Digital accounting

Making Tax Digital (MTD) will see most businesses and taxpayers accessing their tax affairs online through digital tax accounts from 2020 onwards.

It will replace the self-assessed tax return with a new quarterly digital reporting regime and change:

  • how you or your business keep accounting records
  • how you or your business report income and expenses to HMRC 
  • the services you or your business require from your accountant or tax agent.

It will also offer self-employed taxpayers the opportunity to pay tax through optional ‘pay as you go' instalments, based on the data submitted with HMRC under the new digital initiative.

Timeline and thresholds

Digital accounts will unite your tax details in a single place, much like an online bank account, and will start being phased in from April 2019/20.

The following table shows when you or your business can expect to start filing digital accounts:

Annual turnover Quarterly tax reports Timeline
Over £85,000 + VAT-registered VAT only  April 2019
Over £85,000: for all businesses/landlords  Income tax + National Insurance (NI) At least April 2020
 £10,000 to £85,000* Income tax + NI  At least April 2020 - and voluntarily
 All companies Corporation tax  At least April 2020 

*Small business threshold to be confirmed.

Key facts

  • MTD will be available on a voluntary basis for the smallest businesses
  • businesses and landlords with a turnover below the VAT registration threshold (currently £85,000) can choose when to move to the new digital system
  • businesses are not required to provide updates to HMRC more regularly than they already do
  • all businesses and landlords will have at least 2 years to adapt to the changes before being asked to keep digital records for taxes other than income tax.

In addition, the following details have been confirmed:

  • firms will be able to use spreadsheets to record their receipts and expenditure
  • quarterly updates will not apply to charities
  • accounting for income/expenditure on a ‘cash in, cash out basis' will be extended.

The smallest businesses do not need to keep digital records, or update the revenue quarterly, until at least 2020.

If you're in employment or a pensioner with secondary income of more than £10,000 a year from either self-employment or property, the same exemption applies.

Software

Your business will need to submit digital records to HMRC using third-party software.

Several vendors are developing MTD-compatible software. You will need to decide - and budget for - whichever package you go for. HMRC previously estimated MTD technology to cost around £280 per business.

Very little is known about the software choices, although HMRC intends to publish a software register in due course to outline MTD-compatible options.

Cyber security

With electronic interactions between taxpayers and HMRC poised to soar, it is imperative to take steps to protect your business from this threat.

Low-cost, easy to implement techniques include:

  • backing up your data
  • installing the latest updates on your tablets, smartphones and computers
  • prevent malware damage by having the most recent anti-virus software installed
  • be aware of phishing scams, particularly via email
  • use strong passwords to protect your data and change them regularly.

We can assist with your digital accounts.

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SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Our Customer Promise. Respond to any question sent to your accountant or any dedicated department within 24 hours.  If we need more time, we will update you as soon as we can and we promise to keep you informed of the progress we are making in answering your question.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new business team on 01442 275789 or email: newbusiness@sjdaccountancy.com. Our new business team is open Monday to Thursday (8am to 8pm), Friday (8am to 7pm) and Saturday (10am to 4pm)

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.