Tax reporting is changing soon – are you ready for it?

Starting from 2018 all businesses self employed and landlords will have to update their tax affairs digitally at least quarterly.  The intention is that this will be via apps or third party software, so keeping records on a spreadsheet (or in a shoebox!) is no longer going to be an option.

If you look at the HMRC Youtube video (click here for link), it all looks very lovely and simple, but the reality may be very different and there is very little information on how it will actually work.

This really seems to have been rushed in and HMRC is being lobbied by all accounting bodies to delay implementation, but they seem to be going ahead….

 

What do we know?

Everyone will have their own digital tax account and it will be pre-populated with info HMRC already have about you.  Eg if you are in employment, it will put your P60 details in there for you.  At least quarterly you will need to update this info with your self employment income, dividends etc- using an app or third party software.  HMRC have confirmed that tax agents ( eg your accountant) will not have access your digital account online, and will only have access through third party software.

So ignoring your accounts til mid January each year is definitely out – that’s probably a good thing!

You will have to keep records either on the free app HMRC will provide, or on a cloud based system – and keep it up to date.

 

What we don’t know!

When do you send this info through? Will it be on a cash basis or invoice basis? What if you make an error?

Will the quarters tie up with your VAT quarter if you are registered?

What about year end adjustments or do you have to update “use of home charges” etc quarterly?

Will there be penalties for sending the information late?

The intention is to start paying your tax on a pay as you go basis too rather than once a year – OMG!

 

What should you do?

You probably already have a Personal Tax Account (“PTA”) and possibly even a Business Tax Account (“BTA”) and you should get access to this now. (click here to see how to access)

If you are using spreadsheets for your accounts, you need to start thinking about changing over to a digital system as 2018 really isn’t that far away.  I will be keeping my clients up to date with changes to the system as they are introduced.  HMRC consultations are due – but have been delayed until after the referendum!!