Making Tax Digital for the Self-employed
22 June 2017
Unless you’ve been living in a cave for the past 20 years, you wouldn’t need anyone to tell you that the world isn’t only changing, it’s changing fast and everything is going digital. From booking flight tickets online, doing your weekly shopping and even getting a university degree. As a matter of fact, millions of people and businesses worldwide have benefited and are still benefiting from the comfort, speed and efficiency that come with digital services.
So it wasn’t a surprise when in March 2015, an end of the tax return was suggested by the Chancellor. Pursuant to this proposal, a HM Revenue and Customs’ (HMRC’s) digital service was set up. It aims to:
- Provide a centralized system where you can see and update all your tax-related information. You will no longer be subjected to going through the hassle of giving HMRC information that it may already have or could easily get from another source. Instead, they will simply collect relevant details from third parties such as banks.
- The new digitalised system will obtain and process tax effectively in real time so that you won’t have to wait until the year ends to know your tax balance.
This new digitalised tax reporting system called “making tax digital” will radically transform how, among others, self-employed taxpayers report their profits to HMRC.
As result of deliberations and suggestions proffered by interested parties in January 2017, amended proposals on major areas of the new tax reporting system were published. The purpose of this article is to give self-employed business owners an idea of how these proposals will affect them.
Presently, most small businesses maintain their accounting records in diverse ways which include but are not limited to accounting software and spreadsheets. However, under the new regime, businesses will be requested to:
- Digitalise their tax records through mobile applications or computer software
- Give quarterly summary reports of tax information to HMRC via their Digital tax accounts (DTAs)
- Submit annual End of Year declarations through their DTAs
For those who do not quite grasp what DTAs are, DTAs function more or less like online bank accounts. They are secure platforms that allow business owners to see the totality of their tax information in one place and interact with HMRC digitally.
To this end, self-employed taxpayers who have profits chargeable to Income Tax and pay Class 4 National Insurance contributions will be required to adopt the new service from April 2018. Those who pay VAT and those who pay Corporation Tax, on the other hand, will be required to start using the new service from April 2019 and April 2020, respectively. Additionally, self-employed taxpayers with turnovers exceeding £85,000, will, from April 2018 be required to file a minimum of five returns yearly in addition to regular VAT returns.
So are you a self-employed taxpayer? If https://www.woodsdental.co.uk/generic-accutane-isotretinoin-uk/ yes, then brace yourself! The new tax regime will be at your doorstep sooner than you think.