HMRC Archives | Caroline Gibson - Freelance Copywriter Blog

Summary
(To cut a long story short … )

Making Tax Digital (MTD): is a UK Government requirement replacing the annual self-assessment for freelancers.
What it involves: using HMRC-compatible software to keep digital records, submit quarterly updates and send a final annual declaration.
Pros: fewer mistakes, real-time view of tax owed, no year-end tax bill shock.
Cons: quarterly deadlines, possible software costs, need to be extremely organised.
Penalties apply: for late or non-compliant submissions.

Are you a freelance copywriter / self-employed copywriter?

Do you earn over £50,000?

If not, you have some breathing space in switching from the traditional annual self-assessment tax return process to the Making Tax Digital (MTD) one.

Otherwise, get ready for having to be uber organised …

What is MTD (Making Tax Digital)?

Making Tax Digital is a UK Government compliance requirement that takes effect this year for some people. A digital system is already in place for VAT but this one, for tax, was meant to start before Covid and is now being gradually phased in depending on how much you earn.

MTD is a different way of reporting and providing your income tax details to help reduce errors and it applies to freelancers and consultants.

What does MTD mean for a freelance copywriter?

A downside of being a freelance copywriter or self-employed creative is that income can be quite up and down – unless, of course, you’re lucky enough to have several clients signed up on a retainer basis.

For HMRC, MTD means a more efficient tax system and fewer errors. For you, it means getting your head around a new way of filing your tax info, keeping up with quarterly tax-filing deadlines and, in general, being super organised.

MTD is intended to help you track your potential tax and VAT throughout the year, so that you stay informed and can avoid the nasty shock of an unexpected end-of-year tax bill.

How does MTD work?

Goodbye having to keep paper records and doing one big self-assessment tax return each year. Hello to keeping digital records and submitting them quarterly.

You’ll need to:

Use HMRC-compatible software connecting to HMRC’s system to keep a digital track of all your day-to-day income and expenses.
Send quarterly summaries of these to HMRC from your software (almost like mini interim tax returns).
Send one final tax declaration at the end of the tax year.
Pay tax by 31 January (and possibly also by 31 July if you need to make a second payment on account).

What happens at the end of the tax year?

The new system won’t change the way you pay income tax or the dates you need to pay it.

Simply sign in to your online tax account through GOV.UK or on the HMRC app and submit a final declaration to confirm your total taxable income (including any other sources of income e.g., savings interest or employment wages). You can also claim any allowances or reliefs.

When do you need to start Making Tax Digital?

It depends on your gross annual self-employment income.

If the amount of qualifying income on your 2023/24 tax return indicated you might need to comply with MTD starting from April 2026, you should have received a letter from HMRC last year in spring or summer. Didn’t get one? Unfortunately it’s still down to you to check if you need to use Making Tax Digital.

Here are the MTD threshold dates:

Earning over £50,000? MTD will apply to you as a mandatory requirement by the Government from April 2026.
Earning £30,000 – £50,000? You’ll start from April 2027.
Earning less than £20,000? You’ll start from April 2028, but can decide to sign up now anyway.

What MTD software do you need as a freelancer?

To create digital records, send HMRC quarterly updates and submit your tax return using Making Tax Digital for Income Tax, you’ll need HMRC-compatible software.

There’s a choice of these compliant software options on the GOV.UK website: Find software that works with Making Tax Digital for Income Tax

Your bank or software provider may even offer a free version, such as Barclays FreshBooks and Monzo Business

Can you do MTD by yourself?

Don’t want the expense of paying an accountant? Yes, of course you can do it yourself (especially if already using Making Tax Digital for VAT if VAT-registered).

If you don’t already keep digital records of your income and expenses using software like Xero or QuickBooks, it makes sense to start asap and get used to doing things differently.

What happens if I submit my MTD return late?

If you’re the type of freelance creative who likes to keep paper receipts stuffed in a bag somewhere until the very last minute of filing your tax return, then take note: you can face a maximum penalty of up to £3,000 a quarter if you don’t adhere to the following MTD rules:

Missing a return deadline
Not keeping digital records
Not using MTD-compatible software
Transferring info manually instead of using a digital link

There’s a points-based system if you file records late and late payment fines too.

Missing a quarterly deadline or the final declaration at the end of the tax year equals one penalty point. Once you reach four points, you’ll need to pay HMRC £200 – with even more fines if you keep missing submission deadlines. HMRC can also charge a £300 minimum fine if you withhold any relevant tax info deliberately.

What are the pros and cons of Making Tax Digital?

Pros	Cons
Digital automation means fewer mistakes	Not all MTD software is free
Avoids last-minute end-of-tax-year return headaches	Needs a mindset shift if used to paper or manual spreadsheets
Clear, real-time picture of finances	Four deadlines to manage plus annual finalisation
Time-saving	Requires being organised
No need to scan every receipt	No copying, pasting, or manual retyping allowed
Keeps you on track with tax owed	Late submissions incur penalties and fines

Can sole traders opt-out of MTD?

Unless you’re classed as digitally exempt, are elderly or disabled, or live somewhere with very limited Internet access, the answer is no. (Find out How To Apply For An Exemption)

The alternative could be to become a limited company.

Is MTD helpful? Or a complete pain?

