HM Revenue and Customs (HMRC) has made a statement of intent to extend its revolutionary digital tax system to self-employed professionals.
The tax authority has confirmed an income tax pilot for self-employed individuals and their accountancy agents to test its flagship Making Tax Digital system. The pilot will give the self-employed the chance to trial keeping business records digitally and submit regular income tax updates to HMRC, rather than filing annual self-assessment tax returns.
The pilot is available to sole traders that have income from a single business and whose accounting period ends after 5th April 2018. Those with income derived from additional sources may be required to report it to HMRC via self-assessment.
Those interested in trialling the Making Tax Digital system can currently choose from two approved pieces of accounting software, but it’s expected additional approved software providers will appear in the coming months.
Participants in the pilot must use the approved software to keep an accurate record of all income and business expenses. Summaries of income and expenses must be submitted to HMRC every quarter. Individuals may see an estimate of the tax they owe at the end of their accounting year, based on the data provided to date in their business tax account and via the approved software.
Those involved in the Making Tax Digital pilot can send income tax updates to HMRC more frequently if they wish to see a more regular estimation of tax owed. They can even pay their tax bills on a pay-as-you-go basis.
Brian Palmer, Tax Policy Adviser, Association of Accounting Technicians (AAT), says that should the VAT Making Tax Digital pilot be a “success” there will be a “slow but steady stream of self-employed businesses joining the income tax pilot”.
“Indeed, as confidence grows in the pilot, accountants and tax advisers may decide self-employed start-ups should be on-boarded straight into Making Tax Digital, to avoid the need to transition from the current regime when mandation comes back on the table,” added Palmer.
How to join the income tax Making Tax Digital pilot
Self-employed individuals interested in signing up to the pilot scheme need their Government Gateway user ID and password, which is used to log in to the online self-assessment service.
If you have any questions about the income tax pilot or Making Tax Digital in general, please don’t hesitate to contact your local TaxAssist Accountant for a free initial consultation on 01934 429663 or get in touch via our enquiry form.