Published: 1st Apr 17
A Guide To Making Tax Digital
Making Tax Digital is part of the government’s push to make it easier for individuals and businesses to keep up to date with their tax affairs and to do away with the traditional annual tax return.
With Making Tax Digital, businesses will use digital software to update HMRC quarterly, and the government hopes that by 2020, most businesses, self-employed people and landlords will be updating their tax affairs with HMRC digitally.
To comply with Making Tax Digital, you need to start keeping digital records. You will need to submit a summary accounts update every quarter and an end of year statement, but if your accountant is using the latest digital tax software, they will be able to do this for you. HMRC have confirmed that they won’t be providing their own software.
It is important not to ignore Making Tax Digital because HMRC have confirmed that there will be penalties for late submission and late payment of tax, although they have also said there will be no penalties for the first twelve months while businesses get used to the new process.
So when do you have to start using Making Tax Digital (MTD)?
If you have profits that are subject to income tax, pay Class 4 National Insurance contributions (NICs) and your turnover is above the VAT threshold, then you will start using MTD from April 2018.
If you have profits subject to Income Tax and pay Class 4 NICs, but your turnover is below the VAT threshold, you have to start using MTD from April 2019, and if you pay Corporation Tax, you don’t have to use MTD until April 2020.
There are also exemptions to the scheme. If your turnover is less than £10,000 a year or you cannot go digital because you live in a remote area with poor internet access, you will not be required to keep digital records or make quarterly updates.
If you have any questions about MTD or your obligations under the scheme, get in touch with us at Virgate Accounts. We use the latest digital tax software and can handle every aspect of the MTD process, giving you peace of mind that your tax affairs are up to date and compliant.