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More on Making Tax Digital - The Consultation...

Making Tax Digital

First online banking, shopping, socialising and learning became irreplaceable additions to our everyday lives. Now, it seems, is the turn of online taxes with HMRC announcing their plans to Make Tax Digital last year proclaiming the benefit in allowing individuals and businesses the chance to manage their tax affairs online, in between uploading Instagram posts and shopping on amazon.

Digital?  When is this happening?

A consultation period started on the 15th August 2016 and will finish on the 7th November 2016. The aim of this is to establish opinions on HMRC’s Making Tax Digital Programme, and the production of six consultation documents.

Six! What are they about?

But I'm only a Landlord - surely I won't need to submit 4 tax returns a year?...

But I’m only a Landlord – surely I won’t need to submit 4 tax returns a year?

The idea behind Making Tax Digital is HMRC becoming part of the digital age and that will mean fundamental changes to the tax system to make it “more effective, more efficient and easier for tax payers.”
So all tax payers will have a digital tax account…there will be 50 million of them.  Third parties will be able to automatically fill them with details of your income.  So for example income from employers, pensions and even banks will be automatically fed into your Digital Tax Account.  However the missing link is that only you or your accountant representing you knows how much you are earning from your business and that includes rental income for landlords.   So the obvious solution is that you will be forced to provide details of any income (and expenses) which cannot be auto-filled on a quarterly basis.
So the media has commentated on the impact on small self-employed people who will have to keep their accounts in a digital form (not on excel), but the impact on landlords appears to have been forgotten.  Landlords will also have to submit “quarterly summarized information” but we still don’t know in exactly what format this summarized information will take.

How do I prepare for this?

I'm going Self Employed. What do I do about HMRC?...

The first action is to register with the happy chappies at the tax office. This doesn’t need to be in person, or feel like visiting the Spanish Inquisition. Instead, the government has invested a lot of time and money in making this a digital process, so more can now be done online.  

Registration on the HMRC website does take a little time, but ultimately is just a series of form filling pages. Once complete, you are then issued with a password and a UTR (Unique Tax Reference) number.  You will have to activate the online account, but then, you are set for trading. This can be done up to three months from when you do start trading, but we recommend completing the process as soon as you can. That way you aren’t distracted by the work itself. 

Some kind accountants will set this HMRC account up for you, and act on your behalf. If you are going to be earning low revenues, then you can also opt in to paying for National Insurance, making voluntary contributions.This safeguards your state pension.

If you estimate that you’ll earn over £83,000 per annum then VAT Registration is also required, more form filling! Contain your excitement.

Contactless payments and how they work...

Britain holds the accolade of being the most Contactless country in Europe, pre Brexit. The list of locations that accepts Contactless payments is lengthening and even unattended vending machines have the functionality to accept them.

Contactless cards are installed with the same protection measures as chip and pin cards so they are much safer than using cash. Receipts are not normally provided on transactions below the £30 maximum limit unless they are requested by the customer.

Contactless payments are steadily growing in number and current figures are that 1 in 10 U.K. purchases are being performed with Contactless. It’s seen as an efficient and secure method for transactions of less than £30, predominantly with the under 40’s.

The UK Card Association statistics for February 2016 stated that 84.2 million Contactless cards have been issued in the U.K. and 25.3 million or 30% of these were charge or credit cards and 58.9 million or 70% were debit cards.

What is cloud technology and how does it help with accounting?...

First of all, don’t worry. This isn’t going to be a post where we look to confuse you with the technical aspects of cloud technology. Instead, we thought that as cloud computing is becoming an even more vital business tool for our clients, we’d tell you how it can help with your accounting.

Cloud computing is a highly effective way to digitally store, maintain and remotely backup accounting data. This data is then made available over a network, usually the internet, and is compatible with all of the well known accountancy packages:

Intuit Quickbooks

Xero

Kashflow

Sage One

Freeagent