HMRC’s “Making Tax Digital” programme (cf our news item from September 2016 “HMRC wants you to be software savvy“.) has started to make real progress with the recent launch of Personal Tax Accounts.
Making Tax Digital (MTD) is intended to create a “real time” tax system where both businesses and individuals interact digitally with HMRC and have a much clearer view of their tax liabilities.
In order for it to work, however, business will be expected to provide more frequent updates to the taxman. Importantly this additional accounting information must be provided using “digital record keeping software” – bookkeeping / accounting packages or online services.
Personal Tax Account
Personal Tax Accounts are now available online to provide individuals with a consolidated view of tax, national insurance and pension information. They will be the first port of call when people come to file their self-assessment tax returns but you can you can sign-up now to check tax payments, NI contribution history and even what pension you will be entitled to.
Register via the government gateway to take a look. You will need your national insurance number and other forms of identification during the registration process. There’s an overview video on YouTube if you want to see what the process entails.
MTD for Businesses
The introduction of MTD for businesses has been put back a year to April 2019. Initially it will apply only to businesses with a turnover above the VAT threshold (£85,000 as of 1 April 2017).
From April 2019 businesses will submit quarterly summary data (total income and total expenditure) to HMRC, followed by a year end submission. The year end submission is essentially an annual return, which will be used to reconcile the quarterly returns and provide a taxable profit calculation..
The government has said that the scheme will not be extended to businesses (inc. sole traders and partnerships) with turnover/income below the VAT threshold but above £10,000, until April 2020 at the earliest.
Digital Record Keeping Software
Although spreadsheets haven’t been been declared redundant quite yet, it is time for many businesses to consider switching to a computerised bookkeeeping / accounting system. Even if your business is below the threshold for the initial switch to MTD, you may want to make the change early. It may take some time to iron out any issues and get comfortable with the process of using a computerised system.
Lewis Smith & Co. can provide support and expertise on several effective systems.
- Kashflow: Web-based accounting tool that offers key features such as banking and quotes for start-ups, sole traders and very small businesses. Available for as little as £7 +VAT per month.
- Xero: Great for SMEs who require more advanced features such as invoicing, payroll and purchase order creation. Lewis Smith & Co. were the first qualified Xero partner in the Black Country.
- Sage: The UK’s number one bookkeeping and accounts package that can run an entire business. As members of the Sage Accountants Club we can supply the software and provide both training and support.
Help and Advice
If you have any concerns about the impact of Making Tax Digital on your business then why not talk to us today?
Lewis Smith & Co. can help you devise an appropriate plan to switch to quarterly reporting and implement the right bookkeeping / accounting package for your needs.
Lewis Smith & Co – Accountants for Wombourne businesses.