3 Myths You Need to Stop Believing About Making Tax Digital
If you don't know what Making Tax Digital means, get informed by checking out What Making Tax Digital Means for Individuals and Businesses.
If you are aware of Making Tax Digital (MTD), then you'll know MTD is a government initiative that sets out a vision to 'transform' the current UK tax system, which will bring an end to the tax return by 2020. The main aim of MTD is to make tax administration more efficient and easier for businesses, self-employed people and landlords to get their tax right first time.
Due to lack of clarification from HMRC rumours have surfaced that are preventing business owners from getting prepared. We will address the 3 top myths we've heard in this blog post!
1. Making Tax Digital Has Been Cancelled
Whilst HMRC has made significant changes to Making Tax Digital, the original vision remains the same and MTD will go ahead.
The changes are as follows:
- Only businesses with a turnover above the VAT threshold will have to keep digital records and only for VAT purposes. They will only need to do so from 2019.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least 2020, instead of 2018 as originally proposed.
- Small businesses will be able to file digitally on a voluntary basis for other taxes.
SRK is following these changes and will ensure our clients and readers are aware of Making Tax Digital in real time, as it happens.
2. I Can Opt Out and Do Paper Returns Instead
Making Tax Digital is not an optional scheme that businesses or individuals can opt in or out of.
You will be expected to be prepared for your deadline.
3. Going Digital Will Take Up More Time Than Paper
Whilst there will certainly be an adjustment period, you may be surprised to know that currently 99% of VAT returns, 98% of Corporation Tax and 86% of Self Assessment returns are submitted online.
Furthermore, FreeAgent found that their customers saved on average a day per month after switching to accounting software.
Therefore, MTD will be less of a jump than it seems for millions of UK businesses.
The Benefits of Making Tax Digital
Whilst MTD will offer challenges (and many more myths), individuals and businesses will benefit from the following:
- Through the digital accountant individuals and businesses will be able to see a complete picture of their tax affairs and be able to manage all their liabilities at the same time, in the same place
- HMRC will collect and process information affecting tax in as close to real time as possible
- MTD should prevent tax due and repayments from building up
- Individuals and businesses should no longer have to wait until the of the tax year to know how much tax they must pay, which will provide certainty and help to budget accordingly
MTD may affect the legal entity and/or accounting date you choose for your business, therefore if you are considering starting a business or looking to change the legal entity of your business, then download SRK's FREE New Business Kit, designed to help you with the financial, tax and accounting considerations of starting a new business.
We understand that Making Tax Digital is a challenging time for self-employed people, small businesses and landlords. If you are a SRK client, please contact your dedicated associate for any and all support that you require through this transition. If you are not currently a SRK client, we'd love to help by offering you a free consultation.
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