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Making Tax Digital

Making Tax Digital are you ready?

Late last year HMRC announced one of the biggest changes to our tax system. HMRC have recently confirmed the timetable. Mark Wallace, Walter Wright's tax manager, explains the changes.

What are the changes that were announced?

The government intend to modernise the tax administration system by introducing digital services for tax. By 2020 HMRC want all dealing with them to be done digitally. There are three main strands to these proposals, as follows:

  • personalised digital tax accounts for individuals and for businesses
  • quarterly digital reporting of income and expenditure by businesses, self-employed people and landlords
  • quarterly option for paying tax

When will the changes be implemented?

The chancellor announced the timetable in his Spring 2017 Budget. The timetable will be as follows:-

  Accounting periods stating after
Landlords, Un incorporated businesses, and partnerships with turnover more than the VAT threshold (£83,000 per annum) 6 April 2018
Most other Landlords, Un incorporated businesses, and partnerships 6 April 2019
Limited companies 6 April 2020

In addition, VAT returns will be brought onto the new system from April 2019. Finally, complex businesses and limited companies will be included from April 2020.

Will everyone be effected?

Yes, anyone who receives rental income, or is self-employed, will be effected by the planned changes.

HMRC proposed that those who receive rents (before expenses) of £10,000 or less, or self-employed with a turnover of less than £10,000 a year will be exempt. As this limit will be applied to the amount received before expenses, rather than the profit it is anticipated that only very small landlords or businesses will be exempt.

Will there be fines if I do not comply?

Yes, HMRC have said that if the quarterly returns are not submitted on time there will be penalties, although they may defer these while the new system 'beds' in.

What do I need to do now?

As records will have to be computerised you should review your bookkeeping systems now and move to a computerised system which will be compatible with HMRC's requirements. HMRC have confirmed that spreadsheets can be used, although it will still be necessary to make quarterly reports using software.

HMRC has no plans to offer free software but expects developers to provide free software for businesses with the most straightforward affairs. You need to ensure that you have access to software to meet HMRC's requirement.

Will this be the end of the tax return?

While this may be the end of the self-assessment tax return, there will still be a reporting requirement. After the end of the year, having made any adjustments to arrive at their taxable profit or loss, businesses will make an 'End of Year' declaration that everything is correct and complete. This declaration will be made within nine months of the end of a period of account (normally a period consisting of four consecutive quarterly returns).

How can we help?

We can help you to choose a suitable bookkeeping package, or work with you to maintain one for you on your behalf.

If you would like to discuss the changes in more depth, or how Walter Wright can help you minimise your tax labilities contact Mark Wallace on 01473 822143

Next Step:

Please contact us if you need further advice, have any questions about our services, would like a free consultation.