HMRC’s Making Tax Digital (MTD) plans are going ahead with an April 2018 launch for quarterly updating and reporting for sole traders and buy-to-let landlords. There is a major pilot starting this April. The exemption threshold remain up for review.
Businesses, self-employed people and landlords will be required to start using the system from:
April 2018 if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs)
April 2019 if they are registered for and pay VAT
April 2020 if they pay Corporation Tax (CT)
MTD is not the same as lodging a return online. Most tax payers have done that for years.
MTD has 3 important distinctions:
- Bank transactions and other financial information will automatically flow into your digital tax account
- Submissions will need to be made at least once a quarter
- Submissions will need to be filed using some form of software, i.e. an app integrated into your digital tax account.
We’re not going to lie, there is going to be a transition period and a learning curve for everyone and there may be some extra expense associated with it. BUT, there’s good news too! More frequent submissions can help you avoid any end of year nasty surprises and there is less room for mistakes. Also, being on cloud accounting software (which will be necessary to submit your taxes) allows you to:
- Access your business accounts anytime, anywhere there is an internet connection
- Create bank feeds so transaction data flows straight into the ledger
- At the click of a button you can view bank balances, invoices, bills, expenses allowing you to manage and control your cash flow
- Analyse your business data and therefore facilitate growth.
Change is scary, we understand that, but we are here to help. If you aren’t sure where to start let us know. We would be more than happy to sit down with a cuppa and go through everything. We can help manage the transition to a cloud accounting package, import all of your data and give you the training needed so that everything runs as smoothly as possible and you can get back to business.