28 Nov Are you a tech-head, or a bit of a digital dinosaur? It’s time to get ready for the digital tax revolution
By 2020, the UK is set to move to a digital tax system.
Announced under the Cameron government, then Finance Secretary David Gauke said planned changes would mean:
- No more form filling – HMRC would not keep asking businesses what it already knows.
- The tax system would operate close to ‘real’ time – getting rid of delays, reducing the risk of missing deadlines and incurring penalties, and errors being carried over from one year to the next.
- An end to the paper tax return – with business owners having access to digital accounts.
- From April 2018, businesses, the self-employed, and landlords will be asked for quarterly updates.
More than two million small businesses were using digital accounts in 2015, and the system was being rolled out to all small businesses and individual taxpayers this year.
The plans are out for consultation until the end of 2016.
Find out more about the plans here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/484668/making-tax-digital.pdf
So, what are the benefits?
Business owners will be able to update information online whenever they like – whatever time of day or night.
They will be able to pay at any time of the year – to suit them.
The vast majority will not have to fill out an annual tax return.
Businesses will be able to plan for tax payments without surprises – they’ll see a complete picture of their tax situation on the system.
Are there any drawbacks?
For those who are currently on paper book keeping systems, there could be some pain as they upgrade to digital systems, and quarterly reporting would mean some owners having to do their accounts more often.
Earlier this year, a petition signed by more than 100,000 people raising concerns about quarterly tax reporting triggered a debate in Westminster.
MPs raised concerns from their business constituents about the potential extra burden in time and cost on small businesses, especially solo business owners.
The government said the plans would not amount to businesses having to file four tax returns a year.
It promised there would be help for small business owners with access to approved software and an easing-in period to ensure owners could meet reporting deadlines.
What can you do to get ready?
If you’re keeping your books on paper, now’s the time to examine getting a digital system for your business.
There are excellent systems out there like QuickBooks, Sage, and Xero – find the right one for you.
Keeping your books up to date will become even more important.
Outsourcing your book keeping is a cost-effective solution for small business owners. It’s far better than using your time to wade through your receipts and invoices every quarter – your time as a business owner is too valuable for that. You could be spending that time delivering for your customers, making sales, or marketing your business.
Find a book keeper who deals regularly with HMRC, who is adept at using digital systems, and who can keep your books updated ready for quarterly reporting.
If you need help getting ready for the digital revolution, call Jenny Edwards at Balanced Up Book Keeping on 01633 439002.