Making Tax Digital
Digital services are all around us and, for many, are now an intrinsic part of our everyday lives. Just think of Internet banking, online shopping and event booking all the way through to online accounting packages that allow you to run and even automate invoices, manage your expenses and get up to the minute snapshots on cash flow.
In essence, this is exactly where Making Tax Digital (MTD) sits – a digital service aimed at efficiency. The press has had mix reviews, especially in the early consultation stages, but realistically MTD should make it easier for businesses (and individuals) to get their tax correct. Rather than having to complete forms each year and duplicate information already held by government departments, your digital tax account will be populated with accounting data and information already held by other departments and you will be required to check this data for accuracy every three months.
Who will be affected by MTD and what is involved?
Initially, MTD will only be mandatory for VAT registered businesses (businesses with over £85,000 income) and these businesses must comply by April 2019.
Making Tax Digital for Income Tax is available to businesses and sole traders on a voluntary basis should you wish to get ahead of the game but will not become compulsory until 2020 at the earliest.
Advantages of MTD
- The end of the dreaded year-end.
- No more wading through boxes of receipts in a mad rush at the end of the year trying to remember everything while still in a Christmas brain fog.
- Better visibility of your tax liability.
- Tax will be calculated on a quarterly basis using real-time information so you should not receive any unexpected surprises.
- Tax bill reductions.
- You will see how your tax bill is shaping up and will have more opportunities to regularly review how you can reduce your bill through effective tax planning.
Of course, there will be some impact for some businesses. If you have not already embraced cloud accounting platforms now is the time as MTD does require the use of technology to report in the information required. Set up correctly, using a recognised supplier will make this a smooth transaction.
A helping hand
Do you actually require an accountant for Making Tax Digital? The honest answer is no.
This is something that you can do yourself. However, with the increased frequency of reporting and the learning curve associated with implementation, it may be advisable to seek professional advice from an accountant who understands the Making Tax Digital process and also cloud accounting platforms.
Whether you require one-off support to ensure everything is correctly set up or you would like ongoing support Nicola Hageman Accountancy can help. Take a look over the services we can offer and feel free to like us on Facebook to get regular tips and updates on best accounting practices.