you owe, just sign into your personal tax account using your Government Gateway ID and view your latest self-assessment return.
“You will then be able to see your statements, as well as any payments on account you have already made and what is due towards your next bill.”
Mr Andrews concluded bu examining how the obligation may have been impacted by coronavirus: “If you’ve earnt less this year than last, the good news is you can apply to pay less – so shouldn’t lose out. You make the request for a lower payment to HMRC either online or by post.
“If you miss this payment, you will be charged interest on any money owed so it is important you meet the deadline. After 30 days, HMRC will apply interest at 2.75 percent, and you may have to pay a penalty.
“Remember that if your bill is less than your previous year’s total, you will be given a rebate, but if it ends up being more, you will be expected to make a balancing payment on the 31st January to settle your account.
“Payment is simple and can be done online using debit or corporate credit cards, via bank transfer or direct debit (make sure you allow enough time this to go through, three to five (working days), in person at your bank or building society, or by cheque through the post.”
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