By 2018, the government’s Making Tax Digital initiative will start to affect businesses across the nation, completely overhauling the way that tax is currently paid.
Initially introduced by George Osborne in 2015 as a way to reduce the tax administration burden on individuals and businesses, the Making Tax Digital regime will require all businesses to report their tax online on a quarterly basis.
When will it begin to affect me?
There are three key milestones for the Making Tax Digital regime, all depending on your year end:
- In mid-2018, all sole traders, partnerships and unincorporated landlords with income in excess of the VAT threshold will be required to start updating HMRC quarterly regarding income tax and National Insurance.
- In 2019, all VAT registered businesses will have to report VAT quarterly through digital software. Sole traders, partnerships and unincorporated landlords whose income is below the VAT threshold will now have to report income tax and National Insurance quarterly.
- In 2020, limited companies will need to begin updating HMRC quarterly.
How can I remain compliant?
Businesses and individual taxpayers will have to register with HMRC to use the new system. They will then have access to pre-populated information and can make submissions or updates at any time.
A cloud accounting package can help you to make a seamless transition to the new regime, but isn’t just useful for the new tax regime. While cloud packages allow you to make accurate submissions, they also offer real-time information about your accounts, so that you know exactly where you stand at any time.
If you’d like to transition to a cloud-based system, we can talk you through the options, including packages like Xero, Sage, Kashflow and Quickbooks, set the system up for you and provide full training so you can make the most of the information at your fingertips.
What happens next?
Full details of the new regime are still to be revealed. However, we are already working with our clients to ensure that an efficient structure and plan is put in place ready for the start of the legislation, and we are keeping them up to date with all of the latest information.
If you are concerned about Making Tax Digital or would like to make the transition to a cloud-based package ahead of its introduction, please contact us by calling 01242 776000 or by completing the contact form below.