Get ready for Making Tax Digital - the end of the annual tax return!
Have you recovered yet from the stress of filling in that tax return before the deadline?
Well, it could soon be a thing of the past under the Government’s plans for Making Tax Digital!
It’s been over a month now since the annual January 31 deadline which saw thousands of sole traders and small business desperately trying to pull together their self-assessment forms at the last minute.
The Government says its aim in Making Tax Digital is to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – and it would mean the end of the annual tax return for millions.
It has been described as one of the biggest changes to the UK tax system for generations.
Instead of the annual tax return, the Government is hoping to get everyone reporting quarterly via a fully digital tax system where everyone has access to their own account online.
Although the full details have yet to be revealed, the plan is for HMRC to roll out the regime for small businesses and the self-employed paying Income Tax first from the middle of next year, before moving on to larger firms and looking at VAT and then Corporation Tax.
Making Tax Digital should be fully operational by 2020, says the Government.
Under current proposals, any company with a turnover of above £10,000 will have to make the digital transitions, although many professional accounting bodies have suggested this is too low.
After initial consultation, the Government has said:
- Businesses will be able to continue to use spreadsheets for record keeping, but they must ensure that their documents can link to HMRC software
- Businesses eligible for three line accounts will now be able to submit a quarterly update with only three lines of data (income, expenses and profit)
- Free software will be available to the majority of small businesses
- The requirement to keep digital records does not mean that businesses have to make and store invoices and receipts digitally
- People will have at least 12 months to become familiar with the changes before any late submission penalties will be applied
The move to Making Tax Digital is partly prompted by the hope it could save the taxman £8bn a year – HMRC calculates that is the figure it misses out on each year due to taxpayer error.
Jim Harra, HMRC's director general, customer strategy and tax design, said: "The appetite for digital services is growing and traditional paper-based processes make no sense in the 21st century where the vast majority use digital services.
"Making Tax Digital will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right."
With all these changes coming, why not get expert advice from Granville Bookkeeping by calling 01952 402 632 or 07814 690 878 or email email@example.com to see how we can help?