Most taxpayer find doing one return per year stressful enough but by 2020 anyone earning over £10k will be doing quarterly returns.
‘These changes are going to be very onerous,’ said Chas Roy-Chowdhury, of the Association of Chartered Certified Accountants.
‘It is not just about filling in a form, it is going to be a real burden.
‘Workers will have to make sure their books and records are up to date at least four times a year in case the taxman decides something is amiss and investigates them.’
Initially workers will not have to pay tax four times a year. But accountants suspect quarterly returns are a step toward this.
The plans were slipped out in the small print of George Osborne’s autumn statement. Around four million people will be affected: the self employed, small business owners and landlords who make more than £10,000 a year profit.
George Osborne said: ‘HMRC is making savings of 18 per cent in its own budget through efficiencies – in the digital age, we don’t need taxpayers to pay for paper processing, or 170 separate tax offices around the country.
‘We’re going to build one of the most digitally advanced tax administrations in the world. So that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.’
In order for this to work, small businesses will need to keep their accounts up to date.
The top 5 common accounting problems accountants deal with are:
1. Not doing any accounts – the shoe box approach to business
This is the most common mistake, book keeping is best done as you go along, putting all the paperwork in a shoe box or carrier bag is a really bad idea as you have no idea how your business is performing.
2. Not keeping receipts. Often small business miss out on claiming all their expenses because they fail to keep receipts and lose track of their spending
3. Not reconciling. Reconciling your bank statements to your cash book is vital to make sure that all of your income and expenses have been recorded in your accounts.
4. Using the wrong accounting system. For some businesses a manual cash book and records are fine but for many accounting software such as Debitoor will be needed to keep track of debtors, creditors and VAT. Make sure you understand your accounting system and operate it correctly.
5. Mixing business and personal expenses. Some sole traders even mix up business and personal bank accounts and in extreme cases don’t even have a business bank account. This can cause errors and often means that a sole trader will either claim to many expenses or to few.
Will small businesses be able to overcome these problems or will they end up in a tax mess with Digital Tax Accounts?