Are you ready to ‘Make Tax Digital’?

In the 2015 Budget, the Government announced plans to modernise the tax system to make it easier for individuals and businesses, including medical accountancy firms, to keep on top of their tax obligations. Now, at the start of 2017, plans have been launched for a new and modernised approach to submitting tax information.

 

What is being planned?

Making Tax Digital is a new system that provides every eligible individual and business with their own personalised digital tax account, which are constantly being expanded and improved. The account will function in a similar way to a bank account, allowing the tax payer to interact with HMRC directly, registering, updating, filing and paying tax on any date and at any time that suits them. For many people, this will replace the need for the annual tax return.

The intention is for HMRC to have moved entirely to a digital system by 2020. This should eradicate the need for endless form filling and will help reduce delays and streamline access to tax information. The aim is for people to no longer have to give information multiple times, nor to update details that can be sourced from other places, such as employers, banks and other governmental departments. The system will also offer regular prompts to help people stay on top of their obligations and will offer support through secure messaging and web chat functions.

 

How will it help?

The system is designed to make it easier to update tax information and to pay. Users can also choose to file their tax return and pay at a time when it suits them. The online billing system will show at a glance what people owe and how it has been calculated. It will also flag up attempts at fraud and will be able to offer more help to people needing support with the system and how to work out their tax payments. Businesses will also be able to report on their tax year much closer to its end, meaning that the process will align itself much more closely with a ‘real-time schedule.

The system will also help individuals react appropriately to changes in their lives, such as job moves, babies being born, property lettings, inheritance or capital gains issues and the approach of retirement. Any changes in a person’s tax position can be reconciled faster and refunds processed more quickly in any cases of overpayment. This will be done by regular checking of PAYE data, income, benefits-in-kind and personal allowances etc.

 

What you need to do

Over the coming months and years, millions of taxpayers will be brought into the new system automatically. Individuals and businesses should contact their accountant if they have any queries or are unsure about how the changes will affect them. Or visit the HMRC’s website to read about the plans and their implications on taxpayers.

 

 

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