This week I’m on a rant about Making Tax Digital – because it is a humongeous change to accounts and tax as we know it- and most of those people it’s going to affect – haven’t cottoned on!

The MTD change is starting with the little guys – that’s you and me, which seems unfair to us, but from HMRC’s stand point is logical, as they need to get it right with people with relatively simple tax affairs, before moving onto the Amazon’s and Starbucks of this world!

At the moment, it’s all change from April 2018 for the self-employed and landlords with turnover of over £10,000 – that’s really not that much.  There is an outcry about this and everyone is lobbying HMRC to increase the threshold to slightly larger businesses with turnover equal to the vat threshold – as at least they are used to doing some kind of digital return already.  But at the moment we are stuck with the £10k cut off.

So if you have turnover or rental income of £10k very soon you are into reporting your results quarterly – and digitally – to HMRC.  Sending your receipts in a carrier bag to your accountant once a year (probably 7-8 months after your year-end) is just no longer an option.  Even sending then nicely analysed on a spreadsheet looks like it won’t do anymore.

So how are we going to do cope with MTD? The truth is – we just don’t know – as information from HMRC is so limited.

As an accountant I’m really busy dealing with my clients at the moment and I have plenty of “carrier bag” clients – whom I love dearly.  They don’t get accounts – why would they?  I don’t get plumbing! (no offence plumbers – but I really cant read a receipt when its been through the wash)

Do I have time to do their accounts 4 times a year rather than 1, and within a one month deadline?  Probably not.

Can I do it for the same fee?  Definitely not!

I am in the process of educating my clients and moving them onto cloud accounting packages and most of them making the switch do like them.  Most get that once they know what they are doing, it will save lots of time and give them up to date figures which they can use to make real time business decisions.

After all, what real use is a set of accounts 9 months after the end of your year, apart from telling you how much tax you owe?  With real time information, accountants can really add value to a business.

But most decent accounting packages come with a monthly subscription.  For some clients, the annual fee of that alone is about what they pay now for their annual accounts, so their costs are really going to increase.  Research shows the annual cost of MTD to a small business will be £1,250.

So whilst I get the logic, and it all sounds lovely in theory, HMRC need to step into the real world and consider the thousands of small businesses this is really going to affect.  We need the turnover limit increased and the start date delayed to give clients time to adapt to digital systems.

You can give HMRC your views before Nov 7 here  https://www.gov.uk/government/collections/making-tax-digital-consultations

Rant over.

A few personal tax reminders this week to point you in the right direction.  Need any more help – you know where I am!

1. It’s your responsibility to complete a tax return and advise HMRC if you need to submit one – don’t wait to be asked!
2. You need to submit your return by 31 January 2020, or the penalty is automatically £100.  The penalty is not reduced or cancelled if there is no tax due.
3. Getting yourself set up to file your return takes time.  HMRC send out passwords in the post, and their postal system is worse than their phone system – so don’t leave it too late!
4. If you want any tax owed to be collected via an adjustment to your tax code then you need to submit by 30 December 2019.
5. If either you or your partner has adjusted income over £50,000, and you have been claiming Child Benefit in the year, then you need to pay this back at least in part.  You do this on your tax return, so you need to provide the details
6. If you are self employed, class 2 NIC is paid via self assessment so this will be appearing on your statement as an amount due.  If your earnings are low, then the Small Earnings exemption is now automatically applied.
7. Married couples and civil partners may be eligible for the Marriage Allowance which enables transfer of an element of the personal allowance between spouses (see previous blog.) This is widely underclaimed so check if it applies!
8. If you are a higher rate tax payer and have made charitable donations in the year, then don’t forget to add this to your return as you will get tax relief on your donation.
9. If you jointly own rental property, then this income is automatically split 50/50, unless you have declared otherwise to HMRC.  It’s not a matter of choice as to which of you declare it!
10. Tax isn’t meant to be taxing – but it is!  Just let someone else do and get your life back!  Contact Rosie Forsyth at Wilkins & Co

Guest Blog – The reality of self-assessment!

