Coconut has today launched a new smart current account combining banking and accounting services, designed specifically for the UK’s ever-growing freelance and self-employed workforce.
The app-based business current account will prepare customers for HMRC’s ‘Making Tax Digital’ which starts rolling out from April 2019. Coconut features automated tax management and expense tools, giving customers visibility into how much tax they owe with a real-time estimate, while also categorising their expenses for tax and allowing them to stay on top of client payments with instant notifications.
The Coconut Start account which ultimately aims to eliminate tax returns, is free and can be opened in minutes on a mobile – instead of waiting for weeks which is the current norm. The app will offer optional extra services, such as VAT management.
Recent data from Coconut’s Self-Employment Survey highlights how money becomes complicated business when you work for yourself. Unexpected tax bills, unpaid invoices and financial admin are holding people back from finding financial security, with a quarter of respondents admitting that budgeting for taxes is one of the top five headaches when working for yourself. Keeping track of expenses (24%) and completing tax returns (22%) were also high on the list of challenges that self-employed people face, with almost a quarter storing their receipts in a box waiting to be sorted at the end of the year.
Sam O’Connor, Co-Founder and CEO of Coconut said:“The growth of self-employment in the UK is one of the biggest structural changes in our workforce of our time, but self-employed people are still one of the most underserved groups of businesses when it comes to banking products and services that meet their specific needs.
“Staying on top of tax and expenses, getting paid on-time or managing an unpredictable flow of income is a big worry and time-suck for customers. And this is only going to become a bigger burden with Making Tax Digital requiring digital tax submissions quarterly instead of annually. We created Coconut to sort out these challenges for freelancers and we ultimately aim to eliminate the need for tax returns, removing a huge amount of stress for business owners.”
The nature of the UK’s workforce is changing. The growth in the numbers of self-employed workers has massively outstripped growth in standard employment over recent years with a record 4.6 million choosing to work for themselves.
Despite making up such a large proportion of the workforce, self-employed people lack digital solutions specifically tailored to their needs and are often time-poor, which means completing tax returns is a major source of frustration. This is supported by HM Revenue & Customs’ (HMRC) announcement last week that more than three million UK taxpayers are yet to file their online self-assessment tax returns for the 2016-17 financial year, putting millions of self-employed professionals at risk of an immediate £100 late filing penalty – even if they don’t owe any tax. Last year, 840,000 people filed their tax return late suggesting a windfall for HMRC of £84m in late fees, and with Coconut that will be a thing of the past.
HMRC’s new requirement for businesses and self-employed people to keep digital records and send quarterly tax submissions through it’s Making Tax Digital initiative will only compound this problem further for unprepared sole traders. Coconut aims to solve this through its innovative offering which will make the pain around self-assessment deadline day a thing of the past for the self-employed.