There is a marked difference in the way society views different forms of self-employment says Lucy Cohen, founder of Mazuma Accounting Services:
Look at the language we use around different sorts of businesses to see the disparities.
Take the tech market. Proprietors have C-suite style titles: Founder, CEO, VP, CTO. Big titles that give an air of authority, despite not being in profit yet. Those titles are distinctly white-collar, elite even, and yet founders are essentially self-employed.
Compare that to plumbers, electricians, cleaners. They’re all self-employed too. In many cases they turn a profit far sooner and more consistently than a tech founder, and yet society views them as distinctly blue-collar. Why? Because they use their hands to hold wrenches and mops instead of laptops and tablets? The average plumber almost certainly pays more tax than an early-stage tech business, and a few of the big corporations I could name.
Over the last 18 months as the world plunged into an apocalyptic-style makeover, who were we desperate to keep on as key workers? Tech founders? Or tradespeople? While Elon Musk shot a car into space and Branson and Bezos shot themselves into orbit, it was the electrician who kept the lights on and the washing machines spinning.
Bear with me. I’m getting there. Making Tax Digital is about to shake up the tax system for millions of self-employed people and who is going to be the worst hit by the changes? Who is going to have less time and fewer resources to adapt to the new system? It’s the mops and wrenches brigade.
There are very few plumbing companies set up by people who are not plumbers. In a tech company the founder may not have tech skills. They may have a little black book and access to money. If you spend time doing the job yourself, as many tradespeople do, you have far less time and energy to deal with all of the additional admin that being self-employed brings. When a change like Making Tax Digital comes in, it’s relatively easy to buy software and hand it over to a “finance team”, but if you have to DIY it, it’s yet another burden. Plumbers are less likely to live in a digital world.
If you’re a digital native you probably summon a car to your door and a snack to your desk via apps, and cringe as your parents try to text. On the other hand, digital natives usually take weeks to tile the bathroom.
You might argue that Making Tax Digital is simply asking everyone to do the same thing. I’d say that it’s significantly easier for some people than others. Even if you don’t consider it outright elitist, it’s undoubtedly more aligned with the current working practices of the tech founder than the joiner.
We need a commitment to be inclusive, and I mean of all businesses, not just those with founders who have fancy titles. Because when the excrement hits the air conditioning unit, you know exactly who you’ll be calling.
Current requirements for sole traders for income tax:
- Once-a-year filing to HMRC for income tax
- No requirement to keep digital records
- Can file directly to the HMRC website (no requirement for any software)
- Fined £100 if filed late
Requirements for sole traders from April 2023:
- 5-times-a-year filing to HMRC
- Digital record-keeping (no invoice books or paper receipts)
- Details from physical paperwork must be input into software
- The requirement to use software to file to HMRC
- New penalty points system for fines with increased amounts
- No need to file anything yourself
- Can submit paper receipts to us by post
- Free invoicing tool
- No deadlines missed = no fines
- Mazuma will meet all the new requirements for you