What is Making Tax Digital?
Making Tax Digital (MTD) is a radical new system being introduced by HMRC. It will transform the way that tax returns are filed online.
Under MTD, self-employed barristers must keep accounting records electronically and use that information to provide updates on their business profit to HMRC on a quarterly basis.
HMRC’s main aim under the scheme is to make tax administration more efficient and easier for taxpayers through the introduction of a fully digitised system. Also, HMRC estimate that they lose around £8bn a year through filing errors by taxpayers and that MTD will help to reduce those errors.
The way that business profits are reported to HMRC is changing. Barristers with income in excess of the VAT threshold will need to begin digital submissions from April 2018 under the current proposals, and barristers with income below the VAT threshold will need to begin digital submissions with effect from April 2019. Quarterly submissions will be due to HMRC following these start dates, and will need to be based on accurate accounting data. The reports must be submitted one month after the end of the quarter.
That means you will no longer need to wait until the end of the year to find out how much tax you need to pay. However, a penalty regime will apply to late submissions.
If you are not already using software for your business record keeping/accounting you will need to establish a system in order to comply with the rules