Making Tax Digital (MTD) is a Government initiative to modernise the tax system – making it easier for individuals and businesses to keep on top of their tax affairs and seeing the end of Self-Assessment tax returns.
By making the tax system more effective, more efficient and easier for customers to comply with, HMRC aims to drastically reduce taxpayer error, saving billions.
MTD will require most businesses, self-employed professionals and landlords to update and maintain digital records using third party software. The implementation of MTD will undoubtedly affect millions of people, so it is important to seek expert guidance to understand what is happening and when.
Making Tax Digital for businesses
MTD for businesses is well under way – by April 2019 all VAT registered businesses over the £85,000 threshold will need to use the MTD system as to comply with VAT requirements. For those below the threshold, use of the system is optional.
Widening the use of system to taxes beyond VAT will not come into effect until 2020 at the earliest, until it has been shown to work.
As laid out in the summary of responses, MTD is expected to do the following:
- Reduce taxpayer error by 10%
- Create a tax system synonymous with the ‘modern digital experience’
- Give businesses a clear view of their tax position throughout the year
Making Tax Digital for individuals
Through a personal tax account, individuals will be able to access their tax information, review and update records and manage their account in one place. Ultimately it aims to replace self-assessment tax returns, eventually seeing the end of annual tax returns completed by individuals. Digital interaction with HMRC will also be available via secure online messaging.
HMRC recognises that not all organisations are fit to use the digital tools required for MTD and will review potential exemptions on a case by case basis.
Whilst the process of Making Tax Digital is already in action, further changes to the system must be anticipated.
Our specialist tax team are on hand to support you through the switch to digital, ensuring you are compliant and benefiting from the digitised tax system.