What is Making Tax Digital?
Making Tax Digital was first announced in the March 2015 Budget as part of the government’s plan to modernize the tax system, making it easier for businesses and individuals to deal with their tax affairs.
It is a massive project, which will insist that most businesses, including sole traders and landlords, keep their accounting records using computer software. The software will automatically update HMRC with relevant data on business income and expenses on a quarterly basis.
This will result in a streamlined system and see the end of the annual tax return, transforming tax administration so it is more effective, more efficient and easier for taxpayers.
When will it affect me?
HMRC have recognized that many small businesses would need time to prepare for the changeover and have revised the timetable to the following:
April 2019, businesses above the current VAT threshold of £85,000 will be required to maintain digital records – but only for VAT purposes.
April 2020, further roll out of Making Tax Digital is expected to affect small businesses under the VAT threshold.
Businesses will not be asked to keep digital records or to update HMRC quarterly for other taxes until 2020 at the earliest.
How will it work?
The requirement for digital records will be completed via specific software, which will link directly with HMRC for the purpose of submitting the data to them.
Whilst this may include spreadsheets, there will be no method of directly uploading data to HMRC from the spreadsheets, it will need to be uploaded through approved accounting software that has been linked with HMRC.
Help with Making Tax Digital?
We fully understand what is required to manage your business records digitally and have spent time developing the right support services to help you through this period of change and to ensure that you understand what is required to manage your business records digitally.
If you are still using paper-based records you should seriously consider changing to a digital system soon, making an easier transition to digital reporting when it is introduced.
We can offer support, training or a bookkeeping service which will ensure that you comply with all aspects of Making Tax Digital.
For more information on how we can help you and your business, please download our guide or call us on 01623 238523.