This month, Jack Posner (principal) and Darren Stone (manager) of Leon and Company Chartered Accountants in Leeds write about the much-publicised Making Tax Digital and how it affects you.
By now, you’ve probably heard the Government are trying to bring us right up-to-date in the tax world! Out went the old paper tax returns years ago (unless you’re one of the very few sending them by post to the tax office every October), and finally, the Government are hoping to now scrap tax returns – in any of its forms – altogether.
So how does it work? Firstly, by giving HMRC the biggest project imaginable. Making Tax Digital – or MTD, as most people call it – will mean the end of the annual tax return for millions. Every individual and business now has access to their own personalised digital tax account.
Essentially, all your information that HMRC already knows about you (e.g. PAYE income, bank interest received, etc), will be pre-populated into your digital tax account – so all you – or your accountant – has to do is add any information HMRC does not already know. This would include income such as, but not limited to, your business’s trading results, VAT returns, dividends received, income from property, etc.
The most publicised part of MTD is that these “returns” are not made once a year like with the current tax return system, but submitted online every quarter. However, there would also be a “5th quarter” to report at the end of the year which finalises all your figures and trading results once your accountant has completed the year-end adjustments, etc.
This is clearly a whole new way of thinking. Until last month, the roll out of these sweeping changes were scheduled to start next year (starting with VAT-registered sole trades, moving to smaller businesses and personal tax in 2019, and limited companies later on).
However, these plans have now been put back until at least 2020. The government claim this is to give businesses plenty of time to adapt to the changes. Whatever the reason, we should all realise that MTD is coming and we must all prepare for it. Voluntary take-up is available, and could be a good idea for those pioneers amongst us. After all, we will all need to bring ourselves up-to-date in the end – it’s just a matter of when.
