09 Nov Making tax digital
FROM APRIL 2019 HMRC IS GOING DIGITAL
Eventually, all your income and allowances will be kept in the digital account that HMRC are setting up to calculate your tax liabilities.
This is a “massive” change as tax returns will be scrapped and replaced by your personal digital account. This is probably the biggest tax change for 20 years.
HOW WILL THIS AFFECT YOUR TAX AFFAIRS?
It will shift the emphasis from reporting historical data on a tax return, to uploading real-time data to your personal tax account.
Banks, building societies, pension providers and employers will be required to “push” information to HMRC. And you will be obliged, in most cases, to upload quarterly information to HMRC on the profitability of your business or property letting income sources.
How will I have to send information; all I have is a spreadsheet?
The upload will have to be done electronically and if you already use bookkeeping software that we have recommended, this facility will be in place in good time. If you haven’t considered the use of accounts software We can help you get everything ready before the upload obligations begin from April 2018.
How will I know if the information I am sending means I will pay too much tax?
We will be offering a service to check your accounts data for you before it’s uploaded. We will also check your personal tax account at least once a year (at the end of each tax year) to make sure that the income tax liability assessed is correct. The year’s end review will include a look at ideas to reduce your tax bill, if appropriate planning opportunities are available.
I only have buy-to-let property income; will I be affected?
Unless your income is below £10,000, you will have to make quarterly uploads to HMRC. Call us now to discuss the use of simple accounts software that will do this for you. And have no fear, we will be on hand to make sure that the data is correct.
WHAT HAPPENS NEXT?
HMRC are still consulting on the fine print, but new legislation will probably be enacted next year to enable Making Tax Digital to proceed.
The most important “to-do” is to be prepared. We already have enough information to recommend that clients with significant business or property incomes take on suitable accounting software to record their transactions. This software will be update during 2017 to facilitate the electronic transfer of information to HMRC the following year.
ARE THERE ANY ADVANTAGES TO THIS CHANGE?
Although you will need to take on and use compliant accounts software, this does mean that manual chores, like analysing sales, bank accounts and so on, will be done automatically. The key is to make sure the data you enter is correct.
For the first time, you will also have access (via your online personal tax account) to estimates of your future tax liabilities based on current year earnings.
From a planning point of view, these are positive changes. We can help you set up your accounts software to maximise benefits for your business, and also keep an eye on your personal tax account to make sure that the projected tax due is correct.
COMPLIANT ACCOUNTS SOFTWARE
If you still use spread sheets to do your accounts you will need to start using compliant software to aid the digital transition. We at Pentins are experts at this and advocate two excellent compliant digital accounting solutions Xero and QuickBooks.