Between the buzz of GDPR, Open Banking, and PSD2, it’s easy to lose track of yet another regulatory change, but HMRC’s Making Tax Digital is poised to radically change tax season for people and businesses across the UK.
While Making Tax Digital should streamline the reporting process and eliminate the stress of annual tax seasons in the long term, there are likely to be growing pains as people adjust to the new system. To comply with Making Tax Digital, businesses and individuals will need to build good financial habits, such as consistent financial tracking and receipt management–and the sooner they adopt those practices, the better.
The new regulations aim to make the tax system more efficient and accurate by using digital tools. Set to begin rolling out in 2019, Making Tax Digital will restructure the tax system with the goal of becoming “one of the most digitally advanced tax administrations in the world.”
What does it mean for individuals?
Under the new regulations, people are assigned a Personal Tax Account–an online dashboard for checking income tax estimates, filing a personal tax return, claiming a tax refund, updating personal information, etc. The goal of the Personal Tax Account, eventually, is to have people regularly updating their information in order to eradicate annual tax returns. This ongoing reporting process will make maintaining digital receipt records a vital financial practice for anyone looking to make a tax claim.
What does it mean for businesses?
For businesses, the changes mean tracking their finances using third-party software and then submitting tax reports quarterly. The accuracy afforded by digital tools is essential. HMRC cited that from 2014 to 2015, over £3.5 billion were lost due to human error in Value-Added Tax (VAT) returns. Now, 98% of registered businesses are filing electronic returns on an annual basis, but the new regulation will aim to seamlessly integrate the government platform with third-party software for further improved record keeping.
How can mobile receipt management help?
The reliance on third-party apps and software to supplement the government platform are a key aspect of Making Tax Digital. While this change in the tax system should alleviate some of the stress that comes with the annual tax season, it also means that it’s more important than ever for people to manage their accounts and save digital receipts on a regular basis.
While the full range of Making Tax Digital services won’t be rolled out until 2020, people can ease into the transition by adopting regular digital receipt management now. As the economy increasingly moves online, digital receipt management is becoming more than just a best practice to save people time, stress, and money–it’s a mandatory tool for the modern financial world.
Header image created using Creative Common assets from Pablo Stanley.