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What does making tax digital mean for your small business?

The digital revolution is upon us and there’s no escaping it. Each day thousands of individuals are benefiting from the convenience and ease of digital services with a click of a button.

Simple, daily tasks such as checking an online bank statement, booking a train and even doing the weekly shop are simplified through advancements in technology.Consumers and individuals use these services and more so businesses are starting to recognise and harness digital potential. Changing the foundation and structure of their model to incorporate digital services and the results have paid off.

Last year the Government declared that they too want to reap the benefits of this digital revolution and that fundamental changes will be made to how the tax system operates.In this blog we will look at what constitutes to “Making Tax Digital” and what it means for your small business.

Making Tax Digital

Making Tax Digital (MTD) is a government initiative which aims to modify the tax system and move to a full digital tax system by 2020. First announced in the 2015 Budget subsequently six consultation papers focusing on different aspects of the plans have been released. The Government is committed to reducing burdens on tax payers by creating an accessible and transparent tax system in line with the digital age.

A fully digital tax system will be more:

These reforms aim to bring an end to old style tax return and change the experience for millions of taxpayers. For more information about the reforms please visit: www.gov.uk. Please note that taxation services or tax planning are not regulated by the Financial Conduct Authority.

Going digital

The consultation papers that were released this summer require feedback from taxpayers and accountants.With the early changes in full swing, from 2018 the way that we interact with the tax system will become more digital and those listed above will need to use software or apps to keep tabs on their business records. For those who keep paper records the digital change will be a big one.

What does this mean for your small business?

While many businesses already use financial services to manage their accounts, by 2018 all small businesses in the UK will have all of their financial activities, including liabilities and entitlements, in one place – their digital account. This will be fully accessible.

MTD for small businesses requires:

And you?

While MTD at a first glance may only seem to be a “digitisation” of the tax system, the changes will have a large effect on many small businesses across the UK.By having all of your business’s tax affairs in one place you will save time, be more efficient and know where you stand from a tax position, which will help you make executive business decisions.

If you run a small business and have any questions about the new MTD system get in touch with our team of specialist advisors here at Pareto FP.