‘Making Tax Digital’: a guide for non-experts
- Author Peter Hristov
- Published March 19, 2020
- Word count 461
Making Tax Digital is an initiative from HMRC aimed at making it easier for businesses and individuals to submit accurate tax returns and to keep on top of their financial records. Called Making Tax Digital, it has so far been aimed primarily at VAT-registered companies. Many such companies with a taxable turnover over the VAT threshold (currently set at £85,000) are now required to use bookkeeping software that is compatible with Making Tax Digital and to submit their VAT returns electronically via the Making Tax Digital service, as part of an ongoing pilot scheme to test its efficacy and functionality.
Who can take part?
Participating businesses and individuals, or their agents, should sign up to Making Tax Digital via the HMRC website. These include VAT-registered businesses and other VAT-registered entities, including limited companies, government bodies and charities. There are some exemptions and you should check online to see if you are obliged to take part or not.
Self-employed businesses and property landlords (except those who are earning income from furnished holiday lettings) can also take part in the scheme on a voluntary basis to keep their accounting records digitally and send their income tax updates to HMRC using this system instead of filing a self-assessment tax return.
Advantages to the Making Tax Digital scheme include an easier system to operate and a greater chance of submitting correct data from the first attempt. HMRC figures show that easily avoidable tax filing mistakes cost the Exchequer more than £9 billion per year. It also cuts down on paper usage and the requirement to keep bulky paper-based accounts, expense receipts and invoices that take up lots of room and use up valuable paper resources.
How does it work?
Participants use the system to keep tax and accounting records, alongside their own accounting software. The Making Tax Digital system also offers many in-built products and guides to help users understand and operate it. Information is sent directly to HMRC, preventing errors from creeping in as they could do more easily using a different, multi-stage process, and making the process of paying your tax bill quicker and easier. You can run your own digital filing or have an agent do if on your behalf, such as an accountant, bookkeeper or tax specialist.
HMRC is not offering its own software, but has provided application programming interfaces that allow other software packages to integrate with the HMRC systems to allow a seamless transfer of financial and tax-related data.
For more information, please visit the UK Government’s website at www.gov.uk. There are a number of online publications and guides available to help you work out how the scheme works, how and if it applies to you and when the various signing up, submission and payment deadlines are due.
Peter is content creator that has been working for Receipt Bank for over 1 year.
Receipt Bank is a bookkeeping and accountancy software that lets you keep track of all your expenses.
Website URL: https://www.receipt-bank.com/uk/Article source: http://articlebiz.com
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