Oct 9, 2016

This week’s post is a guest blog by Helen Watson of Helen Watson Social Media.  Helen decided that as her busines was new and her accounts straightforward, she’d tackle her tax return herself.

Read how she got on!

“I’ve recently become self employed – which has loads of benefits; I love my job, my clients are great, I’m the master of my own destiny.

Then, this utopia is rudely interrupted by the spectre of SELF ASSESSMENT. My first time doing a tax return, I have a good think about this. I’m an intelligent person, I have maths GCSE, my tax affairs are pretty straightforward. This is the process I will follow:

1. Log onto HMRC website
2. Put some numbers in
3. Celebrate with smug face and accompanying G&T

I decided to do my self assessment in October, to get it out of the way. This was a good move, I may even have it completed by the Jan 31^st deadline – assuming the HMRC gods are in a benevolent mood.

A brief summary of my actual process:

1. Log onto HMRC website. I’ve already registered so all I need is my user ID, my unique tax payer reference number, my password (god knows), an access code, my mothers grandma’s shoe size, the cat’s date of birth and my first G&T.
2. Put some numbers in. Am I using the ‘cash basis’ for my accounts? I don’t know, how am I supposed to know? Do I have any capital allowances? Not a clue.  Do I need to change my class 4 NIC? Am I exempt from class 2 NIC?  Where are my dividend certificates?
   Why don’t I know any of this stuff? Someone, somewhere should surely have warned me about this.
3. Give up, resolve to complete another day, have G&T.

If you have a tax return to complete this year, I have some advice –

START NOW!

It will take about 83 times longer than you anticipate. There will be:

• Swearing
• Drinking
• Searching for documents but finding only receipts for your child’s shoes that you bought in 2013 (not tax deductible)
• Wondering if HMRC has a plan to send you back to employment by tempting you with PAYE

In the end though, there will be success. You can manage it, HMRC do have lots of hints and tips to help you through the process. You just might have to read some of them 96 times to work out what they actually mean!

So to avoid feeling “ruff” on January 31st, don’t delay any longer, and make a start!

If it’s all too daunting, and you aren’t sure where to start, then get some help from an expert – contact Rosie Forsyth at Wilkins & Co.

So the heating’s on, the sequins are back, and Lord Sugar is firing people. It can only mean one thing……….

Oct 3, 2016

TAX RETURN TIME!

C’mon, you’ve had since April to do it and you’ve put it off for 6 months so far.  There are 4 months to go before the final deadline, so just get it out the way now, before winter really sets in and the “C” word gets mentioned.

All my October blog’s are dedicated to personal tax and helping you get your returns in this side of Xmas.

So let’s look at the basics – what are the deadlines?

• 31 Jan – most people know that 31 January is the filing deadline for tax returns.  This is for your 2015/16 tax return which covers your income from 6 April 2015 – 5 April 2016.  Any tax not already paid for the year is also due for payment then, plus any payment on account you need to make for your 2016/17 tax.
• 31 October -if you want to send a paper tax return then this has to be in by 31 October.
• 5 October – if you have a new source of income in the year, or need to register for the first time for self-assessment – then this has to be done by 5 October (like now!!)
• 31 December – if you owe tax for the year and you want this to be collected via your tax code in 2016/17, rather than sending them a cheque at 31 January, then you need to get your return in by 31 December, not 31 January.

If it’s your first year of self-assessment and you are going to do it yourself, you will first need to register to file online and get the passwords sent to you in the post.  This can take a few weeks to come through, so you really can’t afford to leave this until January as not being organised won’t be an excuse for not filing on time!

By doing your return now, rather than in the New Year, you will know what your tax bill is going to be and you can budget for any tax due over the next few months.  You’ll also have that warm inner smugness that its done, and that you won’t be joining the January panic this year.