I Sell Online. What Do I Need to Know About Making Tax Digital?
If you sell products through your own website, run a WordPress store, or use marketplace platforms like Etsy or eBay, there’s a good chance you’ll be affected by changes in how tax is reported in the UK. Making Tax Digital (MTD) is the government’s way of bringing tax into the 21st century — making things simpler and less of a chore. It means keeping your records online and sending updates to HMRC using software that’s set up for it, cutting out paperwork and helping avoid slip-ups. The idea is to make tax easier to manage, more accurate, and less time-consuming for people running their own businesses. Whether you’re new to online selling or perhaps you just haven’t had time to look into MTD yet, this guide will hopefully give you a good overview of what to expect. PLEASE NOTE: We are not a law or tax firm and do not therefore provide legal or tax advice. The information in this blog/article is not a substitute for advice from a qualified solicitor or tax professional. While we aim to provide accurate and helpful information, we do not guarantee that it is correct, complete, or up to date. If you require legal or tax advice—particularly for a specific issue, a complex matter, or one that requires personalised guidance— you should consult a qualified solicitor or regulated tax adviser. 1. What is Making Tax Digital (MTD)? Making Tax Digital (MTD) is the government’s way of bringing the UK’s tax system into the digital age. The main idea is to make tax simpler, quicker, and a lot less stressful — so no more digging through shoeboxes full of receipts or panicking at the last minute. With MTD, you’ll be expected to keep your records digitally and send updates to HMRC more regularly, rather than just once a year. This is already a must for some businesses, and more people will be joining in soon. So, what does this mean in practice? ✓ Digital Record-Keeping: Businesses and individuals must keep their tax records digitally (for example, using accounting software). ✓ Regular Updates: Tax data is submitted to HMRC more frequently, typically quarterly, rather than once a year. ✓ Use of Approved Software: Submissions must be made using HMRC-recognised software or bridging tools. If you sell online and take care of your own taxes, MTD is definitely something to have on your radar. But don’t worry — it’s really not as scary as it sounds! 2. Why was Making Tax Digital introduced? HMRC’s main goal is to cut down errors and make tax simpler for everyone. Many people either under-report or overpay because of missed paperwork, forgotten income, or last-minute guesses. MTD aims to reduce this by using digital tools to keep everything accurate. Making Tax Digital isn’t new — it was first introduced back in 2015, with the government setting out their plans to get everyone keeping tax records online. Since then, it’s been rolled out in stages, and now more and more businesses and individuals need to get on board. If you’ve just started an online business or are new to managing your own taxes, it’s definitely something you’ll want to know about. For online sellers juggling orders, fees, and stock, this clearer picture of your finances throughout the year can be a real help. Moving everything online, HMRC hopes to save you time, stress, and paperwork. Here’s the catch — many sole traders aren’t prepared yet. Research from IRIS Software found nearly half of UK sole traders aren’t ready for the changes, with 31% saying they’d never even heard of MTD. Around 45% risk failing to comply with the new rules, which could lead to penalties. There’s also a communication gap between sole traders and HMRC. Around 74% say they don’t get enough guidance, and many are waiting on official info before moving forward. Interestingly, younger sole traders tend to be more prepared — 37% of those aged 25-34 feel ready, compared to just 10% of those aged 45-54. 3. Who needs to follow the rules? MTD is becoming a must for more and more people. It’s already mandatory for all VAT-registered businesses, and from April 2026, it will be required for self-employed people (like website owners working as sole traders) earning over £50,000. The threshold drops to £30,000 in April 2027, so even if you don’t have to follow the rules just yet, it’s worth preparing now—because chances are, you’ll need to use MTD sooner rather than later. Right now, VAT-registered businesses with taxable turnover over £85,000 have had to follow MTD rules since April 2019, and smaller VAT-registered businesses joined in from April 2022. MTD isn’t just for sole traders—it covers a range of business types depending on their tax affairs: ✓ Sole traders and self-employed people who earn over certain thresholds will need to comply with MTD for Income Tax (from April 2026 for most). ✓ VAT-registered businesses of any size, including companies, partnerships, and sole traders — they’re epected to use it for VAT. ✓ Landlords with rental income over certain levels also fall under MTD rules for Income Tax. Limited companies and other incorporated businesses will face MTD requirements as it expands, especially for Corporation Tax in the future. If you’re self-employed and earning over £50,000 from April 2026, you’ll need to use MTD for Income Tax. Those earning between £30,000 and £50,000 will be included from April 2027. If you sell online and report your income through Self Assessment, it’s worth checking where you stand. You might not need to do anything yet, but it’s smart to be prepared! See also: I’m a Solopreneur – What Products Do I Need to Get My Business Online? 4. When is it happening? Making Tax Digital is being rolled out in stages, so it might already apply to you — or it could be coming soon. If you’re VAT-registered, you should already be following MTD rules — that started in 2019 for larger
Tax Changes 2024: Need to Know Info for Side Hustlers
Starting an online side hustle is an amazing way to earn some extra income while doing what you love. It’s a chance to turn a passion into a profitable venture right from the comfort of your bedroom. What better way to make a little income on the side? But then, there’s tax. There — we said it. Like shouting “boo!” in a library, the mere mention of the word is enough to send shivers down the spine, conjuring images of paperwork mountains and costly mistakes. Alas, paying tax is a fact of life. The good news is that keeping your accounts in order isn’t as tricky as it sounds. It’s all fairly simple, really. In today’s blog we’ll explore some new tax rules outlined for 2024, from shifts in tax brackets to changes in deductions and credits, giving an overview of how these updates might impact you. You may even be able to save a little money along the way. Embarking on an online venture can be rewarding in more ways than one. According to research by Aviva, as many as one-in-five UK adults have started online side hustles since March 2020. The average post-pandemic side income sits at about £497 a month, with around 16% of these new projects now earning over £1,000 each month. 