Making Tax Digital is the government’s new initiative to transform tax administration and revolutionise the UK tax system. In the long-term the government is hoping to make the whole tax system more effective, more efficient and easier for taxpayers to get their tax right. HMRC wants to be the most efficient tax authority in the world, and embracing the use of digital data appears to be the path towards that.
HMRC estimates that over £9 billion is lost taxes annually, being a huge loss for HMRC as this translates into a funding deficit for important services. This can be reduced by the digital bookkeeping switch. According to HMRC the improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.
It will affect everyone who pays tax, from Companies to self-employed individuals and landlords, promising to help reduce errors and enhance productivity. HMRC is hoping that MTD will make doing taxes easier for business while minimising the risk of not collecting tax. Overall it is an attempt to make the whole tax experience better.