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Tax is changing. The government’s ambitious initiative, known as Making Tax Digital, is set to revolutionise the way we deal with finances and shake up the industry. This plan is a part of HMRC’s ambitious plans to become one of the world’s most digitally advanced tax administrations.
If you’re looking for information about what these changes could mean for you and your limited company, we’ve compiled a comprehensive guide to ensure you’re well-informed for what’s ahead.
Making Tax Digital (MTD) is HMRC’s initiative to make the tax return process less complex and to reduce the amount of administration involved. Under this system, information will be filed electronically using the government’s approved software and paper records will no longer be accepted. The digitalisation is set to include the Self-Assessment Tax Return, VAT Returns, Income Tax and Corporation Tax.
The tax changes are set to be rolled out incrementally. Depending on your circumstances, the changes will impact you as follows:
If you are VAT registered and your turnover is above £85,000 for the financial year, you will be required to record transactions only digitally starting in from 2019. The current online VAT return will no longer be available and instead, you will need to use the MTD compliant software.
If your business is VAT registered but your earnings are below the VAT threshold, you will not be required to keep digital accounting records until the 2020 financial year. However, you will need to monitor your annual turnover and if this increases above the £85,000, you will be required to comply with MTD.
As a client of Nixon Williams, the switch to digital software in April 2019 will require no effort on your part. Your accountant will move your data to MTD-compliant software before the deadline. All data stored on spreadsheets will need to be transferred across, as anything but HMRC’s own approved software will be rendered obsolete.
When Making Tax Digital becomes mandatory, the same exemptions will apply:
The exemptions are the same as the current exemptions for VAT online filing: if you are unable to engage digitally due to factors such as your age, location, disability or religion, you may not be required to comply with Making Tax Digital.
When Making Tax Digital becomes mandatory for Income Tax, there will be an exemption for businesses and landlords with low income, but this level has not currently been set.
If you have any questions about the changes ahead, contact your dedicated accountant or give us a call on 01253 362062.