Extended Tax Digital
After introducing the Making Tax Digital (MTD) scheme and unveiling the benefits that go hand-in-hand with the digital accounts packages it endorses in our last blog post, we’re back with an update. The HM Revenue & Custom (HMRC) pilot of Making Tax Digital has now been extended, meaning the businesses and sole traders we work with day in, day out can reap further rewards. So, what does the recent update mean for you and your accounts?
In light of the recent update, the Making Tax Digital scheme and its advantages can now be unlocked by a new group of business savvy taxpayers. Individual landlords with simple tax affairs can now use digital accounting via the initiative to submit quarterly updates to HMRC. The agents that represent them can also now sign up to the pilot. The latest update sees other taxpayers able to access further options. Sole traders with an income from just one business and taxpayers that rent only UK property, but not as furnished holiday lets, are now able to opt out of self-assessment, using software to report their income tax instead.
How can I join the pilot?
Joining and utilising the pilot as a VAT registered organisation or one of the taxpaying landlords, agents or sole traders mentioned above couldn’t be easier. In order to join you must first ensure that you are able to keep digital records of business transactions. You must also be able to commit to sending income tax updates directly to HMRC on a quarterly basis. Use of MTD-compliant software is recommended and our team of accountants can assist with your selection.
Sending updated information every three months is just as simple as signing up, and you’ll be able to view up-to-date ‘best estimates’ of your tax liability throughout. It’s not just quarterly reports that are easy to submit via these digital accounts packages. A final report should be filed through the system at the end of your accounting year to confirm your income and expenses. Allowance and relief claims can also be submitted at this stage before receiving a full tax calculation for the year.
What if I don’t qualify?
If none of the updated criteria applies to you, don’t worry. You can continue to report your income to HMRC using the self-assessment system, submitting your returns in the usual way.
Whether you qualify for the MTD scheme or not, preparing your accounts is vital. VAT registered taxpayers with an annual turnover of more than £85,000 have until 1st April 2019 to familiarise themselves with this new way of working. No formal date has been set for the scheme’s full introduction, but it is likely to be after 2020 due to HMRC’s current focus on Brexit preparations.
To discuss this and any other matters relating to Making Tax Digital, please contact Rob on 0191 251 7599.