One of the key elements in HMRC’s plan to close the tax gap is a strategy called ‘Making Tax Digital’ (MTD)
Each year the UK tax authorities, HMRC, publish figures for what they refer to as ‘the tax gap’. This figure is the difference between what HMRC expects to collect in tax and the amount actually received. The latest figures were published recently for the year ending 5 April 2021, and the tax gap was GBP32 billion.
The Aim
By requiring businesses and individuals to report income and gains directly and more regularly using appropriate software, less errors will be made and the right amount will be paid, so more tax will be paid than happens now.
Property Or Business Earnings
HRMC estimates there are 4.2 million taxpayers who earn more than GBP10K a year (from either businesses or properties) that they wish to bring into this digital reporting system.
This is a significant step, and there are very few exclusions allowed. The process was originally due to begin on 6 April 2023 but has now been delayed with a new date of 6 April 2024.
From that point, taxpayers will need to keep digital records using compatible software, prepare and submit quarterly reports of income and expenses along with an end of year summary.
In addition, a “final declaration” will need to be submitted by 31 January following the end of the tax year to include details of all of other taxable income and gains.
Current Payment System Remains
Although more frequent reporting is needed, thankfully the current system of two payments on account and a balancing payment by 31 January after the tax year is expected to remain in place for the foreseeable future.
To ensure you understand whether or not you will be required to report under the MTD regime, understand your reporting requirements, and have appropriate software in place. talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
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