What is Making Tax Digital and how will it affect my business?

What is Making Tax Digital and how will it affect my business?

What?

If you've been self-employed for a few years, you will probably have noticed that HMRC have been encouraging people to file their tax return online rather than complete the traditional paper form for a while now.

Businesses will have a digital tax account and information from your business bank account and any other government departments you deal with will be updated automatically.

Instead of filing a tax return and declaring your information every year, businesses will check this information every three months and submit any additional information that HMRC require.

Why?

HMRC have been moving towards more online tax services for a while for a few reasons.

Mistakes are often made on Self Assessment tax returns, and having a digital account with information automatically updated and checked regularly will (hopefully) reduce the number of errors.

Updating your information regularly will also mean that there's less chance of you getting a nasty shock when you file your tax return, as your tax will be calculated every three months instead of 12.

HMRC have also said that having a single tax account and being able to interact with HMRC digitally will benefit taxpayers, as you will be able to see everything in one place, at a convenient time for you.

When?

HMRC will be testing out Making Tax Digital from spring 2018.

However, it will only become mandatory from April 2019, and only for businesses over the annual VAT threshold (currently £85,000).

There is no set date as to when Making Tax Digital will become mandatory for other businesses as of yet.


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