As you may or may not know, HMRC have announced that by 2020 most businesses will have to manage their tax affairs digitally. This includes companies, partnerships and self-employed taxpayers. Taxpayers will now also be expected to update HMRC on a quarterly basis, signalling the start of a new era for tax and accountancy. HMRC have broken these mass changes down into ‘four foundations’ which summarise what you can expect when the changes are put into effect.
Making tax digital for individuals
After the changes, every business small or large will have access to a digital account; enabling you to interact with HMRC digitally at time which best suits you. It’s through these accounts that you will be presented with a personalised picture of your tax affairs, complete with prompts, advice and support via such things as web chat and secure messaging.
Making tax digital for businesses
Once the changes come into effect, you will no longer have to wait until the end of the tax year before knowing how much tax is due. This is a result of HMRC collecting and processing information in real time; hopefully preventing tax due or repayments from building up.
HMRC expect to see a reduction in the amount of documents taxpayers send to them which they already have, or are available elsewhere. This is because users of the system will be able to see the information that HMRC has through their own digital tax account. The information submitted to this account will be used to provide a tailored service to each individual taxpayer, thus making the tax process quicker and much more personal.
Tax in one place
Under the current system, it’s impossible for taxpayers to see a picture of their liabilities and entitlements in one place. However, by 2020, taxpayers will be able to see their complete financial picture through their digital account, similar to how you would on an online banking account. This will make it possible to set an overpayment of one tax against the underpayment of another. Essentially making it like paying a single tax.
To find out how you can make your business digital tax ready contact us – we’ll be happy to help.