HMRC’s Making Tax Digital – What You Need to Know Now
- By 2016, HMRC will provide every individual and small business with access to their own secure digital tax account, that enables them to interact with HMRC digitally. The digital account will present individual taxpayers with a personalised picture of their tax affairs.
- By 2020, a business’s tax liability will be all in one place for their Income tax, VAT, national insurance and corporation tax, enabling taxpayers to be able to see their complete financial picture in their digital account.
- From April 2018 all businesses and landlords with turnover over the VAT threshold (currently £85,000) will submit their business income and expenditure quarterly to HMRC.
- From April 2019 all businesses and landlords with turnover over £10,000 will need to file quarterly with HMRC.
- From April 2020 all limited companies will need to file quarterly with HMRC.
- The deadline to submit the update is 30 days after the quarter end.
- There will also be a 5th return due 10 months after their accounting year end, to tie up any loose ends, and to confirm the year’s tax liability.
- There will be a points system for late submissions.
Taxpayers with their income solely from employment, partnerships, dividends, interest, etc will not need to join MTD.
- Community Amateur Sports Clubs
- Businesses “unable to engage digitally”. This covers:
- practising members of religious society or order whose beliefs are incompatible
- persons for whom online filing not reasonably practical (statutory test, particular to a tax payer) – eg disabilities, age, remoteness, location etc (includes not having internet)
What’s Happening Now:
- HMRC will expect the quarterly and annual updates to be made via online accounting software. They are currently speaking to software developers about how this will work.
- We already have nearly all of our clients using Xero “Beautiful Accounting Software” which is really easy to use software to manage your sales invoices, bank transactions and expense claims.
- We also recommend Receipt Bank for managing expenses and bills, which links seamlessly to Xero.
- We will be getting our remaining clients onboard within the next 12 months.
- For VAT registered clients, we are already performing a Xero HealthCheck once a quarter before we submit your quarterly VAT returns.
- So we feel we’re nearly ready for Making Tax Digital
What You Can Do Now:
- Make sure you are using online accounting software and making full use of it within the next 12 months.
- Speak to us if you need some help getting going. We are 100% Xero Certified, and will make sure you’re using it properly.
- Keep an eye on our blog and on HMRC’s Making Tax Digital announcements.
- Ask us any questions.
Thank you for reading!
**Autumn Statement Update 23 November 2016**
The Chancellor didn’t discuss MTD specifically, but did announce a £1bn investment in full-fibre connections and future 5G communications by 2020-21 which will create more reliable broadband for many, and claimed that 95% of taxpayers will have super fast broadband by 2017.