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Making tax digital

making tax digital

Get the latest news and updates on the recent HMRC announcement on making tax digital

What is making tax digital?

Making tax digital is a new piece of legislation from HMRC that means starting from April 2018, most businesses and self employed individuals will be required to handle quarterly record keeping communications to HMRC digitally.

This means using either an app or an accounting software package to submit your data directly to HMRC. The reason HMRC is making to make tax digital is because it will reduce the burden on taxpayers and ensure the tax system is much more transparent and accessible.

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Video: HMRC explanation of making tax digital

This video from HMRC explains what you need to know about making tax digital. As the deadline for MTD is a couple of years away, all details haven't yet been confirmed.

HMRC help guides

HMRC have released 3 help guide documents that will give you more insight into making tax digital. You can download them below.

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Frequently Asked Questions

Who does MTD apply to?

At this stage the consultation documents only apply to sole traders, landlords and partnerships. Further consultation papers are expected to be released that relate to Limited Companies later in the year.

When is making tax digital happening?

At this stage the consultation documents only apply to sole traders, landlords and partnerships. Further consultation papers are expected to be released that relate to Limited Companies later in the year.

Are there any exemptions for MTD?

MTD consultation confirms that all unincorporated businesses and landlords with annual incomes below £10,000 will be entirely exempted from the new obligations. It also proposes to defer implementation for a limited group of businesses and landlords with annual incomes above that threshold.

making tax digital
making tax digital

Will this change how I pay tax?

Yes, as well as submitting accounting data, businesses will also pay their Income tax, National insurance and Capital gains tax (or obtain refunds) on a quarterly basis.

How is information under MTD sent to HMRC?

Businesses will need to send this information from their accounting software such as Clear Books that links to and also updates their digital accounts with HMRC. HMRC suggests that much of this information could be collected using the software to automate accounting entries, with the software summarising and submitting the totals to the tax department every quarter.

Are there any significant simplified processes under MTD for small business and partnerships?

The main emphasis seems to be on an aspiration to lift the current £83,000 turnover threshold on the cash basis of accounting, which is currently permitted by HMRC, to £166,000.

Cash basis allows businesses to account for their income and expenses when they actually receive payment or when they actually pay for an expense while on an accrual basis expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. There is also the suggestion that businesses could stay on this basis of accounting up to a turnover of £300,000. This is with a view to simplify the tax calculations for small businesses.

Join the discussion

AccountingWEB are having discussions around making tax digital within their articles and forums. With the MTD consultation period ending in November 2016, HMRC are expected to release mainstream communication around MTD next year.

Find out more by visiting AccountingWEB

One of our partners inca are also discussing the importance of real time tax management. See inca's take on MTD here

making tax digital

Are you ready for MTD?

Clear Books will be working closely with HMRC to make our software fully compliant for MTD for sole traders and partnerships by April 2018 and then by April 2020 for Limited Companies.

Learn how Clear Books™ can streamline your accounts in time for making tax digital

Learn more