UPDATE 27/04/2017- The Making Tax Digital scheme has been dropped, but the scheme is expected to bereinforced in the early stage of next parliament, soon after the general election on June 8, 2017.
Contractors are likely to face a bill of £280 for digitally recording their taxes on a quarterly basis under the newly introduced ‘Making Tax Digital’ scheme.
The scheme will operate from April 2017 which will replace the annual tax return and is planned to be fully implemented by 2020.
Businesses, contractors and freelancers are expected to incur transitional costs as they move over to the new MTD scheme. The current estimate made by HMRC is that the average transitional costs will amount to £280 per business, over the period 2017-2018 to 2020-2021.
Who is affected?
HMRC has stated that businesses, self-employed people and landlords will be required to start using the new digital service from:
- April 2018 if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs)
- April 2019 if they are registered for and pay VAT
- April 2020 if they pay Corporation Tax (CT)
What’s the Transitional Cost?
As the move takes you to the digital world, some businesses may be required to purchase new hardware and equipment.
Costs will arise from the extra time contractors will spend on familiarising themselves with the new digital tools that will be used to submit the information on a quarterly basis.Funds may have to be spent on purchasing new software, apps or upgrading the current software that you use.
The costs will depend on what software is available on the market and on which portal you will find to be accessible.It’s possible to find contractor accountants that use cloud based accounting software that makes uploading your tax information easy and hassle free.
FreeAgent’s online software allows you to bring all your finances together, from expenses to payroll, to VAT to tax returns.
Gorilla offers an all-inclusive package for £85 per month plus vat which includes your membership with Free Agent.
If you would like to find out more about the Gorilla service, give a member of our New Business team a call on 0330 024 0406, or you can email firstname.lastname@example.org.