Tax is getting easier for small businesses and HM Revenue and Customs is showing how in a new video.
Independent traders and people running small businesses want a simpler tax system, and would rather not spend time digging out months of receipts to fill out their annual tax return. HMRC is committed to transforming the tax system to create something that is more effective, more efficient and easier for taxpayers.
Most of the UK’s 5.4 million businesses already manage their tax online – over 99% of VAT returns are submitted online. By 2020 the dreaded annual tax return will have been replaced with a simpler online system.
The new digital tax accounts integrate the different information businesses have to provide into a simple process, from entering it in a business recordkeeping app through to sending it to HMRC. So instead of one big, onerous tax return each year, businesses can check that the information they are recording is correct, and simply click “send” to update HMRC once a quarter.
Many taxpayers want more certainty over their tax bill and access to an in-year picture of their tax position, which their new digital accounts will provide. Too many viable new businesses go under when they receive their tax bill simply because they didn’t know how much to set aside. Digital tax accounts will help to fix this issue.
For those small businesses that aren’t already keeping records digitally, there will be a range of software packages and apps available to use, including free ones for those with simple, straightforward tax affairs. There will also be clear, simple advice on how to use the new digital tax account.
Some businesses will want time to adjust, which is why these reforms are being introduced bit by bit, with no one moving onto the new system before 2018.
Later this spring, HMRC will consult widely on how the new system should operate. People who genuinely can’t use digital tools (perhaps because they can’t access broadband, or don’t own a computer or smartphone) will be offered alternatives, like nominating someone else to update their information for them, or giving information by phone.
The video below, called Making Tax Digital, shows how the new digital tax accounts will work and how local businesses will benefit from using the online system.