It’s Tuesday! Let’s talk Tax. Read this week’s short tax snippet for Doctors & Dentists, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – take 5 minutes to have a read.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
What is “Making Tax Digital”?
Making Tax Digital is a government initiative to get 100 percent of tax filing online.
The aim of this new system is to move tax into “real time” so that the taxpayer is able to maintain their tax affairs to a higher degree of accuracy, and to keep on top of setting their liabilities via more regular payments.
For the Treasury, MTD means more revenue, as the success of this new system reduces both non-intentional and intentional errors on the usual annual tax return.
The Revenue estimate that in the full year of operation, they will receive an additional £500 million from one-off transitional costs as well as on average an additional £280 per business, from 2017 to 2021.
How does MTD affect you?
For the taxpayer, MTD is likely to be a chore, as under MTD legislation, businesses would be required to file quarterly tax returns, plus an end-of year return, compared to just the one return under the current system.
Those that are expected to find the change the most cumbersome are small business owners, including the self-employed and landlords that have relatively straight forward affairs and don’t use a professional accountant.
Businesses and landlords with turnover under £10,000 are exempt from MTD at present.
MTD delayed for small businesses
Due to criticism from the tax profession over short timeframes, as well as a lack of confidence on how MTD will work in practice, MTD has been delayed for one year for small businesses.
New deadlines for businesses, self-employed people and landlords:
- April 2018 – quarterly reporting for all businesses paying income tax, with turnover above VAT threshold, currently £85k for 2017/18.
- April 2019 – quarterly reporting for all businesses paying income tax, with turnover below the VAT threshold.
- April 2020 – quarterly reporting for limited companies
The delay until 2019, means over 3 million UK small businesses get an extra year of grace before they need to comply with MTD.
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