We’re only just out of dealing with the new GDPR regulation malarkey and already we need to turn our attention to the next thing on our to-do list: Making Tax Digital. Making Tax Digital (MTD) first reared its head in 2015 when it was announced that the current tax administration system was to be fully transformed by 2020. ‘That’s all well and good,’ I hear you thinking, ‘but what does this mean for me?’
Well to answer that question we’ve put together a list of some of the most common questions about MTD and what you need to do to prepare properly!
What on earth is Making Tax Digital?
Let’s start with the basics. Up until now HMRC only receives certain information about your personal or business income and expenditure. This happens whenever you submit your details to HMRC (when you’re paid) and when businesses submit quarterly VAT returns. However, no profit information is included at this time.
Going forward HMRC want to collect more information on a quarterly basis, giving them more insight into individual incomes and the profits businesses make.
Why the sudden change?
HMRC’s rationale behind this is that it will help eradicate the £9 billion they estimate are wasted each year due to tax errors and mistakes. What is not clear in HMRC’s communication is whether these savings are a result of additional tax they hope to collect from the taxpayer, savings on HMRC costs or a combination of the two.
Who does this affect?
Making Tax Digital will affect anyone who has a taxable income that is out with PAYE. This means you will ultimately have to report income and expenditure figures to HMRC on a quarterly basis if:
- You run your business as a Limited Company, partnership, or sole trader.
- You receive property income from a buy-to-let or furnished holiday let.
This information must be submitted electronically through MTD compatible software.
When do I need to make changes?
The introduction of MTD for VAT registered businesses will take place in April 2019, whereas the planned timescale for non-VAT registered business and property income is scheduled for April 2020. These changes become more urgent if you are currently not using commercial software to do your returns or do not know if it is MTD compatible.
How can Defacto-FD help?
With over a year to go till the deadline, we have already helped 99% of our clients transfer to an appropriate digital system. We work with you to make sure you choose the right software and know how to use it correctly so that you don’t get caught out by anything. We know it can seem confusing and tricky, but Defacto are here to help!
Please get in touch if you have any specific questions or stay tuned for more blogs, which we’ll be using to show how the software has helped our clients deal with MTD and save time in the process.