Finance Bill 2017-19 puts Making Tax Digital back on the agenda: FreeAgent reports
With the much-anticipated Finance Bill 2017-19 finally out in the wild, award-winning online accounting provider FreeAgent takes a closer look at the points relating to Making Tax Digital (MTD) and the dividend allowance, and their implications for your small business and contractor clients.
Making way for Making Tax Digital
Now that the post-election dust has settled, the new Finance Bill puts MTD back on track with proposals to legislate for MTD for VAT as well as for Income Tax. In the revised timescale for MTD, which was announced in July this year, deadlines for keeping digital tax records were only confirmed for VAT figures, with similar requirements for “other taxes” only coming into effect in 2020 at the earliest.
The inclusion of MTD for Income Tax in this Finance Bill is a strong signal that the government is still committed to rolling out MTD beyond the boundaries of VAT reporting for small business clients. The Finance Bill 2017-19 seeks to introduce a minimum threshold for clients’ businesses to be mandated to participate in MTD. The government has previously said this will be £10,000 annual turnover.
Cut to dividend tax-free allowance set to go ahead in April
The Finance Bill confirms that the government still plans to drop the dividend tax-free allowance from £5,000 to £2,000 from the 6th of April 2018. As we reported in our Budget coverage back in March, this means that clients who are company directors/shareholders and take a low salary from their company - making up the rest of their income with dividends - will have to pay more tax on that income as a result of this measure.
The Finance Bill 2017-19 is currently being considered in parliament, and will be fully introduced after the Autumn Budget has been announced on the 22nd of November. FreeAgent will be reporting here on the Autumn Budget announcement and its implications for your small business and contractor clients.
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This article is adapted from a blog post originally published on freeagent.com.