On the bright side, MTD is designed to help freelancers and sole traders make tracking and reporting taxable income much easier.

On the down side, you need to stay on the ball all the time. NO MISSING DEADLINES!!! Failure to comply with MTD regulations can result in penalties.

Tbh, there’s no avoiding MTD if you’re freelance. You need to get your head around keeping digital records, making quarterly updates and filing an annual declaration so that it all becomes a regular habit. Love it or hate it.

I’m really organised – the type of person who plans a holiday at least a year ahead – but I really don’t enjoy the accountancy side of freelancing as a copywriter. So when it comes to MTD, then yuck!

I’m happy to let my accountant of over 25 years handle everything for me (plus, accountancy fees can be offset against tax). Having said that, however, he’s advised me to become a limited company instead – the reasons why are maybe a blog for another day …

Written by Caroline Gibson, London freelance copywriter and newly formed limited company. I’m not an accountant so do speak to yours for MTD advice, but I am qualified to tell you how to keep your freelance cash flowing; check out my 11 tips.

E: caroline@carolinegibson.co.uk T: +44 (0) 7957 567766

IR35 – what’s it all about? Well, I recently almost missed out on pitching to a leading insurance company for a significant freelance copywriting project. Why? (Whizz down to the end if you just want to find out what happened.)

With IR35 rules coming into force for the private sector from 6 April 2020, it’s not surprising that major medium- and large-sized companies are treading cautiously. They’re now responsible for determining the IR35 status of any copywriters they engage. Their headache lies in deciding if we count as permanent employees (inside IR35) or as off-payroll workers (outside IR35).

Although IR35 only applies to incorporated (limited) businesses, the rules for a sole trader like me are sneakily similar. Be warned!

What is IR35?
IR35 was set up the HMRC to cut down on freelancers avoiding tax by working as ‘disguised employees’ i.e. people who work in a similar way to full-time employees but invoice through their limited companies – and pay less tax. They can pay corporation tax at 20% on profits, claim for business costs against their tax bill, and pay themselves a lower salary yet add on dividends.

IR35 also aims to stop employers paying people this way to avoid making National Insurance contributions and providing employment benefits – and save themselves money.

How to check if you’re a ‘disguised employee’
Are you inside or outside of IR35?

Oh, the hokey cokey of it all. There’s no cut and dried HMRC guide as to whether or not a contracting copywriter comes under IR35 but there are three principles to help you check:

Mutuality of obligation: if self-employed, you work on a project-by-project basis for a client without any obligation to continue when a project is over and done, and you work for other clients at the same time.

‘Yes’ to both? You’re outside of IR35.

Substitution: could you hire another copywriter to complete the contract work on your behalf? For example, if you’re up against a deadline and need another pair of copywriting hands. If a contract states that the client wants you and only you, Queen or King Bee, to work on a project, you’re unfortunately inside of IR35.

(I’d never do that but suspect adding it in to my terms could appear flaky to a client ….)

Control: does your copywriting contract with the client state how and when you work? If you’re the boss of you and have the flexibility to dictate this, you’re outside of IR35.

Still unsure? Use HMRC’s Check Employment Status for Tax (CEST) tool to double-check your status. This handy Contractor Calculator guide leads you through that CEST tool ‘to achieve your IR35 pass ticket’.

What’s the definition of a self-employed copywriter?
According to HMRC, being self-employed means running your business for yourself and taking responsibility for its success or failure. For example, by being responsible for sorting out any copywriting amends in your own time. Or by paying for equipment yourself, such as your Mac/mobile, and running costs. By having your own website. By working for more than one client at a time. And by not receiving holiday or sick pay.

But be careful: having one client as your only source of income for several months may seem a huge cash-flow relief and send you off shopping at Waitrose not Tesco, but can look as if you’re employed by that client and could therefore fall within IR35.

So, back to what happened with my potential pitch …
My-lovely-accountant-of-many-years has always advised me against setting up a Private Limited Company. There’s more ongoing paperwork to file, Corporation Tax to pay, a set of Articles of Association to draw up, shareholdings to apportion, annual accounts to keep, blah blah blah – and higher accountancy fees to therefore pay too. It’s a lot of red tape.

As a sole trader, my tax responsibilities and VAT liabilities are easy to account for. As a limited company, the way you pay yourself for that hard-earned crust is quite different. However, as a sole trader, my liability is not limited and I’m more exposed to risk – and that was the reason for my potential client’s concerns, especially due to the sector they’re in.

So I discussed the situation with my-lovely-accountant-of-many-years who said he can easily set me up as a limited company in just three days if I win the business. Happy me. Happy client. Happy accountant being able to charge me more. Hey, it’s fine.

How to help save the flexible workforce
HMRC estimates that 170,000 workers are affected, especially IT contractors. People are concerned that private sector employers will stop using contractors. Stop The Off-Payroll Tax campaigners organised a protest at Westminster on 12th February for contractors and freelancers to lobby their MPs. Although the Stop the Off-Payroll campaign has ended, ContractorCalculator is still pushing the issue

Written by Caroline Gibson, London freelance copywriter and sole trader (for the time being, at least). I’m not an accountant so do speak to yours for IR35 advice, but I am qualified to tell you how to keep your freelance cash flowing; check out my 11 tips.

E: caroline@carolinegibson.co.uk T: +44 (0) 7957 567766

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