We only use cookies for website functionality and security.

Blog

Find all the latest news, stories, insights and tips from Paragon Bank.



Making Tax Digital: are you ready?

taxtime-featured.jpg

What’s it all about?

Instead of filing a traditional self-assessment tax return, the government wants individuals and businesses to keep records digitally and send quarterly updates to HMRC. Taxpayers will also need to send in a final report after the end of the tax year, together with a claim for any reliefs or allowances.

The idea is to help taxpayers plan better by giving them an estimate of how much tax they owe as they go through the year rather than waiting until the end of the tax year.

It’s also designed to help taxpayers get their tax right. HMRC estimates avoidable mistakes cost the Exchequer over £9 billion a year and believes the improved accuracy that digital records provide will reduce the amount of tax lost as a result of mistakes.

Tax payment deadlines won’t change under the MTD service.

Making Tax Digital for VAT

VAT-registered businesses with a turnover above the VAT threshold will have to use the MTD service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

However, as letting residential property is exempt for VAT purposes, it’s not expected that this will be of significant interest to landlords unless they have other activities that are subject to VAT.

Making Tax Digital for Income Tax

This will apply to landlords and self-employed businesses but the scheme will not be compulsory for taxes other than VAT until at least April 2020.

If you’re a self-employed business or landlord, you can voluntarily use software to keep records digitally and send Income Tax updates to HMRC instead of filing a self-assessment tax return now as part of a pilot scheme.

Do I have to use special software?

Potentially. There will be a requirement to keep records of transactions in a digital format but spreadsheet products like Excel will be acceptable. There will also be a requirement to transmit the final information to HMRC using ‘API-enabled’ software. However, it may be possible for an accountant to transmit the information on a taxpayer’s behalf and for taxpayers who don’t use professional accountants, other online solutions may be available.

Will there be any exemptions?

It’s expected there will be some limited exemptions for those who are digitally excluded, for example, because of disability or access to broadband.

What should I do next?

You can find out more about the government’s MTD plans here at the gov.co.uk website.

We also recommend that you seek professional tax advice from a suitably qualified professional to help you get prepared.

The information in this blog is intended for general information purposes only and should not be used as a substitute for professional advice. Landlords and investors should seek independent advice from a qualified tax adviser and discuss options available for their individual portfolios.

11 January 2019

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551