Making Tax Digital for business has been dropped from the Finance Bill 2017 for now, but Making Tax Digital for individuals starts in this month. So how will it affect you?
HMRC have a lot of information at their fingertips; every time you are paid a monthly salary or pension HMRC are told, if you get a company car HMRC are told, they are given details of the interest paid to you by your bank etc. etc.
If you get multiple sources of income, to date HMRC have only been able to establish if you have underpaid or overpaid tax at the end of the tax year.
But from 31 May they are going to look each month to see if you have underpaid or overpaid tax. If you’ve overpaid tax you should get it back very quickly but if you have underpaid tax they will adjust your tax code so you pay more tax for the rest of the year.
Thus if you have underpaid tax HMRC will seek quicker and more significant tax deductions as they look to square off your tax by the end of the tax year. This will accelerate the receipt of taxes by the Treasury.
The net effect of these changes is that you will receive more frequent coding changes, maybe several a year if your affairs are more complex. But these do need to be checked to ensure they are correct. This can be done via your personal tax account and every tax payer can access theirs online via www.gov.uk/personal-tax-account
The other useful information on the personal tax account is your National Insurance contributions record and a forecast of your entitlement to state pension at pension age. We all need between 10 and 35 qualifying years to receive an amount of state pension – ideally you will aim for the full 35 years. If there appears to be a shortfall you can act on it. In particular parents who have not claimed child benefit in recent years may be missing out on National Insurance credits for years that they are out of work due to childcare responsibilities.
If you wish to discuss this in more detail please do not hesitate to contact me.