Making Tax Digital – are you affected?

Making Tax Digital – are you affected?

Jan 16, 2019

You may be aware that the Government is implementing a new system known as Making Tax Digital (MTD).  But what is it and will it affect you?

What is MTD?

MTD is a new system which will allow HMRC able to collect and process tax more efficiently.  The aim is to reduce the excessive build-up of payable tax.  It will mean that individuals and businesses will no longer have to wait until the end of each tax year before knowing how much tax they need to pay – which should be helpful from a financial planning point of view.

Why is it being introduced?

MTD will mean HMRC can collect and process information almost in real-time.  Individuals and businesses will no longer have to wait until the end of each tax year before knowing how much tax they need to pay – this should help with financial planning.

There are four pillars of the new system:

  • Tax Simplified – current information held by HMRC should not need to be submitted again.
  • Making Tax Digital for Business – there will be no need for businesses to wait until the end of each tax year to understand their tax position.
  • Tax in One Place – taxpayers will be able to see a complete financial picture of their tax liabilities and entitlements in their online account.
  • Making Tax Digital for Individuals – individual taxpayers will be able to interact with HMRC more flexibly. Online accounts will contain a personal record of tax affairs and act as a source of advice and support.

Who will be affected?

MTD will not impact everyone in the immediate future.  It will be launched in April 2019 and will apply to businesses with a turnover above the VAT threshold (currently £85,000) and this will be for VAT purposes only and will mean that VAT records must be submitted through MTD-compatible software.

How will MTD develop?

HMRC has announced its intention that from 2020 it will be mandatory to report tax digitally on a quarterly basis, so freelance contractors, CIS contractors and those who work through their own limited company or PSC are likely to be affected in future. 

Keeping you informed

If you have any questions about MTD, or would like to discuss any aspect of your tax, please get in touch on 01244 684700.

 

 

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