Making Tax Digital

Making Tax Digital is a scheme created by the government in order to simplify the process of managing individual and business tax payments. The digitalisation of the yearly tax return will eventually phase out the traditional tax return scheme self-employed people deal with. The introduction of Personal Tax Accounts will hopefully make the process of tax requests much easier, and much more fluid.

HMRC ascertained the need to bring a modern approach to taxation, as the traditional method was becoming outdated. The existing process pressured many businesses at the end of the tax year. The modern Making Tax Digital scheme will be more transparent and will make better use of information. It also reduces the chance of a taxpayer making mistakes.

With so much uncertainty regarding the changes in the tax return system, we would like to highlight a few points where we think the taxpayer should be aware of.

MAKING TAX DIGITAL: WHAT ARE THE DIGITAL TAX ACCOUNTS ABOUT?

One of the key features of Making Tax Digital, is the introduction of Digital Tax Accounts. This is essentially an online tax-management platform that provides taxpayers with a real-time overview of where they currently stand with their outstanding tax bills. Digital Tax Accounts are designed to give individual taxpayers and businesses more insight into the money they owe. This includes all payable taxes, such as, but not limited to, corporation tax, VAT and Pay-As-You-Earn (PAYE) tax. Digital Tax Accounts will enable taxpayers to pay their tax-bills throughout the year, with help of a day-to-day accounting software. Your financial affairs can and will be managed in a manner that suits you. However, Digital Tax Accounts remain an unknown quantity to many and are likely to take time to get to grips with.

MAKING TAX DIGITAL: HOW WILL IT WORK?

Traditional annual tax returns may become superfluous once Digital Tax Accounts become the standard method of dealing with your tax. However, paying taxes and requesting tax returns could still be an issue. Taxpayers are still obliged to keep HMRC fully updated on their financial status and business activities. In fact, the frequency at which this occurs will increase to quarterly, meaning individuals and businesses will need to be more precise and vigilant with the information they provide. The responsibility of providing the correct information still lies with the taxpayer.

MAKING TAX DIGITAL: HOW TO REGISTER

Luckily is registering one of the simpler tasks. The estimated time it takes to register an account will be about 15 minutes, and it is fairly straightforward. You will need your Government Gateway Account and National Insurance Number.  It’s worth noting that a temporary reference number will not work. Common problems encountered in the registration process tend to relate to errors with users’ Government Gateway ID and lost passwords.

MAKING TAX DIGITAL: COMMON PROBLEMS ENCOUNTERED

The new manner of taxing is likely to make the process of managing your tax easier in the long run. However, the implementation of this new taxation system will be difficult, and it will not come without its problems. Many individuals and businesses are struggling to come to terms with exactly what the new system entails. HMRC have made a series of changes to the planned roll-out of the new scheme which has caused confusion and uncertainty for taxpayers.

Failing to fully grasp what the new system entails can cause many issues. This could lead to not meeting the responsibility of paying taxes.  Failing to pay taxes could in turn cause more problems, such as fines or untimely attention from HMRC.

Many of our existing clients approached us with concerns over the introduction of a new Taxation system, due to uncertainty over how it will impact on their existing systems and practices. Experienced taxpayers tend to be accustomed to the traditional tax return system and are daunted by the changes. Fortunately, we are well-versed in managing the switch to Digital Tax Accounts and the service we provide takes all the worry out of the impending changes. However, those who are yet to develop and implement robust systems to manage the switch effectively may leave themselves open to problems.

Individuals and small business owners who are less confident with digital systems and information technology (IT) are likely to be particularly susceptible to falling foul of HMRC’s expectations. The switch to digitalisation is beneficial to many but is already causing problems for many who simply don’t have the skills or confidence to create their online account, access the online hub and regularly update their status digitally.

MAKING TAX DIGITAL: WHAT WE CAN DO FOR YOU

Making Tax Digital is the future of tax management and there is no doubting it is here to stay. We are confident digital taxation can benefit you and your business. With our expert input, a thorough understanding of digital taxation and our tried and tested systems, we can make the transition simple.

The Financial Management Centre has a thorough understanding of what the new taxation system entails and can take the stress out of the changes that are coming. It is no secret that tax causes some of the biggest problems faced by sole traders and small businesses. By choosing the Financial Management Centre to take control of your Digital Tax Accounting needs, we can relieve the pressure and ensure your transition to digital taxation runs smoothly from start to finish.

We provide a cost-effective service for individuals and small businesses across the country and our experience is second to none. Don’t hesitate to get in touch and chat to one of our experienced advisors and make arrangements to speak to us in more detail to find out exactly how we can manage your digital tax needs. Contact us directly on 0800 470 4820 or 0333 202 7198 or email info@tfmcentre.co.uk for more information.