39% of respondents in the same Aviva study describe turning a genuine hobby and passion into an income stream. 30% state that the additional income was to help cover their own bills and expenses. 21% of new side hustlers, meanwhile, are aiming for more than just a top up, with the ultimate goal of quitting the desk job and becoming their own boss. ❝ Keep in mind that your side hustle, no matter how small, may still be a business in the eyes of tax authorities. This means that any income you generate may be subject to tax. ❞ Some side hustlers assume that if their side gig isn’t their main job — or if they haven’t been trading for a full year yet — that they don’t need to worry about taxes. Sadly, that’s not the case. Keep in mind that your side hustle, no matter how small, may still be a business in the eyes of tax authorities. This means that any income you generate may be subject to tax. Tax laws are changing all the time and it can be difficult to keep up. As we’ll get into, some of the tax information for last year is about to go out of date (if it isn’t already). Understanding how to handle your taxes and self-assessment is key to avoiding stress and penalties. In this guide, we’ll offer some tips on where to look for updates and how to understand what they mean for you. We’ll break down what counts as taxable income for your side hustle and how to figure out what you owe. Keeping informed is also key to staying sure you’re taking advantage of all the opportunities to save. Be sure to check the gov.uk website for official guidelines. Remember that you should always seek tax advice from a qualified professional. The £1,000 Threshold To start on a positive note: You probably don’t need to make a declaration if you’ve made less than £1,000. This one isn’t a new rule for this year. Tax-free allowances for property and trading income came into effect back in April 2017. If your annual gross trading income is under £1,000, it may be the case that you don’t need to tell HMRC. However, be sure to double check the government’s official website, as there are some situations in which you’d still need to register for a Self Assessment and declare your income on a tax return. Even if you make less than £1,000, you should always keep a record of your income. Good record keeping will make it easier to comply with tax rules. There’s also a variety of deductions and credits you can take advantage of — more on that later. But what if you are making more than a grand a year through your online gig? First of all, congratulations! It’s great to see that hard work is paying off. If you run a part-time business online and your gross annual taxable income is more than £1,000, then you’ll need to inform HMRC. You must register for Self Assessment by 5 October in the following tax year. This is true whether you work for yourself, own your own small business, or have money coming in from a number of avenues. Given that £1,000 in a year only equates to around £80 per month, there’s a good chance that you’ll be above this threshold. Tax rates for 2024 The tax year runs from April 6 to April 5, the following year. Everyone gets a tax-free Personal Allowance of £12,570, which decreases after £100,000 income. Employees working for a company would usually pay taxes on income (via PAYE), but this isn’t the case of an online side hustle. Estimating your taxes means figuring out roughly how much you need to pay. You’ll look at what you’ve earned, what you can deduct, and then use that info to work out what you owe. If you’re doing this throughout the year, you can avoid nasty surprises when the bill comes due. Here’s how it breaks down based on earnings: ☐ Up to £12,571: 0% – Personal Allowance ☐ £12,571 to £50,270: 20% – Basic Rate ☐ £50,271 to £125,140: 40% – Higher Rate ☐ Over £125,140: 45% – Additional Rate Remember: Income tax bands are based on earnings across all sources of income. So while your online gig might only be bringing in £10k a year, if you’re on a £25k salary in your main job, that’s £35k in total — and you’d be liable to pay tax on the remainder after your Personal Allowance. (This is a simplification, though, as we’re not taking into account National Insurance contributions and other factors.) Register as a sole
Was it a Budget for Business?
This week’s Budget setting out the Government’s updated economic strategy wasn’t packed with too many surprises, but did you spot the main elements that may affect your business? Whatever your politics, here’s our quick run down of the main points you may like to look at in more depth. You can find full details of the Budget announcements on the HM Treasury website Super-connected Cities A re-confirmation that Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, London, Manchester and Newcastle have been selected to become broadband super-connected cities. The £100 million investment was first announced in the 2011 Autumn Statement and a further £50m has been announced to fund a second wave of cities. Corporation Tax cut In an attempt to spur on more companies to drive the economy forward, the main rate of corporation tax is to be reduced by an additional one per cent. The rate will now reduce from 26 per cent to 24 per cent in April 2012 and then to 23 per cent in April 2013 before a further reductio to 22 per cent by April 2014. Corporation Tax relief for certain tech Subject to final state aid approval, new Corporation Tax reliefs will be introduced from April 2013 for the video games, animation and high-end television industries. Simplification of small business taxation The Government has announced a consultation, reference introducing a voluntary cash basis for unincorporated businesses up to the VAT registration threshold as well as a simplified expenses system for business use of cars, motorcyles and homes as well as the possibility of a disincorporation relief. VAT Threshold increase From this April, the VAT taxable turnover threshold, governing who must be registered for VAT will be increased from £73,000 to £77,000. Income Tax changes For those lucky enough to be earning over £150,000 you are probably well aware that the top rate of income tax will be reduced from 50% to 45% in April 2013. The key change however, affecting almost everybody in the working world, is the rise in the basic individual income tax personal allowance to increase by a further £1,100 – taking it to £9,205 in total – also by April 2013. Enterprise Management Incentive Scheme This scheme designed to help SMEs recruit and retain talent is set to provide additional support to help start-ups access the scheme and more than double the grant limit to £250,000. A more detailed blog about this scheme is already planned by 123-reg in the next few weeks. Obviously, there are many other aspects that will impact on your business but we believe these will be the main items you probably need to be considering in the next few months. We will be following up on a number of these points in our business-focused blogs in the next few weeks.