Making Tax Digital
In pursuit of helping companies and individuals with their taxes, HMRC's new project MTD (Making Tax Digital) will move the majority of tax affairs online. The whole system will become one of the most advanced tax systems in the world.
The main reason for constructing and fulfilling this project is to help society and the government in making taxes more effective, efficient, and simpler for the taxpayer.
Due to the complexity of this project, each of the different tax areas will be introduced in different stages:
· 2015: Introduced personal tax accounts to easier manage personal affairs.
· 2019: The first stage of MTD was implemented. Businesses that are VAT registered and have a turnover that is more than £85,000 are required to submit all returns online via chosen accounting software and keep their records digitally.
· April 2022: The second stage of MTD will be implemented for VAT registered companies. This stage included a new group; businesses that are VAT registered and their turnover is below £85,000 need to follow the same rules as the companies above.
· April 2023: At this stage, MTD will be implemented for taxpayers who file Income Tax Self Assessments for business (self-employed) or who have property income of more than £10,000 (landlords) – from the start of the tax year 2023/24.
With this change, HMRC will expect the self-employed & landlords to use chosen and compatible software to provide quarterly summaries of the income and expenses – the records of which will need to be recorded in the software (and submitted via the software to HMRC). This will help in estimating the tax owed to HMRC. The annual report will still need to be submitted as based on this the final tax bill will be calculated and any allowances and reliefs added.
HMRC believes that thanks to this solution there are going to be fewer mistakes in filling the tax returns, avoiding tax losses for both parties. Moreover, the data provided will be more accurate as a result of it being updated regularly and stored online.
It is really important that you are prepared and ready for these changes. If you would like any further information on how we can help in making your Tax Digital or if you need any further clarification, please get in touch.
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