Making Tax Digital
Updated: Feb 21, 2019
Original article published in The Bay Magazine Swansea (October 2017) Link: https://www.theswanseabay.co.uk/2017/10/01/9838/
You may have heard about 'Making Tax Digital' which is a key part of the Government's plans to make it easier for individuals and businesses to get their tax right and keep on top of their tax affairs.
What is it all about?
Making Tax Digital is explained by the following four foundations;
Better use of information – customers will not need to report to HMRC information that it already has, or is able to get elsewhere, such as employers, banks or other government departments. The digital tax account will allow you to check that the information HMRC is holding is complete and accurate.
Tax in real time – you should no longer have to wait to the end of the tax year or longer to know how much tax you need to pay, the new system will operate as close to real time as possible.
A single financial account – At the moment you cannot see a single picture of your liabilities and entitlements in one place, this will be changing and will be similar to online banking.
Interacting digitally with customers – customers and agents will be able to interact with HMRC digitally and at a time to suit you.
What is the current timetable?
Under the new timetable:
Only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records, only for VAT purposes;
They will only need to do so from April 2019; and
Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
The government has given assurances that it will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record-keeping to become more widespread.
What can you do to prepare?
At Allchurch & Co we encourage using Cloud Based Accounting Packages to manage your business. This will ensure you are ready for Making Tax Digital and there are many advantages you will benefit from, such as;
Ease of access – Cloud based packages allow ease of access as you can log on remotely, via smart phones and while you are out and about not only when you are in the office.
Low cost – It is a relatively low cost accounting solution with no large up-front investment but paid via a monthly fee.
Real time financial information – Keeping your cloud based accounting software up-to-date means you will have much better information for decision making and cash management as at a click of a button you will know how much your debtors owe you, or how much you owe to your creditors.
Back up and data security – Cloud based packages provide you with peace of mind that your data is safe and secure.
Please get in touch if you would like to discuss how Making Tax Digital will impact you and your business, or would like support in preparing for the change.
Don’t forget if you need to register with HMRC for self-assessment for the tax year ending 5 April 2017, the deadline is 5 October 2017.