The Digital Tax Revolution: Streamlining Your Taxation Experience

In today’s business landscape, regardless of its size, it is likely that some or all of your tax returns are completed online. Embracing digital tax systems presents a swift and efficient method, making completing tax returns more convenient and record submission hassle-free. As the UK government pushes toward a digital tax future, understanding this transition becomes imperative. HMRC has decided to make using some digital taxation systems mandatory by 2019, which may sound scary at first, but it doesn’t have to be!

Why Does The Government Want To Make Tax Digital?

Making Tax Digital stems from the aim to harness information more effectively. HMRC will hold a wide range of data, including bank details, employment records, and benefit information. Making Tax Digital will allow them to combine this information and offer a tailored approach to cater to individual taxpayers. Centralising this information benefits taxpayers as we have a comprehensive view of all the data that HMRC holds in one place.

Real-Time Tax Insights: Breaking Free from Year-End Surprises

Making Tax Digital introduces the concept of real-time tax monitoring, liberating taxpayers from the year-end tax bill shock. By accessing your tax information whenever you please, you can proactively manage your taxes throughout the year.

Unified Financial Snapshot: The Power of One Account

Unifying your entitlements and liabilities in a single place empowers you to access a comprehensive picture of your financial affairs that you can access at any time.

Enhanced Engagement: Connecting with HMRC Digitally

The Making Tax Digital framework facilitates digital interactions with HMRC, incorporating messaging, emails, support, prompts, reminders, and personalised guidance, meaning more efficient communication for timely tax compliance!

Implementing Making Tax Digital: A Closer Look

Each taxpayer will receive a Personal Tax Account, where all of their taxation and employment details are gathered together in one accessible location. Currently, all information is set up in separate stand-alone systems, and we have to piece together the overall picture ourselves. The initiative aims to streamline tax completion by

allowing agents like employers to contribute information for HMRC to facilitate tasks such as self-assessment, simplifying processes and reducing effort.

From 2019, Making Tax Digital becomes mandatory, commencing with VAT- registered businesses. Smaller businesses with lower turnovers are temporarily exempt from digital tax obligations. The transition isn’t seismic for VAT businesses, as they have been filing digitally since 2010.

While Making Tax Digital becomes compulsory for some, many businesses are expected to proactively adopt digital systems over the next few years simply because it is easier. The gradual shift aids traditional businesses, ensuring a smoother transition. This voluntary approach is projected to continue until at least 2020.

Steps Forward and Security Considerations: Navigating the Transition

Stay attuned to HMRC’s pilot tests for income tax and National Insurance Contributions. VAT-related pilots are set to commence in Spring 2018 and will run for at least a year before mandatory implementation. Following that, quarterly updates and digital record-keeping become requisites. If unsure, your accountant can provide guidance for you.

Beyond that, plan your shift to digital methods, either through HMRC-endorsed software or with your accountant’s expertise. Make your tax and business information digitally compliant, ensuring a smooth transition.

Having all of your tax affairs online may have you worrying about cybersecurity implications, but the government has addressed this issue and assures us of secure record storage, aligning with stringent data legislation, and potentially even enhancing security due to centralised management.

MTD may be moving slowly but if you wish to start your digital taxation journey, your accountant will be able to help you get online and understand the system as it stands.

Maxing Tax Digital may be a gradual transformation, but if you want to ensure you are prepared, your accountant will be able to support you with getting online and understanding the evolving tax system!