In 2018, there is one key financial subject which will dominate businesses of all sizes across the UK for the coming two years, says Clare Elsby, Business Development Director at Elsby & Co Accountants.
By April 2019, whether you are a company owner or simply an individual taxpayer, HMRC’s plans for ‘Making Tax Digital’ will revolutionise the way VAT-registered traders, including landlords, process their taxes.
What this means for your business
The ultimate goal is for all businesses with a turnover in excess of the personal allowance to be registered for quarterly reporting under Making Tax Digital. April 2019 sees the start of this process, but just for VAT registered businesses and landlords with turnover above the VAT threshold (currently £85,000).
After this date, there will be a phased timetable for all other businesses to comply in the same manner, beginning in 2020.
The motivation behind all of this online activity is twofold. In the first instance, it is intended to make tax reporting and billing much more accurate and straightforward by allowing businesses to update and access their financial information and submissions on a ‘live’ basis.
Secondly, there is a determined push by HMRC to clamp-down on a shortfall in tax collection from traders who don’t declare their income accurately, or in other words ‘tax fraud.’
This digital revolution mirrors the wider trend of moving almost every aspect of your business possible online. You’ll probably have noticed similar developments as banks withdraw chequebooks from circulation and, along with the Post Office, increasingly close branches and offer fewer ‘walk-in’ services.
What Making Tax Digital means for employees
If you’re an employee, you are also being encouraged to set up your own personal digital tax account. This is because HMRC are ultimately passing the responsibility for looking after your tax code to you, rather than your employer.
The end result will be that your tax code will change much more frequently, not just at the end of the year, with the aim of improving the accuracy of your final tax details and payments.
Another advantage will be that the personal digital tax account will allow you to instantly access your tax records, including your State Pension calculation and, if you want to apply for a mortgage, you’ll be able to download all of the necessary information.
There are plenty of other practical day-to-day benefits, such as cloud-based accounting software that enables you to snap pictures of your receipts on a smartphone or tablet, which are then automatically uploaded to your software. No more biscuit tins full of loose paperwork then.
At Elsby & Co, we have been preparing for Making Tax Digital and our team of friendly advisors are fully trained and experienced in cloud accounting and helping our clients review their needs before making the switch to digital in good time.
We offer all of the latest expertise in setting up a personal digital tax account, reviewing cloud accounting software that best suits your needs, and taking additional precautions to protect information online.
However, be warned. This all new territory for the way many individuals, businesses, accountancy firms and even HMRC have been doing business for many years, and so we are advising all of our existing and prospective clients to contact us at the earliest opportunity to take advice and be prepared.