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Going digital with your taxes: everything you need to know

The promise of a transformed tax system by 2020 is moving forward, so it’s time to make sure you’re fully confident of the facts about going digital with your taxes.  

Going digital with your taxes

In an increasingly digitally-dependent age, it’s unsurprising that HMRC is quickly moving towards digital record-keeping, despite some concerns about how these processes will be implemented.

By 2020, over 50 million individuals and small businesses will be managing their taxes digitally, so being fully aware of the facts about going digital with your taxes is essential.

The ‘Making Tax Digital’ pilot is well underway, so read on to make sure you’re ready to implement any potential changes and avoid being left behind!

How to prepare

Records of your earnings and costs will have to be retained using digital tools. HMRC have announced they will not be providing free software to do this.

Although spreadsheets will be acceptable, technical requirements will need to be met, such as providing updates from each quarter and supporting end-of-year activity.

Despite not providing free software, HMRC have many routes through which you can contact them, including a Webchat service where you can check the facts about going digital with your taxes.

Certain people will be exempt

A case has been made that Making Tax Digital discriminates against those who aren’t technologically adept.

Although 82% of adults used the internet daily in 2016, HMRC recognise that up to 15% of the population are ‘digitally excluded’ and therefore will be exempt from these changes.

Individual cases will also be considered, but a simple lack of desire to switch to a digital system probably won’t cut it!

If you’re feeling reluctant, you can be assured by the fact that a large percentage of businesses are already doing their taxes digitally, with 86% of Self-Assessment returns being completed online.

You won’t need to keep extra records

HMRC have made it clear that going digital isn’t going to require any additional records, especially given that the main aim is to simplify taxes for everyone.

As well as simplifying the tax process for the self-employed, a major aim of Making Tax Digital is to reduce burden on businesses by around £400m.

So despite some reluctance from certain sources, the facts about going digital with your taxes seem to suggest that things will become simpler and should reduce costs.

The benefits

There are naturally going to be challenges to individuals and small businesses when it comes to going digital with their taxes, but hopefully the benefits will be significant.

It should become much easier for self-employed people to know exactly where they stand with their taxes throughout the year.

This should reduce the likelihood of there being any nasty surprises at the end of the tax year.

Increased transparency concerning your taxes should also allow you to budget and plan your costs more effectively.

In summary: the facts about going digital with your taxes

Making Tax Digital is undeniably a bold move by HMRC. Despite some issues being raised, it would seem this process should ultimately simplify taxes for the self-employed.

For those whose taxes feel like a burden, it may be a relief to have access to all your tax information in one easily accessible and frequently updated location.

If these facts about going digital with your taxes haven’t managed to reassure you, why not speak to us today – we’d be happy to answer any questions you have.

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