Making Tax Digital - decent idea - typical HMRC integration
MTD – it sounds like a weapon, doesn’t it? And, in a sense, it is: Making Tax Digital is HMRC’s ploy to simplify our financial declarations and make them less of a knotty, time-consuming issue. It was announced in the 2015 Spring Budget, leaving a glut of questions on the lips of business owners across the country.
It’s been postponed (not surprising) and may look different when it is finally ready, but lets look at the changes we’re facing.
What does MTD involve?
Paperwork is nobody’s friend, not in the age of high-speed, accessible internet. The government realises that sending paper tax assessments via post is hardly the quickest or most accurate method to give HMRC the information it needs.
Hence, MTD is erasing paperwork altogether – in its stead, you’ll have to use the HMRC portal or third-party software to complete your income, expenditure, and tax liabilities, ready for direct submission.
This will allow for a constant, holistic flow of data, as well as removing the thankless task of sending the same documentation over and over again. HMRC can retain it all, confident there’s far less risk for errors or late reports.
On top of that, the financial tax year will be broken up into quarterly payment deadlines, as opposed to a single annual figure. While this has been a controversial move by the government, it will, ultimately, make self-assessments more fluid, closer to the evolving state of your earnings.
Is anyone exempt from MTD?
Only businesses bringing in less than £10,000 a year will remain untouched by Making Tax Digital. For the rest of us, the upgrade comes in increments that depend on your yearly income.
Any company over the VAT threshold (£85,000 turnover) must jump to MTD by April 2018. More leeway has been granted to businesses that fall between this figure and the £10,000 minimum – for them, the cut-off point is 2019, timed to start in April.
So what do I need to do in preparation?
If you’re a startup or small business earning less than £85,000, then you have plenty of time to make the switch. Yet, in any case, it pays to go digital sooner rather than later – it will save you time and avoid headaches further down the line.
The first thing you’ll need to do is hunt for a quality, HMRC-approved software provider. We recommend Kashflow, which has already been given the governmental thumbs-up. Also, consider that MTD is a legal necessity: that means you can list this investment as an expense, and factor it into your tax return.
The second push should be towards an accountant that can make the shake-up totally painless. Nabarro Poole, as it happens, are already well-versed in cloud accounting, meaning you can stay one step ahead of the MTD initiatives with our support. We work with several tools, and can analyse the best way to present your earnings in a real-time, online format.
Making Tax Digital is coming, and we want you to benefit from getting ahead of the curve before the April deadlines. Curious to learn more? Contact us today for advice you can count on!
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