So, what are digital tax accounts and how do they fit into the making tax digital (MTD) picture?
If you are confused, it’s not surprising with all the deadlines which have been set and moved. In this blog, we outline the current situation with Making Tax Digital and explain how this will impact you.
Digital tax accounts and Making Tax Digital
The focus of MTD is currently VAT, which has been implemented from April 2019. If you are VAT registered and have a VATable income of over £85,000, you will be well aware of this. HMRC has now confirmed that businesses will not be asked to keep digital records, or to update HMRC quarterly for other taxes, until at least 2020.
When it does come in (and we think the 2020 deadline will move to 2021 or 2022), MTD will represent a significant change to how taxpayers record their financial information and submit tax returns. Taxpayers will move to a fully digital tax system, using digital tax accounts.
Making Tax Digital for Business (MTDfB) was first “introduced” in the 2015 Spring Budget. The government’s Making Tax Easier document was published shortly after and outlined plans for the “end of the tax return”. It also set out the government’s vision to modernise the UK’s tax system, with digital tax accounts set to replace tax returns for ten million individuals and five million small businesses.
However, industry experts and those within the accountancy sector expressed concerns over the proposed pace and the scale of the introduction of MTDfB. As a result, the government amended the initial timetable for the initiative’s implementation, to allow businesses and individuals “plenty of time to adapt to the changes”. This is the reason for the current hiatus.
The introduction of personal tax accounts
Although MTD is postponed until at least 2020, HMRC have introduced the “personal tax account” (PTA) which is the precursor to the digital tax account.
Have you accessed yours yet? Well, you should do as there are some natty features which enable you to see your pension forecast and the number of tax years for which you have full NI contributions. You can see your NI record going all the way back to when you were 16 – it’s quite interesting! It’s worth accessing your PTA just for that.