Can we get Philip to u-turn on Making Tax Digital?
The Chancellor, Philip Hammond, has been forced to do a u-turn on his proposals to increase National Insurance for self-employed people contributions by 2%. His plan would have cost an average self-employed person £240 a year and were seen as an unfair tax on hard working entrepreneurs and freelancers. Philip Hammond has said that his u-turn on national insurance shows he is willing to listen to the will of the people. We are urging him to listen to the people again and to scrap Making Tax Digital which is going to cost self-employed people and small businesses 10 times as much as the National Insurance rise would have done.
Can Small Businesses Afford an Extra £2000 a year?
Making Tax Digital is due to be introduced for self-employed people in April 2019. The Association of Certified Chartered Accountants estimate it will cost self-employed people and small businesses £2,000 per year. The Federation of Small Businesses estimate it will cost £2,700 per year. As with the National Insurance rise this new cost is being targeted specifically at entrepreneurs, freelancers and the self-employed as the Conservative government doesn’t think they are being taxed enough.
Some MPs within Philip Hammond’s own party have already started to question how sensible Making Tax Digital is, and there is widespread horror at these proposals from small business groups and accountancy professionals. Much of the concern about Making Tax Digital is that the government seem to have got their sums drastically wrong. Where small business groups and accountants are putting the cost to small business and the self-employed of Making Tax Digital at £2000 to £2700 per year the government puts it at £70. Even then the government only thinks the extra £70 will be for 4 years after which they don’t think it will cost anything.
The Government’s Figures are Just Plain Wrong
As an online accountancy practice who specialise in dealing with self-employed people, and with micro and small businesses, we know that the government’s £70 cost estimate is wrong. The government’s estimate was based on people using free software which doesn’t exist. To get the software they need small businesses are going to have to pay out at least £300 per year. The government’s estimates are also based on everyone moving from doing 1 tax return a year to doing 4 ‘tax updates’ without ever seeking any help from an accountant. We know that for most self-employed people and small businesses in the real world this is simply not going to happen.
Philip Hammond has already made one concession on Making Tax Digital by moving the start date for businesses with a turnover under £83,000 from April 2018 to April 2019. He did this after acknowledging issues with the timetable, but we suspect that the real cause of the delay is that the government are starting to realise how bad their maths is.
We are urging Philip Hammond to go the whole hog and abandon Making Tax Digital as an ill-conceived and badly planned attack on entrepreneurship. If you agree you can help us by joining our campaign to Say No To Making Tax Digital.
