Tax is changing, and we’re all going to have to change to keep up. From 2018, your personal HMRC accounts will all be online, with businesses following from 2019.
Make sure you, and your accountant, don’t get left behind!
What’s it all about?
Traditionally, records were kept on paper and files with HMRC annually. And then came desktop software like SAGE. Or spreadsheets. But the tax returns were still annual. Over the past few years, cloud-based software and apps have changed the way accounts and tax returns are prepared. And now HMRC is getting in on the act with “Making Tax Digital”.
In the next few years, HMRC will be requiring everyone to submit their tax information regularly and digitally. No more getting all your invoices together and handing them over to your accountant at the last minute. You and your accountant will need to be on top of things all year long!!
What is changing?
At the March 2015 Budget, the government announced they were going to invest £1.3 billion on transforming the tax system with digital technology with plans to end the need for annual tax returns by the end of this parliament in 2020. And, in August 2016, a number of consultation documents have been released giving more detail.
The vision for ‘Making Tax Digital’ is to have a digitalised tax system that is more effective, efficient and easier for taxpayers.
Some of the headlines from the HMRC documents are:
- By 2018 most small businesses including those self-employed, will have personal digital accounts that use software and apps to keep business records and update HMRC quarterly.
- Cash basis accounting will be used so small companies can pay tax based simply on the difference between cash in and cash out, rather than when invoices are issued. This will be on a quarterly basis rather than annually.
- Customers will be offered a range of modern payment options including the option to pay as you go through personal digital tax accounts.
- Making Tax Digital will be introduced in phases: April 2018 for Income Tax and National Insurance obligations, April 2019 for VAT obligations and April 2020 for Corporation Tax obligations.
Why is it changing?
- HMRC’s aim is to reduce the burden for taxpayers and provide greater certainty over tax bills through direct prompts from HMRC.
- Businesses will not have to wait until the end of the year to know how much tax they will pay.
- Tax payers will be able to send and receive information from HMRC at the click of a button with alerts to help businesses with advice and queries.
- It will make it easier for businesses to comply with their reporting obligations and deliver accurate information to HMRC.
Who does it affect?
- All individuals and businesses
- The only exceptions are unincorporated businesses and landlords with a turnover of under £10,000.
Of course, the HMRC documents highlight the benefits. The difficulty for most businesses (and many accountants) is that they’ll have to change their software and processes to comply.
How can we help?
While most accountants have stuck with traditional desktop software, we hopped on to the cloud a few years ago by teaming up with Xero, the world’s leading cloud accounting software. Nearly 2 years ago, we became their first Gold Partner in Merseyside.
So, we know what we’re talking about. We offer Xero to all of our clients. It’s a massive time saver and is compatible with Making Tax Digital.
We also offer Receipt Bank, which allows you to simply take photos of your invoices and they’re automatically uploaded and analysed in Xero. Our clients love the convenience and time it saves.
And, if you don’t want to do it yourself, we can do the bookkeeping once a quarter to keep you compliant. As well as keeping to HMRC’s rules, it gives you much more control of your business as you’re always on top of your numbers.
If you want to avoid getting left behind, want to keep HMRC happy, and want to be more in control of your business, please get in touch.
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Added by Jon Davies
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