September 24, 2018 0

What is Making Tax Digital and How it Will Affect You?

What is Making Tax Digital and How it Will Affect You?

Many aspects of the modern business have become efficient and paperless due to the increased usage of cloud technology. Therefore, government agencies related to taxes are also thinking of making taxes digital in coming years. This step is going to be taken by HMRC and will end the paper accounting for millions of taxpayers across the UK. This move of HMRC will deliver digitally modernized, efficient and updated taxation system to compete with the best systems existing in the world.

When this system will come in existence, i.e. from April 2019, all the businesses above VAT limit have to set a digital tax account and file their returns of very quarter thereafter online. Even if you think that your business will not exceed the limit, you must get prepared for filing the tax return digitally. Let’s try to understand what is making tax digital and it is going to affect you.

Why HMRC is making tax digital?

The following reasons are what provoking HMRC for making tax digital.

  • To help in making efficient and effective use of information- With the current system, HMRC is getting same information consistently every year. With this approach of digitization, the process of taxation will be easier and smarter. HMRC can collect information from employers, banks and some other government agencies related to financial matters. You will also be provided with the access to your account so that you can view and update the details. HMRC can make use of this information whenever required.
  • To provide access to immediate tax- With the arrival of making tax digital, you are not required to wait until year-end to know how much tax you have to pay. HMRC will collect and process the gathered data immediately to give you a real-time view of what you have to pay.
  • To offer the central financial account to taxpayers- As stated by some of the accountant and bookkeepers in Surrey, for now, you don’t have a central account where you can see the details about your liabilities and privileges. With making tax digital it will be changed in 2020 and you will have a central account to which you can login and view a complete picture of your tax situation as you can do in online banking.
  • To communicate with the customers digitally- In the current scenario, it is very difficult to communicate with HMRC for any queries or question to be answered. You have to hold for long whenever you call them. With this digital system, it will be relatively easy to communicate with HMRC for getting digital information, support and advice through chat and messaging. You can ask your questions whenever you want.

How will it impact you?

Making tax digital will have the same impact on businesses as well as on individuals. It will be greatly beneficial for taxpayers. You just have to send the summary of your incomes and expenses once in every quarter digitally through your digital tax account. However, if your business is below the VAT limit, then you will be exempt from it.  Only the businesses above the VAT limit will have to use making tax digital business system which is starting from April 2019.

Also Read – How To Register & Check Vat Number?

To get more information about this system and to check if you will be affected by it or not, just search on the internet with keywords, Find local accountants near me and visit one of them, so that you get the detailed information about the entire system and all your queries regarding the same will also be solved. So, don’t lag behind, go digital with your taxes

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