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Making Tax Digital

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is a HMRC initiative with ambitions to revolutionise the UK tax system and ultimately bring an end to self-assessment.

HMRC hope that Making Tax Digital will make tax administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system.

There have been a number of timetable amendments from HMRC, below we have compiled to most up to date information. 

 

Making Tax Digital changes for an individual 

For non-business taxpayers, MTD is already having an effect, seen by the introduction of the Personal Tax Account, Dynamic Coding (real time information changes in PAYE tax codes), and the introduction of Simple Assessment.

Personal Tax Account

Personal Tax accounts allow individuals and taxpayers to interact securely with HMRC, update details, and check tax affairs in real-time, including pensions and NIC’s. All taxpayers can now create and access their own Digital Tax Account. All taxpayers can now create and access their own Digital Tax Account and we’ve included an information sheet which sets out the steps you need to take to open your own account. Whilst HMRC is keen to direct taxpayers to their PTA, please be aware that advisors, do not have access to your PTA. This has been a problem in the development of PTA’s and HMRC is only now taking steps to address. Read more...

You can set up your account by visiting this link: gov.uk/personal-tax-account

Dynamic Coding

From July 2017, HMRC has been using ‘Dynamic Coding’ to update PAYE tax codes more frequently. Banks and building societies will, from April 2018, be required to report information to HMRC earlier and more frequently, than currently. This information will then feed into the Personal Tax Accounts and will be used by HMRC to estimate tax liabilities.

Simple Assessment

HMRC has changed the way in which they assess some taxpayers, removing the need for these individuals to complete a Self-Assessment Tax Return. Instead of asking customers to fill in a return with lots of information, HMRC will now use data it already holds to calculate the tax owed.

The first two groups to be affected are new state pensioners with income more than the personal tax allowance (£11,000) in 2016/17; and employees or pensioners with PAYE tax codes who have underpaid tax and who cannot have that tax collected through their tax code. HMRC started to write to clients from September 2017 with a tax calculation. This could be a P800 or a Simple Assessment letter (PA302).

For updated information on this campaign visit: gov.uk/government/publications/issue-briefing-simple-assessment-ending-the-tax-return/simple-assessment-ending-the-tax-return

 

 

Making Tax Digital changes for a business

The government announced on July 2017 that the pace of compliance would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.

They further announced in March 2019 that they would focus on supporting businesses to transition, and will therefore not be mandating Making Tax Digital for any new taxes or businesses in 2020.

VAT

Major steps have been taken for the introduction of Making Tax Digital for VAT.

Many VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT Returns.

If you are think these rules apply to you and you are not yet compliant. Contact our Digital Solutions Team on 01743 273273 or email cloud@wrllp.co.uk

Income Tax

Businesses can get involved in the Income Tax pilot now on a voluntary basis.Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self-Assessment tax return.

Those who join will need to send quarterly summaries of their income and expenses to HMRC using MTD-compatible software. In response, they will receive an estimated tax calculation based on the information provided to help them budget for their tax. The deadline for making Income Tax payments is not changing.

Find out more: gov.uk/guidance/use-software-to-send-income-tax-updates

 

 

What to do next?

We are advising our clients to make this regulation an opportunity by moving your account onto a cloud accounting software. 
Going Digital makes managing business finances more straightforward. 
By making it easier to get things right, digital record keeping will reduce the risk of unwelcome and costly HMRC compliance interventions and will help businesses to manage their cash flow more effectively, whilst also giving business more control and better capability to forward plan.

The advantages of digital record keeping 

Businesses, regardless of turnover, can benefit from using software to keep digital records:

1. Process data efficiently
Improve the efficiency of your data processing, software can digitally read text from invoices and receipts and input it into your digital accounts. Banks can also be linked to update your account transaction data on a regular feed. 

2. Learn from instant reporting
Instant reports can be extracted from your digital data, so you can drill down into the figures. No more waiting for month or year end to find out how you’re performing. 

3. Protect your future
Forecasting and reporting becomes simpler, you can visualise your financials and carry out complex analysis to create scenarios-based forecasts, giving you a clear view of your cashflow and performance.  

 

How we can help

We are Platinum ProAdvisors for QuickBooks and Partner for Xero, so are well placed to offer expert advice on the benefits of this software, as well as support you through the transition.

 

We offer free "Go Digital" workshops on MTD and Cloud, use the link below to see our upcoming sessions:

 

I want to find out more about Cloud Accounting

I want to find out more about Making Tax Digital

 

Contact our Digital Solutions Team on 01743 273273 or email cloud@wrllp.co.uk