Making Tax Digital and what it means for you…
You may recall hearing about the new ‘Making Tax Digital’ (MTD) initiative, outlined at the March 2015 budget by HMRC and have probably been wondering what this could mean for your business…
Well, here at Mad About Bookkeeping we’ve done the hard work, so you don’t have to! Determined to get to the bottom of this initiative and find out exactly what MTD means for our small business and Sole Trader clients, we’ve detailed below who it applies to, what it all means, what you need to do to comply and when it all starts;
There are four main reasons for the MTD initiative;
1. To simplify tax and reduce the huge reporting burden on taxpayers.
2. HMRC plan to collect and process information affecting tax in real time (or as close as possible), meaning you shouldn’t have to wait until the end of the tax year to find out how much tax you should pay, which should hopefully reduce a build-up of money owed.
3. The aim will be for taxpayers to see their complete financial picture in one place, just like online banking.
4. To offer more support, assistance and visibility for taxpayers online, via web chats, secure messaging and online tracking of forms submitted, at any time to suit.
Who does MTD apply to?
Everyone will require a digital tax account. This is really easy to set up online using this link and you will just need your passport and National Insurance Number to make it through the identity checks: https://www.gov.uk/personal-tax-account.
Once your account is setup, you will need to provide us with your login details, so that we are able to file your quarterly accounts.
We would encourage you to set up your digital account now, if you haven’t already done so and if you need any assistance with this, we’ll be happy to help.
Only sole traders and landlords, or individuals with second incomes over £10k are currently affected, although by the start of the tax year in 2020, this will apply to all businesses, large and small and at this point, the full range of HMRC services will be digitalised and fully accessible from your online account.
What can I use my personal online tax account for?
You can already start using your personal tax account to:
– Check your Income Tax estimate and tax code
– Complete, send and view a personal tax return
– Claim a tax refund
– Check and manage your tax credits
– Check your state pension
– Track tax forms that you’ve submitted online
– Check or update your Marriage Allowance
– Tell HMRC about a change of address
– Check or update benefits you receive from work, such as Company Car, or Private Healthcare
In 2017 you will also be able to report additional sources of income through your account, the new online billing system will be in place, you will be able to see an overview of your tax liabilities via your account and interest paid by banks and building societies will be shown. Further developments will occur over the next couple of years with a complete range of digital services being available by 2020.
What changes will be required from you?
As detailed above, you must first set up your online account: https://www.gov.uk/personal-tax-account. Once this has been done and you have provided us with your login details, the main change for our smaller non VAT registered clients to be aware of, is that you will need to submit your paperwork quarterly, instead of annually.
We will be upgrading all of our software to reflect the changes and to ensure we’re ready to hit the ground running as and when the changes are enforced, so the sooner you can provide us with your digital account log in details, the better prepared we can be.
When will MTD start?
MTD will be mandatory from April 2018, although you may qualify for an extension, dependant on earnings. In the meantime, Annual Tax Payments will continue as usual.
We hope this brief outline will help you to understand MTD a little more, although our experienced and professional bookkeepers are on hand to help and assist with any queries you may have.
If you would like to understand the changes in more detail, please click here for a handy guide issued by HMRC – http://bit.ly/1T1bai2