Making Tax Digital: A Helpful Guide.

What is it?

The Digital Tax Account (DTA) was introduced in the March 2015 Budget; HMRC is committed to abolish the humble tax return and transform the tax system as we know it to be the most digitally advanced in the world – it’s an audacious plan…

Plans state the tax return will be abolished by 2020 but most businesses, self-employed and landlords will need to keep records digitally by 2018. This gives you 1-2 years to complete your move to cloud software. The move is due to the new requirement for information to be submitted online on a quarterly basis, including an end of year declaration (summary) done through digital software. By early 2017 HMRC say that five million small businesses and 10 million individuals will have access to their own secure personalised digital tax account.

What are the benefits of the digital account?

The main benefit is accessibility; you will be able to pay your taxes when it suits you – for example, by direct debit or using the new voluntary pay as you go (VPAYG) option. You will also have visibility on how your tax is calculated and can view your tax affairs online in real time.

Another major benefit is you will no longer have to submit the same information more than once -something the original tax account is famous for – pensions, employment and savings income will be brought together automatically to calculate your tax.

Does it impact all tax payers?

Not quite. Businesses and landlords with a gross income less than £10,000 per year, charities, community amateur sports clubs and the digitally excluded will be exempt from digital tax, but for the vast majority it is going to be required. However, such concerns have already been addressed by the Conservatives with the Broadband Universal Service Obligation Scheme, which aims to give everyone the right to broadband with a minimum speed of 10mbps by 2020. This is a huge task with there being more than 30 million tax payers to get online!

What do I need to change?

The big change will be transitioning from paper tax returns to online digital filing, but the level of upheaval greatly depends on what system you have in place now. Whether you use paper-based, excel or desktop accounting software you will still need to choose a cloud based accounting solution which can submit your financial information in the right format and in real time to HMRC.

How can Cloud Accounting help?

By using a Cloud Accounting solution, the transition to the DTA will be a much simpler one. Our partnership with QuickBooks Online offers you a solution to help organise your finances, save time and get paid faster.  These benefits are delivered online and through your smartphone.

How can we help?

Please feel free to contact us if you need advice choosing the best package for you and your business. Switching to cloud accounting will bring considerable benefits and will make the tax process much easier and less time consuming in the future.

HMRC have published two roadmaps which show how they are developing and testing the digital tax accounts. Should you like to learn more, visit HMRC’s roadmaps. Alternatively, get in touch and we will be happy to help.