Guide to digital tax

There are just days to go until millions of businesses, self-employed people, and landlords ditch the lengthy and overwhelming paperwork of previous tax years and submit records and receipts online in what is a mandatory requirement for many.

digital taxAs for those of us that haven’t quite got to grips with digital tax yet – are you prepared to change the way you log your taxes?

An estimated 1.2 million firms are yet to sign up for the new digital way of life and avoidable mistakes costing the Exchequer billions of pounds a year, so we’ve prepared a simple guide to help you submit your digital tax returns in the easiest way possible.

With SMEs losing millions of pounds each year due to the uphill struggle of updating financial records can you afford not to use digital tax?

When does tax go digital?

As part of Making Tax Digital (MTD), businesses registered for VAT with a taxable turnover above the VAT registration threshold of £85,000 MUST keep VAT records digitally and file their VAT returns using MTD compatible software. This will start from their first VAT period starting on or after 1 April 2019.

Businesses with a taxable turnover below the VAT threshold will not have to operate MTD, but can still choose to do so voluntarily. So, the first step is to check if your business must submit taxes digitally.

If you’re a part of the deferral group below you must go digital from your first VAT Return period starting on or after 1 October 2019.

Who’s in the digital tax deferral group?

  • Is part of a VAT group or VAT Division.
  • Is based overseas.
  • Is a trust.
  • Is a not for profit organisation that is not set up as a company.
  • Submits annual returns.
  • Is a local authority.
  • Is a public corporation.
  • Makes payments on account.
  • Uses the VAT GIANT service.

It might not seem like it right now as you learn the ropes of going digital but the overall purpose of the initiative is to help people and businesses become more efficient and more effective, and to make it easier for taxpayers to get their tax right.

Making tax digital compatible software

The good news is that once you’ve found the compatible software from HMRC, you’ll be able to access the service from any of your digital devices at a time that’s convenient for you. So, in essence, you can submit or update your tax records while you’re on the move.

Register for digital tax

You should receive an email within 72 hours to confirm that you can submit returns using software that’s compatible with Making Tax Digital for VAT. After you’ve signed up, you cannot use VAT online services to send VAT Returns. Once you’ve registered, you can apply for new services, update your information, and see how much tax you need to pay. You must have the correct software in place before you sign up.

What are the benefits of using digital tax software?

  • Use your software to send income and expenses updates and summaries every 3 months.
  • You can easily look at the amount of tax you might owe at the end of the accounting year based on the information you have provided so far in your business account as well through your software.
  • At the end of the accounting year you need to send a final report that confirms your income and expenses. (The small business guide to accounting).
  • Send an update to HMRC more often, for example, if you want to see a more up-to-date estimate of the tax you might owe.
  • Pay your bill as you go, to give you flexibility for you to manage your budget.

How tax going digital will effect income tax

Don’t forget, whether you’re a self-employed plumber, a construction worker, a cleaner, a hairdresser or a landlord, everyone can use the software provided by HMRC to keep business records digital and to send Income Tax updates instead of filing a Self-Assessment tax return – there are a number of options for that can be explored  –

Weird and wonderful excuses

Many a weird and wonderful excuse for late tax submissions have been made to HMRC over the years. Here are the top favourites according to Chartered Accountants, Myers Clark.

  • “My mother in law is a witch and put a curse on me”.
  • “I’m too short to reach the post box”.
  • “I was just too busy”.
  • “Our junior member of staff registered our client in self-assessment by mistake because they were not wearing their glasses”.
  • “My boiler had broken and my fingers were too cold to type”.

Perhaps unsurprisingly, these excuses were unsuccessful in attracting compassion from HMRC and were therefore unaccepted.

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Disclaimer: The advice provided here are our own interpretations and opinions. We have tried to simplify the main points of digital tax to create this guide but for more in-depth information please read the UK government’s tax overview.

Kim Latham is a PR Manager with a passion for travelling. Kim lived in Asia and the Middle East for several years where she worked for international corporations and also as an Editor for several award-winning magazines. Besides that, she loves walking her Westie, reading, cooking, and spending any spare time with her family. Kim is the PR Manager for and any PR queries should be directed too