What does it mean?
You may have seen articles in the press about “Making Tax Digital” but what does this really mean? Making Tax Digital for Business (referred to as Making Tax Digital or MTD) is a government initiative to try and make it easier for small businesses to manage and pay their taxes. It aims to provide you with an up to date view on your tax position to help you to manage your finances better.
How will this affect me?
- All self-employed individuals, landlords and incorporated entities with business income over £10,000 will need to keep digital records of all their income and expenditure and submit these records electronically to HMRC. Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be affected.
- Those affected have the option to make the electronic submission in collaboration with their accountant or on their own.
- Updates to HMRC will need to be made at least quarterly, taxpayers will have an option to pay tax based on their quarterly submissions, if they wish. At the end of the year those affected will be required to submit a final summary for the year.
When will the changes happen?
Making Tax Digital has a phased plan which started in early 2016 and is set to end in 2020. Anticipated key dates include:
- April 2017 – Pilot of roll-out starts.
- 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.