Are you ready for digital tax accounts?
5th May 2017
Making Tax Digital (MTD) has been a hot topic of discussion over the last few months.
If you’re small business owner, sole trader or landlord paying tax through self-assessment, you’ll soon need to manage your taxes online and submit quarterly reports to HMRC.
What do we know so far about MTD and how should you prepare for the changes?
What we know
Former chancellor George Osborne first announced plans in Budget 2015 to simplify the tax process for individuals and businesses.
If you’re an unincorporated business or landlord with an annual turnover below the VAT threshold, you have until April 2019 to prepare for the impending changes.
The changes will take effect at different times for different types of business.
However, following the government’s decision to call a general election, proposed plans for MTD have been removed from the Finance Bill, which may cause delays in the roll out process.
This is the current timeline:
- April 2018 – reporting income tax and class 4 national insurance contributions (NICs) for those with turnover above the VAT threshold
- April 2019 – income tax and class 4 NICs and turnover below the VAT threshold
- April 2019 – VAT for those who are VAT registered
- April 2020 – corporation tax for those who pay corporation tax.
However, if you have an annual turnover of £10,000 a year, you will be exempt from the changes.
If this is likely to affect you and your business please don’t hesitate to get in touch.
The most significant change for businesses owners and individuals is the requirement to use digital software to collate annual records. According to research by the ICAEW, 75% of businesses do not maintain their accounts using digital software.
If you fall into this category then we would recommend in speaking to one of our expert advisers who can help eliminate any uncertainty and help you prepare for the digital tax changes.