Making Tax Digital is a new piece of legislation that sets out HMRC’s vision to transform the UK tax system into ‘one of the most digitally-advanced tax administrations in the world by 2020.’
HMRC will achieve this by moving all personal and business taxation online.
Starting 2017, and due to be completed by 2020, it will impact a wide range of taxpayers, including most businesses, self-employed people and landlords, as well as individual taxpayers.
The aim of the legislation is to make taxation more effective and efficient.
Making Tax digital is revolutionary in many ways. Taxpayers will be able to:
Keep in mind, this is not the same as lodging a self-assessment tax return online. UK taxpayers have done that since 1996. MTD differs in the following ways:
So what’s changing?
MTD has a phased roll-out plan which started in 2016 and is set to complete by 2020. Key milestones* on the road include:
January – June 2017
July – December 2017
January – June 2018
July – December 2018
Are there any exemptions?
The smallest businesses, i.e. those with an income below £10,000, will be exempt.
What about software?
HMRC will not provide any interface or software for filing tax updates. Third party software will be a requirement and HMRC is ensuring free options will be available.
These changes are going to happen, whether you keep up or not. All businesses or individuals will need to consider:
Start getting ready
Your accountant should be happy to walk you through the process and explain how they plan to file your taxes as MTD is rolled out. More information, along with a detailed breakdown of timescales and milestones, is available from gov.uk. You can also join the discussion within AccountingWeb’s articles and forums.