To help make the tax system easier for individuals and businesses, the government has set out a strategy to a digital tax system. The idea is to make sure that people are keeping on top of their finances; HMRC has already been sending out reminders to VAT registered businesses that have still not signed up, letting them know how important it is to sign up. Below is what Making Tax Digital means for you:
Simply put, Making Tax Digital (MTD) is all about making tax administration more efficient and easier for taxpayers, via the implementation of a fully digital tax system.
The changes outlined within this initiative will apply to a wide range of taxpayers, including most businesses, self-employed people, and landlords, as well as individual taxpayers.
However, HMRC has said that it will legislate for an exemption for those taxpayers who are not able to engage digitally and the VAT will be based upon the existing VAT online filing exemptions.
The move is seen as a new way to bring the tax system into the future to make it easier for taxpayers who already choose to report their tax and financial information to HMRC online.
As a result of this new digital system it could mean the eradication of the annual tax return for small business owners. Under the Making Tax Digital system, businesses, self-employed people and landlords will instead be able to keep track of their tax affairs digitally.
You will need to update HMRC at least quarterly via third-party software. This will reduce the need for completing a full tax return four times a year but will mean regular updates online.
This new system brings with it many benefits that will make managing your tax a lot easier as you will have time by being able to access all of your businesses tax information in one place, allowing you to plan and budget for your business more effectively as you will be able to calculate you how much tax you owe in real-time.
If you fall under the remit of the Making Tax Digital scheme, including MTD for VAT, you will be required to use a number of digital tools such as apps and software that will enable you to keep detailed records of your income and expenditure. For more information about Making Tax Digital you can head to the HMRC website.
At Gow & Partners we are always looking for the best strategies to help save you both time and money. With so much information out there about what businesses are entitled to, you may struggle to determine exactly what you should be paying. At Gow & Partners, we can help ensure that you save money wherever possible so that your business continues to grow and thrive.