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Making Tax Digital – What You Need To Know
As children of the digital revolution, we’re always promised things will be made simpler, more convenient, or downright illuminating compared to what we have in the present moment. It’s probably good to take these claims with a pinch of salt, but when the internet wrecking ball comes to demolish an outdated system, it can be quite a thrill, particularly when it can enliven something as mundane as filing tax returns.
In case HMRC’s Making Tax Digital initiative has passed you by, Bright Ideas Accountancy is here to break down what you need to know:
Clearing out the cobwebs
For countless generations, paperwork has been the primary means of submitting tax returns, making it essential for business owners to get organised early if they want to avoid penalties for missing postal deadlines. While HMRC is still a stickler about late submissions, shifting the process online removes the archaic need for physical evidence and weeks of waiting to get your tax returns approved.
In the pages of HMRC’s introductory document about this, Financial Secretary David Gauke and his team proclaim the changes to be about “much more than simply adding digital tools to the current system: [but] about transforming the UK tax system into something that feels completely different.”
What he’s referencing, apart from the time-saving measures, could be the dissolution of a bureaucracy that struggles to tie everything together. All of your information will be in one place, on a user account, so the government can bypass communication between various departments, making the tax system more accurate and easier to deal with.
A new day for bookkeeping
The ultimate benefits, projected to be universal by 2020, are to organise your tax profile much like an online banking page, with clear sums of over and underpayments, how much you’ve paid in total, and what deadlines are approaching. This aligns to the government’s desire for real-time tax information, putting the responsibility of accurate assessment squarely in our hands.
Whilst our accountants generally welcome the change, there are some drawbacks for the busy freelancer or contractor. For instance, tax returns may have to be submitted quarterly instead of once a year, which means keeping your eye on the ball. When you’re meeting clients thick and fast, keeping HMRC updated might slip your mind.
Additionally, by making tax digital, there are less excuses for simple mistakes, such as missing receipts or incorrect RTI submissions. Although you’ll be able to upload evidence with relative ease, sloppy admin and confusing receipts can result in penalties.
As the Making Tax Digital initiative starts to transform our dealings with HMRC, Bright Ideas Accountancy is here to help you with the transition. We can monitor your bookkeeping, advise on tax returns, and make sure everything’s in order when a deadline approaches.
For expert advice on digital tax returns, as well as all other aspects of your freelance or contractor accounting, give us a call on 0161 669 4221, or email Info@biaccountancy.com today.