The new Making Tax Digital requirements impacts YOU
What is Making Tax Digital?
Making Tax Digital is a government initiative that sets out a bold vision for ‘a transformed tax system and the end of the tax return’
Making Tax Digital is all about making tax administration more effective, more efficient and easier for taxpayers, through the implementation of a fully digital tax system.
When will it start?
MTD is planned to start in April 2018. and is expected to be fully implemented by 2020.
Who does it apply to?
The changes will apply to a wide range of taxpayers, including most businesses, self-employed people and landlords, as
well as individual taxpayers who have an annual turnover of more than £10,000.
What does it mean for me?
One of the biggest implications for small business owners is the eradication of the annual tax return.
By 2020 most businesses, self-employed people and landlords will instead be required to keep track of their tax affairs digitally and to update HMRC at least quarterly via their digital tax accounts, or more often if they’d prefer.
HMRC has said that this doesn’t mean you’ll have to complete a full tax return four times a year; you’ll simply need to provide more regular updates online.
The introduction of a ‘real time’ tax system means that instead of reporting information on tax returns and paying liabilities long after the end of the tax year, you will be able to see a real-time view of your business tax affairs and liabilities through your digital accounts. This
should make it easier to understand how much tax you owe and to budget accordingly.
The upshot of all these changes is that, if Making Tax Digital applies to you, you’ll be required to use digital tools, such as software or apps, to keep records of your income and expenditure.
HMRC has stated that it won’t provide its own software, but will ensure that basic apps and software products are available. However, many businesses and their accountants will choose to use more comprehensive commercial software, like QuickBooks as used by LeeP Accountants.
These tools use the data from your day-to-day business activity to build an accurate picture of your business’s tax data, highlighting any possible errors and offering prompts for information that might otherwise be overlooked. Once your software has compiled
the relevant data, you or your accountant will then submit it directly to HMRC on-line.
LeeP Accountants will be happy to talk through the options with you and explain how they plan to work with you as Making Tax Digital is rolled out.