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Micro-firms "in the dark" about digital tax

More than a year after the Government first announced plans for online tax filing, almost half of micro-business owners say they don't know what Making Tax Digital actually is.

A new survey by accounting software provider FreeAgent has found that 43% of micro-business owners and freelancers are not aware of the Making Tax Digital initiative.

And, as the Government launches new consultations on its digital tax plans, the research shows that 86% of respondents who did know about Making Tax Digital said they had not been provided with enough information about the proposals at this stage.

If Government plans come to fruition, small businesses will have to keep digital financial records and provide quarterly updates about their tax to HMRC.

However, the poll shows that a move towards more online reporting is not by any means unpopular - only 8% of all micro-businesses said they felt negatively about digital tax. Of those that are aware of the proposals, 20% said they thought it would make their life harder, while 45% said the plans would make their life easier.

Ed Molyneux, CEO and Co-founder of FreeAgent, said: 

"Making Tax Digital will be one of the biggest changes made to the UK tax system for generations and will start to impact businesses from as early as 2018. But it's clear from our research that many micro-businesses still require more information about what tax digitisation actually is and how it will potentially impact them."
There has been some confusion in recent months about how the micro-business sector will affected by digital tax, Molyneaux said, including stories about how businesses will need to file a full tax return every three months.The reality, he said, is that "when micro-businesses are well-informed about the changes, they are actually quite positive about them - with only a small minority of people we polled saying that they felt Making Tax Digital would make their life harder."

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