The likelihood is that if you are a driving instructor, you are self-employed… and big changes are coming for the self-employed in the HMRC “Making Tax Digital programme (here on MTD).
Gone will be the days of doing your accounts on the back of an envelope, an account book or even a spreadsheet. From April 2024 everyone who earns over £10,000 from self employment will have to use software that interfaces with their HMRC self assessment. HMRC will not be supplying the apps or software to do this but they have worked with partners such as Sage and Quickbooks (there are many more) who can link your device to provide the relevant information to HMRC when required. As well as full software suites that can deal with such producing invoices, managing your payments etc, there are some that will be a cheaper software that will produce a “bridging” solution. This means that you input your information on a normal spreadsheet such as Excel and it then (providing you have done everything in the correct format) it produces the “bridge” to allow that information to automatically upload to HMRC.
500 Q&A questions for driving instructors
When does MTD for self employed start?
MTD for vat is already operational. For self employed people it commences on 6th April 2024 ie will be required for your first quarterly submission after then (July 2024). However, for many instructors it may be best to start a year early in order to get used to the new system and iron out any glitches. This means starting in April 2023. It is often recommended, when making such big changes, to run the two systems in parallel for a while. So in other words to use an app or appropriate software for a year, while at the same time running your existing system. A report commissioned by HMRC (see below) reveals that those people who feel least ready to make the transition to MTD will actually be the last to prepare for it, leaving it to the last minute. We predict that many instructors will fall into this category.
Will MTD be easy?
A report for UK Government here indicates that a third of people think MTD will be difficult. Over 40% of self employed people still use paper record keeping and these are the people who think that the transition to MTD will be most difficult.
Other changes
In addition to needing to use appropriate digital methods of record keeping and submission, the new system will require you to make a submission quarterly rather than annually as at present.
HMRC have produced a list of approved software that is compatible with MTD . However not all software will be suitable for driving instructors and different instructors will have different needs. It is likely that you will need to try out different providers to see which will most effectively meet your needs.