What is all the fuss about?
Making Tax digital (MTD) is a government initiative that is designed to transform the Tax system by 2020, and will mean the end of the traditional annual tax return.
However, the starting timetable is much sooner than this – 2018 for some people.
In essence it will require businesses, landlords and the self-employed to send summary data to HMRC every quarter, through a Digital method (such as Book-keeping software or an App).
What’s the timetable for this?
Businesses and individuals are required to comply with this from the following dates:
April 2018 – self-employed (Sole Trader) with annual turnover more than £85,000 AND Landlords
April 2019 – self-employed (Sole Trader) with annual turnover less than £85,000
April 2020 – Limited companies
What else is covered by Making Tax Digital?
All Individuals will have personal tax accounts, which will be updated with their PAYE and Bank interest income periodically.
What does this mean for those that are self-employed or run a business?
Businesses will be required to submit their accounts every quarter (followed up by a year-end reconciliation to ensure the tax liabilities are correct), and they will need some form of software to keep their records, and submit the data to HMRC.
This will means that businesses and self-employed will no longer be able to keep the income and receipts in a shoe box or carrier bag, until the end of the tax or financial year, and then deal with it close to the tax return deadline.
It means information has to be recorded digitally and on a more regular basis.
If I already use a book-keeping software solution such as Xero, Quickbooks or Sage – will I need to do anything differently?
Software providers are looking at making their solutions MTD-compliant, and so you won’t need to use any further software if you already use such a solution. What you will need to do is consider the accuracy and completeness of the data recorded in the software.
What if I don’t use book-keeping software – does that mean I will need to sign up to one?
While a cloud-based book-keeping software solution is certainly one answer for many businesses, for those that don’t want the cost of a full-blown book-keeping package, then there are other solutions.
At AJ Accountancy, we are looking at an App which will allow users to log income, receipts, mileage, etc, as they go along. The App will then be able to submit the client’s data quarterly to HMRC, to ensure compliance.
If you are interested in considering such a solution, then please get in touch for a no-obligation discussion.
What should I do now?
You should consider how you are currently recording your business transactions and whether you need to consider an alternative solution in order to be compliant.
If you would like to discuss how your business currently records it’s transactions, then please feel free to get in touch with us.
What if I have other questions?
Then simply get in touch with us and we will do our best to answer these questions.