Making Tax Digital: What’s Changing?
In today’s digital world, it only seems fitting that tax should follow suit. Making Tax Digital is the government’s answer to the digitalisation of the VAT process. When these changes come into effect, paper records will no longer meet the requirements of law and only information submitted through HMRC’s software is accepted.
When will I be affected?
The tax changes are set to be incremental and will affect you depending on which category you fall into. The timescales are set to be staggered over the coming years.
Initially, only VAT registered businesses who earn above £85,000 will be required to record transactions digitally and file VAT returns using only compliant MTD digital software from April 2019. The current online VAT return will no longer be available.
If you are VAT registered but your annual turnover is below the VAT threshold, you will not be required to keep digital records or to file your accounts using MTD compliant software until April 2020 or later. However, if your annual turnover increases above £85,000, you will need to comply with the Making Tax Digital Rules.
Making Tax Digital will also become mandatory for reporting Income Tax and Corporation Tax, but not until later than 2020.
When Making Tax Digital for income becomes mandatory, there will be an exemption for businesses and landlords with a small turnover – but this level has not yet been set.
What do I need to do?
When the time comes, your accountant will switch your accounts to the mandatory VAT reporting software. You will be kept well informed throughout the process and we’ll let you know if there’s anything you need to do.
Want to know more?
For more information about the changes to tax, our team of experts are on hand to help. To find out more about what the changes could mean for you, please contact your accountant or call 0203 962 5085.
Published on: 30 November 2018 - By: First Freelance