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Making Tax Digital (MTD) will see most businesses and taxpayers accessing their tax affairs online through digital tax accounts from 2020 onwards.
It will replace the self-assessed tax return with a new quarterly digital reporting regime and change:
It will also offer self-employed taxpayers the opportunity to pay tax through optional ‘pay as you go' instalments, based on the data submitted with HMRC under the new digital initiative.
Digital accounts will unite your tax details in a single place, much like an online bank account, and will start being phased in from April 2019/20.
The following table shows when you or your business can expect to start filing digital accounts:
Annual turnover | Quarterly tax reports | Timeline |
Over £85,000 + VAT-registered | VAT only | April 2019 |
Over £85,000: for all businesses/landlords | Income tax + National Insurance (NI) | At least April 2020 |
£10,000 to £85,000* | Income tax + NI | At least April 2020 - and voluntarily |
All companies | Corporation tax | At least April 2020 |
*Small business threshold to be confirmed.
In addition, the following details have been confirmed:
The smallest businesses do not need to keep digital records, or update the revenue quarterly, until at least 2020.
If you're in employment or a pensioner with secondary income of more than £10,000 a year from either self-employment or property, the same exemption applies.
Your business will need to submit digital records to HMRC using third-party software.
Several vendors are developing MTD-compatible software. You will need to decide - and budget for - whichever package you go for. HMRC previously estimated MTD technology to cost around £280 per business.
Very little is known about the software choices, although HMRC intends to publish a software register in due course to outline MTD-compatible options.
With electronic interactions between taxpayers and HMRC poised to soar, it is imperative to take steps to protect your business from this threat.
Low-cost, easy to implement techniques include:
We can assist with your digital accounts.