Making Tax Digital (MTD)

Making Tax Digital is part of the government’s plan to make it easier for individuals and businesses to get their tax right and keep on top of their tax affairs.

Under MTD, HMRC has created a Personal Tax Account (PTA) for each taxpayer for all their different taxes with HMRC. If you haven’t already accessed your own digital account, perhaps now is the time to take a look. You can find information about your National Insurance Contribution history, State Pension forecast and PAYE codes in the PTA. Eventually bank interest and other third party information received by the Revenue will be linked to your account.

To sign in for the first time, you need a Government Gateway account – you will have one if you’ve used HMRC online services before. If you don’t have a Government Gateway ID you can easily create a new one.

To register go to www.gov.uk/personal-tax-account

Timeline for Making Tax Digital for Business (MTDfB)

Starting from April 2018, MTDfB requires certain businesses, self-employed people and landlords to provide quarterly information digitally to HMRC. This is being introduced on a phased in basis with the following timeline:

  • April 2017 the Pilot scheme starts
  • April 2018 for income tax businesses and landlords with turnover above the VAT threshold, excluding some larger partnerships
  • April 2019 for income tax businesses and landlords with turnover below the VAT threshold but over £10,000
  • April 2019 VAT accounting for businesses registered for and paying VAT
  • April 2020 for businesses paying Corporation Tax and income tax for partnerships with turnover of more than £10m.

There is an exemption for those businesses, self-employed people and landlords with a turnover of less than £10,000. If you have income from self-employment and property, the turnover from both will be added together in the £10,000 test. Those in employment who have secondary income of more than £10,000 per year through self-employment and/or property income will be required to provide these quarterly updates.

If MTDfB applies to you, you will be required to use digital tools, such as software, to keep records of your income and expenditure. Although HMRC have confirmed that spreadsheets can still be used, it is likely they will need to be combined with other software in some way. Over the coming months we will discuss how MTDfB will affect you and your business and consider the options available to help you make a smooth transition to HMRC’s new tax system.

HMRC have yet to confirm the detail and we will keep you updated when new details are published. In the meantime, if you are thinking of changing or updating your current bookkeeping system/software please contact us to discuss which software package might be best for you.

Tax Enquiries - with HMRC obtaining more information electronically about both businesses and individuals, taxpayers face an increased risk of investigation. Even if HMRC finds no additional tax to pay, professional costs can be significant which is why we strongly recommend you take out Tax Fee Protection Insurance. We will write to you over the next few months inviting you to purchase or renew your annual cover.

If you have any questions about the insurance, please do not hesitate to contact us.