Making Tax Digital

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Low Cost Accounts' July Newsletter 2017
Making Tax Digital
 
Making Tax Digital (MTD) is without doubt the biggest change to the administration of tax since the invention of PAYE in the first half of the last century.
It will affect every individual who is a taxpayer and every business in the UK. In particular, it will change the way that businesses keep their accounting
records and report their income to HMRC, and the services that they
need from their accountant or tax agent.

The new regime will also offer the opportunity for self-employed
taxpayers to pay their tax through optional “pay as you go” instalments,
based on the data filed with HMRC under MTD.
 
Key MTD requirements
  •  Businesses must keep digital accounting records. 
  • Businesses must analyse their expenses 
  • Businesses must update HMRC with their income and expenses at least once every three months via a software that complies with MTD.
  • Once a year the accounts for the business must be finalised by adding year-end adjustments and capital allowance claims. The time given for this will vary depending on the business' accounting date, but will be the usual 31 January deadline for clients with a 31 March accounting date.
  • Details of income from other sources will need to be entered onto the personal tax accounts (PTA)
  • Sole traders will start reporting under MTD for the first accounting period starting after 5 April 2018.
  • From April 2019, businesses which are registered for VAT will also have to make their VAT returns through their MTD software.
  • Limited companies will join MTD from April 2020.

Summary
As the requirement for making tax digital and ultimately the move to accounting software for small businesses seems to be inevitable, we strongly recommend that you look at software options sooner rather than later. This will ensure that you have plenty of time to familiarise yourself with the software and the new way of reporting before 'going live'. If you require specialist advice on any of the above or want to know how best to ensure that you are compliant, please do not hesitate to contact your allocated accountant or one of the Directors.


 
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