Over a quarter of the self-employed “know nothing” about switching to the new VAT rules for the government’s Making Tax Digital scheme. This is according to research by the IPSE.

The 1st April sees the new Making Tax Digital (MTD) rules come into effect. From this date on, VAT-registered companies will need to keep digital VAT records and they will have to submit electronic returns every quarter via paid-for software. This applies to all companies which have an annual turnover of over £85,000. Those businesses which have a turnover of less than £85,000 may have to submit their VAT returns digitally by April 2020.

Andy Chamberlain of IPSE, the freelancer group, said: “It is frightening that so many people who will be affected by this major change are still in the dark. There has been little in the way of advertising for people affected except through the businesses that are selling the mandatory software. The government is trying to sound supportive, but it must do more to communicate the changes and guarantee that no-one will be unfairly investigated or penalised for the widespread confusion about this.”

Moving to digital VAT is the first phase of a wider programme of MTD reforms. Taken together, these reforms will completely transform the way all businesses, including those who are self-employed, will pay tax and handle accounts.

The move is intended to streamline the tax process, for both HMRC and the taxpayers. The current self-assessment process will be swapped by frequent digital updates that will be submitted directly to HMRC via compatible software.