The Anarcho-Tyranny of Making Tax Digital

Thanks to becoming an accidental landlord of a property that only just washes its face, I have been pulled into the deathly realms of Making Tax Digital. Hopefully others entrapped by MTD are not as useless as me, but after the ordeal, I can only conclude that MTD is the latest wheeze in the ongoing NDC (National Demoralisation Campaign).

The dread letter arrived from HMRC demanding I register for MTD and access the relevant software. I like to think I’m a vaguely competent person but the combination of HMRC and ‘new software’ set me out in a black sweat. For the past 10 years, like many sole traders, I’ve managed to do my self-assessment tax return in a day; but the noise around MTD is so ominous that I dedicated a week in July to sort it all out. Though HMRC have generously said they won’t fine anyone in the first year, the deadline for first submission is August 7th. I am a law-abiding person, hate that feeling of being in the wrong and want to avoid angry letters. Like a biddable lemming, I am keen to do the right thing. Oh, but it was horrible.

Day One:

• Register for MTD with HMRC, relatively straightforward.
• Ask Claude, Grok and ChatGPT, friends and colleagues what is the best and easiest MTD software. On their recommendations sign up to QuickBooks (also known as Intuit) for an introductory offer of £10.80 a year.
• Spend an afternoon navigating the site. I am disappointed to discover there is no section similar to HMRC’s Self-Assessment software in which to input income and expenses.
• Link QuickBooks to HMRC; straightforward.

Day Two:

• Feel optimistic for my onboarding call with QuickBooks – 30 mins to explain how to use the software.
• Attempt to explain to the lady from an overseas call centre that I have three small income streams (freelance writing, school work and a rental property) – I would like to input my income and expenses for MTD. She encourages me to link my Barclays bank account to QuickBooks and I do. The results terrify me. My bank account is now live on our shared screen: Aldi, Sports Direct, Lidl, Amazon, Scopay, Scopay: -£132. She explained I needed to go through every transaction and allocate it a name, QuickBooks would then automatically put everything into the relevant MTD stream. Given the fact that my freelance writing income for the quarter comprises two payments, and the school income is scanter, it seemed an entirely unnecessary operation to unpick the meagre income from the vast domestic expenses.
• I quickly delinked my bank account and asked for another method. She told me to get a business bank account.
• She did agree there was another way, so we attempted to upload a receipt from a freelance writing payment made in June. We did that, and she said that I had successfully inputted an expenses receipt. I said, “No, it’s income.” She said it had been inputted as an expense. The 30-minute call ended, and I found myself crying.

Day Three:

• Use QuickBooks AI assistant which explains that for three different income streams, I need three different QuickBooks accounts. Have another small cry.
• Delete QuickBooks and unlink the software from HMRC.
• Call Barclays to enquire about a business account. It would be free for the first year then £8.50 a month thereafter.
• Ask AI better questions and sign up to Xero (£1.40 per month plus VAT for the first six months, then £7 a month) which allows three income streams from one Xero account.
• Find out if this subscription can be expensed. It can.
• Link Xero to HMRC.
• Spend the rest of the day navigating Xero and finding it impenetrable. Both QuickBooks and Xero have all sorts of snazzy tools that I simply don’t need.

Day Four

• Visit a local accountant in person. She kindly says that we can use this introductory session to help me navigate Xero. After an hour she is unable to work out what to do. On the verge of tears, I ask if I can just get her firm to do my MTD and tax return for me as I’m finding the software impossible. She says they use IRIS but would charge me £90 for each quarterly MTD return plus £350 for the full tax return in January. That would be £710 a year. She said given what I earn, this is not worth it. She says she will get one of her colleagues who is good at Xero to help me. She says the whole thing is unnecessary and clearly only happening because the Government wants people to start paying tax quarterly. Go home and have another small cry.

Day Five

• Make a double coffee, put on some Palestrina and sit at the kitchen table determined to navigate Xero myself. Fail.
• Furiously ask AI who was the founding genius of MTD: George Osborne.
• Receive an email from Xero asking me if I need an onboarding Zoom call. There is one slot left for the whole of July and August: 7.45am the following morning. I book it.

Day Six

• Take my son to Gatwick Airport in the early hours. Sit in a motorway McDonald’s at 7.45am and connect with Habib from Xero. I tell him what I need to do and he sets up a ‘dummy bank account’ on Xero. He shows me how to input six lots of figures (income and expenses for each income stream), configure it to MTD and send the whole thing off. It was easy but entirely hidden from the ordinary person / AI assistant unfamiliar with obscure corners of accounting software.

Day Seven and Onwards

• Cancel second meeting with accountant.
• Tell Barclays I don’t need a business account.
• Fill in feedback form to say that Habib was excellent.
• Have a slight panic that I’ve inputted the correct figures. Double check my workings. Feel ok again.
• Feel sad that I’m trying to do the right thing and this shouldn’t be so difficult.
• Puzzle over how those high street cash businesses navigate HMRC.
• Look at the news, and feel tearful about the garbage governments of all colours spend my meagre taxes on.
• Wonder how it’s possible for the Government to have spent £1.4 billion on MTD.
• Flag November 7th on the calendar to do the next quarter MTD return.
• Ponder if I would rather work and earn less to avoid this nonsense.
• Remember the income threshold is being lowered in 2028 to £20,000 so will be difficult for most people to escape.

Joanna Gray is a writer and confidence coach.