UPDATE: Due to the snap General Election held in June 2017, MTD has been postponed by one year and will begin from April 2019.
Spring has arrived, and if you’re anything like me, you’re probably looking forward to a good spring clean.
If so, you might be happy to hear about the government’s latest initiative.
Making Tax Digital does exactly what it says on the tin: by 2020, all taxpayers, both individuals and businesses, will have an online account where they can update their details and pay their tax liabilities online.
- no more paper tax returns
- all of your tax information in one place
- the ability to update your account in real time and pay tax based on your activity during the year
- no need for tax rebates as you will only pay what you owe
All being well, the new system should decrease, if not remove, the need to contact HMRC directly. Updating names and addresses will be as simple as a few taps on a screen.
It also means that many aspects of the system will become paperless. Whilst certain information will still need to be communicated via letters, the amount of paperwork will be dramatically reduced, therefore decreasing the amount of clutter created by the tax system.
Et voila! That’s one less thing for you to tidy when you do your spring clean.
The government has set a deadline of two years for businesses to move to cloud accounting software in preparation for the complete digitisation of the tax system in 2020. Software such as Quickbooks, Xero and FreeAgent allow business owners and their accountants to keep up to date records that can be updated in real time, from anywhere and any device.
The first to be affected will be landlords and the self-employed, as well as anyone who receives dividends from their company. In the Spring Budget, Hammond announced that those who fall under the VAT threshold (currently £83,000, increasing to £85,000 from April) will not have to comply until 2019.
Making Tax Digital will be a learning curve, but by 2020 keeping HMRC up to date with your financials and dealing with your tax liabilities will be a matter of logging into an app and clicking a couple of buttons.
Are you already using your digital tax account? How has the move to a digital system effected your business?
To discuss how MTD will impact on your business and what you need to do to comply, get in touch with Tax Champion.