Making Tax Digital

So, what is Making Tax Digital?

Making Tax Digital is a government initiative that sets out a vision for ‘a transformed tax system and the end of the tax return’ by 2020.

The aim of the initiative is to make tax administration more effective, more efficient and easier for taxpayers, through the implementation of a fully digital tax system.

The changes outlined in the Making Tax Digital initiative will apply to a wide range of taxpayers, including most businesses, self-employed people and landlords, as well as individual taxpayers.

 

What’s changing?

HMRC has released consultation papers that outline what it’s planning to do and ask for feedback from taxpayers and their accountants.

The current plans, in brief, are:

  • The smallest businesses, where the trader has total income under £10,000, will be exempt from MTD.
  • Taxpayers will send in summaries of their income and expenditure at least four times a year.
  • More taxpayers will be able to use the cash basis of accounting.

 

When will the changes happen?

Making Tax Digital has a phased roll-out plan which started in early 2016 and is set to end in 2020. Anticipated key milestones include:

  • July – December 2017 – Digital tax accounts show taxpayers an overview of their liabilities in one place.
  • July – December 2018 – Most businesses, self-employed people and landlords start updating HMRC quarterly for income tax and national insurance obligations through accounting software.
  • 2019 – Most businesses, self-employed people and landlords start updating HMRC quarterly for VAT obligations through their accounting software.
  • 2020 – The full range of HMRC services is available through digital tax accounts.

More information about the Making Tax Digital initiative, along with a detailed breakdown of timescales and milestones, is available from gov.uk.

 

What’s next?

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 Xero.

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, either via a computer or a smartphone.

At Bright Partnership we are Gold Partnered Xero providers and all of our staff are Xero certified advisers.

We will be happy to talk through the options with you and explain how we plan to work with you as Making Tax Digital is rolled out.

For more information please do not hesitate to contact a member of the Bright team on 0161 927 3090 or info@thebrightgroup.co.uk

0161 927 3090

Victoria House, Victoria Road, Hale, Altrincham WA15 9AF

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