Making Tax Digital was first announced in the March 2015 budget. Plans are underway to have this system fully implemented by 2020, with the initial stages already underway, and many businesses due to start using the system by the end of next year.
Every individual taxpayer will have a Personal Tax Account, which will bring together all of their tax information in one place. Details of employment income, bank interest received, and dividends from listed companies will be automatically uploaded and stored in the Personal Tax Account.
The burden of Making Tax Digital falls on self employed individuals, who will have to update their account with quarterly income and expenditure figures. Currently many small businesses who are below the VAT threshold only report their profits once a year, on their self-assessment tax return. Under Making Tax Digital, these businesses will need to report on their business every 3 months, with the exception of very small businesses – the current suggestion is those with a turnover below £10,000. Landlords will also have to report quarterly, if their rent is above £10,000. The quarterly reports will need to be made online.
Once the four quarters have passed and been reported on, a final report can be submitted, with adjustments for capital allowances and other tax or accounting adjustments, in the same way that accounts and tax returns are currently completed.
Making Tax Digital is one of the biggest overhauls in the tax system in recent years, in an effort from the government to make Britain’s tax system one of the most advanced in the world.
HM Revenue & Customs have promised free software to individuals to help them comply with Making Tax Digital, in a similar way they provide a free basic tools software for submitting tax returns online.
Here at Kelsall Steele we are happy to discuss the upcoming changes and how they will affect you, as well as suggesting reporting options that will suit you individually. This can include advice on how and when to submit information to HM Revenue & Customs, choosing a suitable software package, or taking the burden away from you by completing the quarterly reporting on your behalf.