The tax system is changing. Now is the time to take your accounting, bookkeeping and tax online if you haven’t already.
Reduce your tax bills
Ask your accountant how they will manage this change for you. Many will have a solution in place already but some may not so make sure you are well prepared even if your accountant is not!
A new tax system – Making Tax Digital
In 2015, the government spelled out their vision for a modernized tax system and the end of the tax return as you know it. It announced it would change the service it provides to a digitally advanced tax online system that would rival any system across the world.
They have named this ‘Making Tax Digital’ which is to be achieved by 2020 through simpler and more aligned payments for tax via online, real time, data led systems. Contractors will welcome this as they are often the types of individuals who are tech-savvy and often pick contractor accountants based on technological advances.
The message for contractors is loud and clear, ditch the spreadsheets and take your accounting online.
When is this happening?
By early 2017 five million small businesses, including freelances and contractors are expected to have access to a secure, personalized digital tax account.
By 2020, most businesses, including companies, partnerships and individual taxpayers who are self-employed and those letting out property, will be required to keep track of their tax affairs digitally and update HMRC at least quarterly.
By reporting information closer to real time, businesses should in theory find it easier to understand how much tax they owe, eliminating any uncertainty over figures and helping them to budget accordingly. Some individuals are already doing this through cloud based software such as Kashflow, Freeagent, Xero or Quickbooks.
Why are HMRC doing this?
Firstly, to provide a tailored service. Taxpayers will not have to give HMRC information that it already has, or is able to get from elsewhere, for example, from employers, banks, building societies and other government departments. Taxpayers will see the information that HMRC holds through their digital tax accounts, and can check at any time if details are complete and correct. HMRC will then be able to offer a bespoke service based on the information it sees.
You will also know where you stand; businesses, freelancers and contractors will no longer have to wait until 9 months from the year end before finding out how much tax is owed. HMRC will collect and process information affecting tax in as close to real time as possible, to stop a build-up of tax repayments occurring.
Additionally, taxpayers will be able to see their complete financial picture in their digital account, as they would with their online bank account. What’s more, they’ll be able to set an over-payment of one tax against the under-payment of another, making it feel like they are paying a single tax. This will be welcomed by contractors who often ask their contractor accountant why they have to make all these separate payments!
How we do digital bookkeeping
Contractor accountants like Cobia are way ahead of the game when it comes to digital, cloud based, online accounting. We brought it in a few years ago to make it easier for contractors to track their financial position in real time, access their data from anywhere and communicate with their accountant via state of the art software. All our clients have their own Kashflow software from day one with us, which makes HMRC’s digital changes a breeze. The digital tax ready software allows you to easily keep on top of your tax so you’ll always feel in control all backed up by expert contractor accountants and tax advisors. What are you waiting for?
To learn more about how we work and the specialist accounting and taxation services we offer contractors, self-employed individuals and small businesses, contact us today.