Making Tax Digital is fast approaching, so it is critical that you prepare sooner rather than later. Here is everything you need to know about making tax digital.
What is making tax digital?
Making tax Digital is a government initiative that focuses on moving all your tax information to a digital platform (that is approved by HMRC MTD) along with an electronic record of your accounts. You will be able to send your information directly to HMRC through a personal digital account and be able to check throughout the year to make sure it is all correct
Who will it affect?
Making tax digital will affect everyone from small businesses, landlords, self-employed and larger businesses.
When will it happen?
- 2019 – Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes.
- 2020- At the earliest for all other taxes (Income Tax and corporation tax)
- Making tax digital will be available on a voluntary basis for the smallest businesses, and for other taxes. All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
Why is it happening?
HMRC wants to modernise the tax system and make it effective and efficient for customers. Making tax digital will leave less room for errors in your accounts. This change will be the greatest digital change in the world and the first of its kind.
Some businesses have already taken part in a pilot for making tax digital and are providing updates to HMRC to develop the making tax digital service. It is very important that you embrace these changes sooner rather than later, they could help your business become more efficient in the long run. To get started it is a good idea to take a look at some cloud accounting packages. For more information on cloud accounting, you can read our page here.