Making tax digital for gig economy workers?

fistfulofsteel

I get all my income from working on online platforms and am worried about being forced into MTD if I cross the £30,000 threshold in 2025-26 tax year.

I've looked at MTD software but it doesn't seem designed for people like me. My process is to log onto a platform, choose work I want to do, and get paid via PayPal in USD at a rate set by the platform. Once a year I look up how much I've withdrawn to my bank account in GBP in total over the year and enter that on my tax return as self employment income. That's the extent of my "record keeping" and HMRC have been happy with it for the last 15 years.

There's no possibility of sending invoices at any point in the process, but MTD software seems to expect them? Will I have to start making fake invoices to match every payment I receive? I get paid multiple times a week so that's going to be a huge admin burden.

The chance of the very small, specialist, non-UK-based platforms I work for reporting directly to HMRC is zero: they'd delete their UK workers' accounts rather than deal with the admin. Can I rely on PayPal to report my income?

penners324

That's exactly what HMRC want you do. You thrn also create the purchase bill to account for any costs.

You can either do this yourself or find another company to do this for you.

Creating a sales or purchase invoice will take a couple of minutes at most.

fistfulofsteel

penners324 said:

That's exactly what HMRC want you do. You thrn also create the purchase bill to account for any costs.

You can either do this yourself or find another company to do this for you.

Creating a sales or purchase invoice will take a couple of minutes at most.

I've never had any costs. I claim simplified expenses (£1000 a year) for working from home. 

This sounds like it's going to be at least 1,000 times more admin than I currently have to do. I don't even know what I'd write on an invoice. My effective hourly earnings might be higher if I make sure I keep my income just below £30,0000 next year.

penners324

fistfulofsteel said:

penners324 said:

That's exactly what HMRC want you do. You thrn also create the purchase bill to account for any costs.

You can either do this yourself or find another company to do this for you.

Creating a sales or purchase invoice will take a couple of minutes at most.

I've never had any costs. I claim simplified expenses (£1000 a year) for working from home. 

This sounds like it's going to be at least 1,000 times more admin than I currently have to do. I don't even know what I'd write on an invoice. My effective hourly earnings might be higher if I make sure I keep my income just below £30,0000 next year.

You don't need to write anything on the invoice if it's not going to a customer.

Does the system you use integrate with any accounts system? Highly likely it does. Then it's even easier 

uknick

First, the MTD threshold will be dropping to £20,000 from April 2028 so you need to plan for this unless you're intending to drop your hourly rate even further.

Next, you're running a business that is generating profits of £29k per year based upon turnover of about £30k.

If your clients really don't require invoices to pay your bill, you should already be raising what is called a proforma invoice.  These are only used by you for internal purposes and are never sent out to the client.  You may need these if HMRC decide to audit you, unlikely but you never know.

Yes, it is extra paperwork, but I doubt would take very long each month.

Finally, what are you doing about getting some MTD software to do your submissions?

fistfulofsteel

penners324 said:

fistfulofsteel said:

penners324 said:

That's exactly what HMRC want you do. You thrn also create the purchase bill to account for any costs.

You can either do this yourself or find another company to do this for you.

Creating a sales or purchase invoice will take a couple of minutes at most.

I've never had any costs. I claim simplified expenses (£1000 a year) for working from home. 

This sounds like it's going to be at least 1,000 times more admin than I currently have to do. I don't even know what I'd write on an invoice. My effective hourly earnings might be higher if I make sure I keep my income just below £30,0000 next year.

You don't need to write anything on the invoice if it's not going to a customer.

Does the system you use integrate with any accounts system? Highly likely it does. Then it's even easier 

What do you mean by system I use? I use a Google sheet to add up what's come into my bank account when doing my tax return. The platforms I work for don't integrate with anything.

fistfulofsteel

uknick said:

Finally, what are you doing about getting some MTD software to do your submissions?

Every so often I look at MTD software, get incredibly confused, and give up. I've been doing this every couple of months since MTD was first announced years ago.

I would work fewer hours to stay under the threshold, not drop my rate. I don't decide what my rate is - the platform does.

Thanks for the term proforma. At least now I know what to Google.

SVaz

Why will you need to create fake invoices?
You’ll have a digital trail via payments into your bank, which is all hmrc will require for mtd. 

Get something like Freeagent account software, link your business bank account and all you have to do is ‘approve’ the bank payment in the right category; i.e. sales. The payment is the digital ‘evidence’.  Job done.  

Any expenses can be digitally saved via screenshot and matched to the corresponding bank payment.  The software will send the retirn straight to hmrc.

fistfulofsteel

SVaz said:

Why will you need to create fake invoices?
You’ll have a digital trail via payments into your bank, which is all hmrc will require for mtd. 

Get something like Freeagent account software, link your business bank account and all you have to do is ‘approve’ the bank payment in the right category; i.e. sales. The payment is the digital ‘evidence’.  Job done.  

Any expenses can be digitally saved via screenshot and matched to the corresponding bank payment.  The software will send the retirn straight to hmrc.

Ok that sounds doable. I've already set up a separate current account which I only use for paying into from my PayPal (which is where the companies pay me). So I can just connect that?

SVaz

Yes you can.
I have my mettle business account linked to my freeagent software and I also created a ‘cash’ account as I’m sometimes paid in cash by customers.
For sub contracting work I don’t raise invoices, I’m simply paid through an online portal into mettle and I just have to approve the payments in freeagent in the right category.  

DullGreyGuy

fistfulofsteel said:

My process is to log onto a platform, choose work I want to do, and get paid via PayPal in USD at a rate set by the platform. Once a year I look up how much I've withdrawn to my bank account in GBP in total over the year and enter that on my tax return as self employment income. That's the extent of my "record keeping" and HMRC have been happy with it for the last 15 years.

So, hypothetically, you earn $100,000 in a bumper year but are only transferring £25,000 into your bank account how much are you declaring? It sounds like you are only declaring the £25k which would be tax evasion as you've not declared the other c£52k

Have HMRC been happy with it or simply not asked questions? There is a big difference between flying under the radar and having an inspection which results in HMRC saying everything is being done properly.