More and more in today’s world goods and services are being processed online. Now the government is transforming the Tax system by making fundamental changes to how businesses and individuals submit their tax returns.
What does this actually mean? From 2020* it will be mandatory to report tax digitally on a quarterly basis.
This new system – Making Tax Digital will be starting in April 2019 with businesses who have a turnover above the VAT threshold (currently £85,000) and this will only be for VAT purposes.
Why is this new system being introduced?
The government wants to reduce the burden for taxpayers and implement an accessible online tax system that reflects the current digital age.
By 2020*, businesses and individuals will be able to register, file, pay and update their information at any point in time by just accessing their online account. For the vast majority this will remove the need to fill in an annual tax return.
Through the introduction of Making Tax Digital, HMRC will be able to collect and process information as close as possible to real time. This should reduce the excessive build up of payable tax. Individuals and businesses will no longer have to wait until the end of each tax year before knowing how much tax they need to pay. This should assist with financial planning and avoid any surprises.
The new system is based around four foundations
- Tax Simplified – Current information held by HMRC should not need to be re-submitted.
- Making Tax Digital For Businesses – There will be no need for businesses to wait until the end of their tax year before they know how much tax they are required to pay.
- Tax In One Place – Taxpayers cannot currently see all their liabilities and entitlements in one place. By 2020*, a complete financial picture will be available to view in their online account.
- Making Tax Digital For Individuals – Individual taxpayers will be able to interact with HMRC digitally at a time of their choosing. These online accounts will contain a personal record of their tax affairs as well as giving access to advice and support.
Contact our Making Tax Digital team via email on – firstname.lastname@example.org or call 01606 369000.
*2020 Date to be confirmed by HMRC.