The tax system is changing, here's what you need to know!
The Government plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs through the introduction of a new reporting system called Making Tax Digital.
HMRC say that their ambition is 'to become one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply'.
The new Making Tax Digital System is built upon four foundations:
1. Better use of financial information
HMRC shall be implementing a better and more effective system for the sharing of third party information that it already has or is able to get from elsewhere. This shall include information from employers, banks, building societies and other government departments.
This means that you will not have to provide HMRC with information that it already holds for you and it reduces the risk of information being sent inaccurately as it shall be fed in directly from the relevant parties.
2. Tax in real time
As part of the Making Tax Digital system individuals and businesses shall be required to report to HMRC on a quarterly basis which for many shall mean the end of the annual tax return!
Ashored believes that by reporting to HMRC more frequently it makes it easier to understand how much tax you owe and therefore allows you to budget accordingly. It also reduces the risk of errors occurring and stops tax due or repayments owed building up.
3. A single financial account
Many individuals and businesses are registered for more than one tax which currently all have separate logins for HMRC. By introducing a single financial account, it shall allow you to see all your liabilities and entitlements in one place giving you a full financial picture of your tax affairs.
The single financial account shall also provide you with prompts, advice and support helping you to stay on top of your deadlines and avoid potential penalties.
4. Interacting digitally with customers
Digital record keeping has become a reality. Advances in technology and changes in legislation have made it easier and more secure for information to be held and transferred electronically.
A key fundamental of the Making Tax Digital system is that individuals and businesses shall be required to maintain their records electronically and that the software used will then link automatically to HMRC systems. This shall reduce the risk of errors and result in more timely and accurate record keeping for many.
Through the introduction of the single digital account customers and agents shall be able to interact with HMRC at a time to suit them through webchats and secure messaging systems.
Making Tax Digital shall mean a significant change in the reporting of information to HMRC. Although full details on how the system shall be implemented are still to be decided Ashored believes that the key benefits of the Making Tax Digital system will be:
1. Always knowing where you stand when it comes to tax
2. Having access to information online in a single place
3. Being able to work online in collaboration with your agent
4. Being able to plan and budget for your tax liabilities more effectively.
Contact Ashored for further information and support on Making Tax Digital and the changes that you shall face.