The government’s new Making Tax Digital scheme will mean that all businesses and self-employed people will move from doing 1 tax return doing to 4 tax returns a year.

Making Tax Digital is going to be phased in between 2018 and 2020. It will start with small businesses and by 2020 all self-employed people, freelancers, contractors and landlords will have been switched to Making Tax Digital. When it is fully rolled our Making Tax Digital will impact 1 in 4 tax payers.

 

4 Tax Returns a Year

With Making Tax Digital all businesses and self-employed people will have to start recording their income and expenses using specialist software. They will then upload this information direct to HMRC 4 times a year. The government suggest small businesses and self-employed people should do this without getting an accountant to check if their figures are correct. At this point they will be able to make a ‘voluntary’ tax contribution.

Currently the government are referring to this as there being 4 ‘tax updates’ per year. They are careful to say that this will not be 4 tax returns. However, if you are sending the information to HMRC and then possibly paying tax on it most people are going to see these as tax returns, whatever the government chooses to call them.

 

How much is this going to cost?

The government says that Making Tax Digital will cost small businesses about £70 a year for the first 4 years. The Federation of Small Businesses puts the average cost to each small business at £2770 per year. The Institute of Chartered Accountants puts the cost at £1,250 per year and the The Association of Certified Chartered Accountants puts the cost at £2,000 per year. Unlike the government they think that small businesses and self-employed people should speak to an accountant before sending their 4 tax returns to HMRC.

As an online accountancy company we work with lots of startups, small businesses and self-employed individuals. We know that most of our clients would be uncomfortable sending their figures direct to HMRC without having an accountant look over them first. We frequently find unclaimed expenses, or money taken from businesses in ways which are not tax efficient. By helping small businesses use their allowances correctly we frequently cut their tax bills by thousands of pounds a year. Obviously the government does not want this kind of thing to continue and would prefer it if small businesses and the self-employed paid more tax than they need to.

John Says Not to Making Tax Digital

 

#saynotoMTD –  Find out how you can join our campaign to Say No to Making Tax Digital