What self assessment taxpayers ought to know about HMRC digital tax changes?
Making tax digital changes are underway and coming along sooner than you’ll believe possible. Implementation deadlines are now set in stone and by April 2018 it will be the law to record and store accounts on software compatible with HMRC systems and capable of sending quarterly submissions.
As a UK taxpayer do you fully understand the implications of Making Tax Digital?
In this short blog I’ll introduce the core information you need to understand how you, the taxpayer, will be affected by HMRC going digital.
- Making tax digital defined:
- The information will be automatically supplied, online, to HRMC on a quarterly basis with the intention no payment deadlines ever missed again.
- Many tax payers and small businesses have an HMRC online account in existence. It pre-populates all the information and sources of income required on the current annual tax return e.g. salary, pension details, dividends and bank interest.
- Who is affected by making tax digital? It’ll be mandatory for businesses, private individuals and landlords. The only exceptions to the rule will be earners below £10,000 threshold.
Do note that the £10,000 threshold is gross income/profits and so far HMRC hasn’t decided what to do with individuals who have a lot of investment income (such as dividends etc) and gains little in the way of earnings and pensions.
- Will payment dates change?
No. Although you’ll make quarterly submissions of information to HMRC the fixed payment dates of 31 of July and 31 of January will remain in place. There will be an additional option of a pay as you go scheme introduced.
- Will quarterly submissions account for business adjustments?
Yes. HMRC understands many businesses make stock adjustments and varying tax payments throughout the year. Following the last quarterly submission a 9 month period is allowed to make any tax and accounting adjustments.
- Tax Record Keeping
Tax Records will by law have to be kept digitally and supplied that way to HMRC quarterly.
A recent ICAEW survey suggested that 75 percent of all businesses, and 82 percent of sole traders, would need to change their record keeping systems to a digital only system in order to comply with Making Tax Digital. This would be at great financial cost and time cost to all tax payers.
My current understanding is that excel spreadsheet or scanned copies will be an acceptable format for quarterly submissions – for how long I can’t be sure.
We’ll strongly recommend to all our clients we keep the records for them and file appropriately, on time and in the correct format as we are digitally ready accountants
- How much will accountancy software cost the taxpayer?
HMRC is not developing apps and software for taxpayers. Instead they’re working closely with the software industry to ensure that apps and software developed are compatible with updated HMRC systems.
If you are looking for further detail you can read ‘Making Tax digital’ by HMRC.
HMRC intend to communicate with all taxpayers in a fully digital world by 2020. No-one can afford to be left behind.
Get in touch now at or call 0141 290 0262 and we will help prepare you for digital change.
Bruce Wilson
Tax Expert