You will probably have heard about digital tax but what does it actually mean for you and how will it benefit your business?
The HMRC digital strategy will mean that you will not have to wait until the end of the tax year to find out how much you owe. This will help you avoid any nasty surprises and plan your finances much more effectively throughout the year.
The HMRC digital system stores your information, so you will only need to fill out any new details or changes. This will save you time and stress, as you will not need to worry about correctly filling out details that you have already given to HMRC.
A system of online billing will mean that you will be able to see what you owe and pay online without needing to fill out a self-assessment form. If you need assistance to get set up or have questions about the system, HMRC have people on hand to talk you through what you need to know.
Your personal digital tax account
You might already have a personal digital tax account set up for your business that you use to pay corporation tax, or for your VAT returns. You can also use your account to keep track of your accounts and update HRMC about your affairs at least four times a year.
HMRC are going to ensure that you have access to free software or apps that you can use to keep records of your income and expenditure. You can choose to pay for your own tax software packages if you do not want to use the free ones supplied by them.
The system will allow you to record all of your day-to-day financial activity. They are really good at spotting possible mistakes in your calculations or identifying figures that look out of place. Using the software will make it much easier for you to give accurate data to HMRC without the hassle of writing it all out each year.
You can send the data from smart phone or computer directly to HMRC. Updating your personal digital tax account in this way is much easier than filling out lots of forms and making sure they get delivered on time.
All your information in once place
You will also not have to wait all year, and fill out and file all your tax forms before finding out what you actually have to pay. You will be able to see straight away through your account a real-time view of your tax and a calculation of what you owe.
Your personal digital tax account will allow you to look at all your tax dealings in one place. Instead of having to visit different parts of HMRC’s website to pay your income tax, National Insurance, VAT and corporation tax, you will be able to pay them all in one place. You can pay everything in a single payment which will make things much easier for you.
The HMRC digital strategy will also mean that if you are running your business alongside another job, you will be able to see how each source of income affects your tax calculation.