March 2017
Steve Wilson, Junior Accountant in our Lytham office has written an article on the government initiative, Making Tax Digital:
Introduction
Making Tax Digital is a government initiative that sets outs to transform the current tax system and phase out the traditional tax return by 2020. With the move to an integrated online system already under way, we would like to take this opportunity to briefly discuss the initiative and outline what the changes will mean for you.
The initiative to date
Making Tax Digital can be seen a continuation of the move to more efficient, paperless tax management and reporting. The developments so far have given all taxpayers and small businesses access to a digital account which can be used to check and manage details with HMRC. However, from April 2017 we will begin to see the rollout of new features that will bring individual and business tax information into one place.
What does it mean for you?
Tax in one place
The digital account will act as a centralised hub providing a complete picture of all liabilities and entitlements. From here you will be able to register, file, pay and update your tax information online.
Making Tax Digital for individuals
Individuals will have access to all their financial data through the digital tax account. Quarterly submissions of information will effectively spell the end of the annual self-assessment tax return for the vast majority of people. An online billing system will be introduced, enabling you to pay outstanding tax which can’t be collected through PAYE.
Making Tax Digital for businesses
Through the digital account businesses will have a clear picture of all money owed, enabling you to budget accordingly. From April 2018, businesses will be required to submit tax information quarterly, similarly to how the current VAT system operates. This will give a real-time view of your business tax affairs and liabilities.
Timeline of proposed developments
July – Dec 2017
Digital tax accounts show taxpayers an overview of their tax liabilities in one place.
July – Dec 2018
Most businesses, self-employed people and landlords will be required to update HMRC quarterly for income tax and National insurance obligations through accounting software.
2019 – 2020
Most businesses, self-employed people and landlords will start updating HMRC quarterly for VAT and Corporation Tax obligations through accounting software.
Our opinion:
The digitalisation of tax has the potential to streamline the current tax system and simplify your personal and business tax affairs. We feel the centralised hub will provide you with a clearer understanding of your current financial affairs, which isn’t always simple to gauge under the current system. The other main change is the move to quarterly filing of information. This should provide a more up to date picture of both individual and business finances while signalling the end for traditional tax returns. However, it will demand a more hands-on approach to tax management and reporting, which is not necessarily what all businesses are looking for. Here at Forbes Watson, we will be quick to adapt to these changes and offer sound advice with your business in mind.
If you have any questions on the above please contact Steve Wilson in the office at [email protected] or on 01253 731355.
Sources:
Gov.uk. (2017). Overview of Making Tax Digital. Retrieved from: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Free agent. (2017). What is Making Tax Digital? Retrieved from: https://www.freeagent.com/glossary/making-tax-digital/
Citizen safe. (2017). Taxes are going digital. Here’s what you should know about it. Retrieved from: https://www.citizensafe.co.uk/tips-and-guides/taxes-are-going-digital