Making Tax Digital (MTD) is a major initiative the Government are introducing which will change the way individuals and businesses pay their tax. It will impact on every tax payer and business in the country. We’ll be writing a number of blogs posts on MTD so you know exactly what it means to you. First of all, we’ll tell you what is planned to happen…
Why bother with MTD?
The Government want to introduce MTD so that the tax system is:
- More effective
- More efficient and
- Easier for tax payers to get their tax right.
The context for this is clear – HMRC reckon they lose about £9 billion every year down to ‘avoidable mistakes’.
Will it affect VAT?
Oh yes! If your turnover is over the VAT threshold (currently £85,000) then your business will have to use the MTD service to keep records and submit your VAT returns from April 1st, 2019. That’s just over 3 months away.
And Income Tax?
The deadline for implementing MTD for income tax is a bit further away – this will be April 2020 at the very earliest, and will probably be impacted by how the VAT implementation goes. If you’re a self-employed business of landlord, you can choose to voluntarily keep business records digitally and send Income Tax updates to the HMRC now, instead of doing a Self Assessment tax return.
Personal Tax Accounts
The introduction of Personal Tax Accounts is all part of this move towards a more digital tax system. The aim is for you to be able to manage your tax affairs through the account, rather than phoning or writing to the HMRC. There’s over 30 services currently available through the new system, with more planned. Registering is easy, but if you do need any help, don’t hesitate to contact us here.
So that is what Making Tax Digital is – next time, we’ll look in more detail at how it will impact on your VAT payments and reporting.