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What Making Tax Digital Means For Your Business

By August 18, 2016January 16th, 2017Blogs

In the March 2015 budget the HMRC announced plans that it would be making tax digital sometimes in the future. On August 15th 2016 they released 6 consultation papers on various aspects of the proposed idea with a consultation period until 7th November. Below is a quick summary of what we know about it all.

What does digital tax mean?

MTD, in place from April 2018, will change how you interact with the tax system. It will be increasingly digital and most businesses, self-employed and landlords will have to update the current software or apps in order to use the new systems and to keep up to date with HMRC business records.

At the moment this only applies to sole traders, landlords and partnerships. Consultation papers in the future are expected to include Limited Companies.

What does the consultation process mean?

The plans explain how the process of MTD is expected to work by inviting small business owners and accountants to comment on the proposal.

Are there any exemptions from the new process?

So far, we know that all unincorporated businesses and landlords earning less than £10,000 a year will be exempt from the new systems. As it is so new to the market the HMRC are still discussing the line between exempt and not but there are talks suggesting some earning more than the amount, will also be exempt depending on other factors.

Will it change how I pay tax?

It will change how you pay tax because as well as submitting the data differently, you will also pay income tax, national insurance and capital gains tax quarterly.

So, when does it come into action?

The suggested plans state that MTD is set to commence in April 2018 for unincorporated businesses. For limited companies this will come into play from April 2020.

If you are unsure if this will effect you or if you are looking for professional advice with your accounts then get in touch with Coleman and Co. With our experience and knowledge in the accounting industry you can count on us to provide you with up to date information regarding your accounts and the finance industry.

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