News & Updates in the Accounting World

Read All About It

Overview of Making Tax Digital

01/04/2019

Introduction to Making Tax Digital

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

• more effective

• more efficient

• easier for taxpayers to get their tax right

Making Tax Digital for VAT

We’ve taken a major step forward in this ambition with the introduction of Making Tax Digital for VAT.

VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns for VAT periods that started on or after 1 April 2019.

The exception to this is a small minority of VAT-registered businesses with more complex requirements. As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. We have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join - see the timeline below.

Income Tax

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRCinstead of filing a Self Assessment tax return.

Helping businesses, self-employed people and landlords get it right first time

The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. 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.

We have consulted with stakeholders throughout the development of Making Tax Digital, both formally and informally.

Having listened to concerns about the pace of change, particularly for small businesses, the government announced in July 2017 that the pace of mandation would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.

The Government further announced in March 2019 that they would focus on supporting businesses to transition, and will therefore not be mandating Making Tax Digital for any new taxes or businesses in 2020.

The primary legislation for Making Tax Digital relating to VAT and Income Tax is contained in the Finance (No.2) Act 2017, providing certainty about the broad framework in which Making Tax Digital will operate, with secondary legislation for VAT laid in February 2018, coming into force from April 2019.

We’ve published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.

We have also published a communication pack which supports our partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.

Help and support

HMRC provides a wide range of digital services and support for businesses and the self-employed.

Smarter experience for individuals

The Personal Tax Account brings together each individual customer’s information in one online place. It allows customers to access the service from a digital device of their choice and at a time that suits them. It allows them to register for new services, update their information and see how much tax they need to pay.

National Minimum Wage and National Living Wage rates

01/04/2019

The hourly rate for the minimum wage depends on your age and whether you’re an apprentice.

This page is also available in Welsh (Cymraeg).

You must be at least:

• school leaving age to get the National Minimum Wage

• aged 25 to get the National Living Wage - the minimum wage will still apply for workers aged 24 and under

Current rates

These rates are for the National Living Wage and the National Minimum Wage. The rates change every April.

Year25 and over21 to 2418 to 20Under 18Apprentice

April 2019£8.21£7.70£6.15£4.35£3.90

Apprentices

Apprentices are entitled to the apprentice rate if they’re either:

• aged under 19

• aged 19 or over and in the first year of their apprenticeship

ExampleAn apprentice aged 22 in the first year of their apprenticeship is entitled to a minimum hourly rate of £3.90.

Apprentices are entitled to the minimum wage for their age if they both:

• are aged 19 or over

• have completed the first year of their apprenticeship

ExampleAn apprentice aged 22 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £7.70.

Increase of automatic enrolment contributions

01/04/2019

​

The minimum contributions you and your staff pay into your automatic enrolment workplace pension scheme will increase from 6 April 2019. This is also sometimes known as phasing.

It is your responsibility to make sure these increases are implemented.

Who does this apply to?

All employers with staff in a pension scheme for automatic enrolment must take action to make sure at least the minimum amounts are being paid into their pension scheme. This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.

However, you don’t need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment, or if you are already paying above the increased minimum amounts.

If you’re using a defined benefits pension scheme the increases do not apply.

What are the increases?

This table below shows the minimum contributions you must pay and the date when they must increase:

DateEmployer minimum contributionStaff contributionTotal minimum contribution

New rate: 6 April 2019 onwards3%5%8%

Current rate: 6 April 2018 to 5 April 20192%3%5%

By law a total minimum amount of contributions must be paid into the scheme. You, the employer, must make at least the minimum employer contribution towards this amount and your staff member must make up the difference. 

If you decide to cover the total minimum contribution required, your staff won’t need to pay anything.

The amount you and your staff pay into your pension scheme will vary depending on the type of scheme you have chosen and the rules of that scheme. Your staff contribution may also vary depending on the type of tax relief applied by your scheme. You can find this information in the scheme documents sent to you when you set up the pension scheme or you can speak to your pension provider.

Most employers use pension schemes that from April 2019 will require a total minimum of 8% contribution to be paid. The calculation for this type of scheme is based on a specific range of earnings. For the 2018/19 tax year this range is between £6,032 and £46,350 a year (£503 and £3,863 a month, or £116 and £892 a week). These figures are reviewed each year by the government.

When you are calculating contributions for this type of scheme you include the following:

• salary

• wages

• commission

• bonuses

• overtime

• statutory sick pay

• statutory maternity pay

• ordinary or additional statutory paternity pay

• statutory adoption pay