Making Tax Digital is part of the governments new initiative to simplify the management of individuals and businesses tax affairs. The aim is to make it easier to keep up to date with tax matters and ensure that tax is calculated more accurately, by collecting and processing tax information as close to real time as possible - meaning the end of the annual tax return!
Therefore starting from April 2018, most businesses and self-employed individuals will be required to digitally maintain records and update this information electronically with HMRC, on at least a quarterly basis. By 2020, it is expected that most companies, partnerships, individual taxpayers who are self-employed and those letting out property will be required manage their tax affairs via this new digital system.
What is the impact of 'Making Tax Digital' for you...
- A single digital financial account, allowing you to view all your different taxes in one place, what payments are due and the ability to offset over payments from one tax against underpayments in another.
- Simplified quarterly reporting of taxable income
- Annual tax return will be replace with an annual declaration, which HMRC will aim to automatically pre-populate with some of the required figures, such as bank interest, employment income, pensions etc.
- Reconciliation of quarterly return info to year-end accounts and annual declaration, along with checking pre-populated data.
- Obligation to use an appropriate accounting software or smartphone app to maintain and submit accounting and tax information.
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Are you ready for 'Making Tax Digital'?
With the requirement for digital data and electronic communication of this information to HMRC, the use of an app or specific accounting software is going to be essential for maintenance of business and personal tax records.
Cloud Base Accounts can provide you with the necessary software to submit digital returns; and carry out the quarterly record keeping to ensure you are compliant with the new MTD regime.
Call for more information or to get started with Digital Accounting.