Making Tax Digital: Everything you wanted to know about the digitalisation of tax but were too afraid to ask

posted on December 6, 2019in the Blog Category

Making Tax Digital: Everything you wanted to know about the digitalisation of tax but were too afraid to ask

That the British tax system is moving towards digitalisation, will come as little surprise to most.  After all, we live in an age where we can put our central heating on with an app and our watches can tell us if we’re stressed before presenting us with an array of breathing exercises.

That the completion of tax returns has remained such a manual, disjointed process for so long, if anything, seems faintly ridiculous. The times though, as Bob Dylan crooned, “They are a changing”.  Here, we explain what the digitalisation of the tax system is going to look like, and how you can be ready for it.

Making Tax Digital

Following the implementation of Making Tax Digital (MTD) for VAT, it is expected that MTD for income tax (self-employed and those with income from property) and corporation tax will soon follow. When exactly this will happen is unknown, but the changes are not expected before 2021.

The government has revealed that the plans have been put on hold to allow HMRC time to focus on the UK’s preparations for leaving the EU. HMRC stated: “We have made the decision to delay plans to release project capability to EU exit work.  This means halting progress on Simple Assessment and real-time tax code changes.” HMRC went on to say that the foundations for MTD for individuals have been laid, which will enable the government to return to the initiative ‘in the future’.

Whilst the future isn’t clear, income tax pilot schemes have started using reporting tools which allow those taking part in the pilot to send over income and expenses summaries to HMRC every three months. They will then be required to submit a final report to confirm all income and expenses for the year, and to claim any allowances or reliefs they may be entitled to.

This will effectively mean that your self-assessment tax return will be replaced by five new reporting obligations during and after the tax year.

How to plan ahead

Our advice to you for now is not to focus on the implication of MTD but to focus on digitalising your record-keeping and accounting.  Speak to your accountant and find a software package that works for you and your business.

If you are one of the 2 million taxpayers who do not engage any professional help in reporting to HMRC, you need to decide what will work best for you.

Whatever way you look at things, the future is digital.

MBL’s role

It is often asked “How will MTD change the role of an accountant?”

One of our core company values is our ability to be Agile. We listen to our customers’ needs and keep ahead of the changing business landscape, proactively offering solutions to our customers that deliver positive impacts to their business.

MTD helps us achieve that value using technology in real-time, which means we can give our clients timely in-year advice.

We are passionate about constantly looking for innovative ways to help drive forward processes, deliver efficiencies, and provide insight and expertise.  It’s part of the reason we think MTD could be the best thing to happen in years.

AvatarWritten By: MBL Marketing

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