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What is Real Time Tax and How Does it Work?

What is Real Time Tax and How Does it Work?
Tuesday, August 07, 2018

The clock is ticking - Making Tax Digital is edging closer each day. Not only does this mean that, if your business is VAT-registered, you have to start paying your VAT via the Making Tax Digital platform but you’ll be one of the first taxpayers to road-test the “Real Time Tax” system.

Real Time Tax has often been overlooked because of the various twists and turns of the almost Tolkien introduction of Making Tax Digital. That’s why, in this article, the Panthera team explain what real time tax is, how it works, and what the benefits of it are.

What is real time tax?

Real time tax is one of the major components (or “selling points”) of the government’s Making Tax Digital scheme. In short, real time tax is a constantly up-to-date view of the amount you’re accruing in tax liabilities.

Many business owners face the problem of not really knowing exactly how much tax they owe, why they owe it, and when it’s due. It’s hard for businesspeople to budget for an unknown amount of tax and this lack of visibility has often been blamed as the reason that some business owners not saving up enough throughout the year to pay the amount of tax that they owe.

Why does HMRC want real time tax?

In order to let everyone know exactly how much tax they owe, HMRC want a system that will tell you the amount that is accessible at any time and on any device.

HMRC have stated that they intend to “collect and process information affecting tax in as close to real-time as possible to help prevent errors and stop tax building up.”

The advantages of real time tax

Currently, many businesspeople only get a true understanding of the tax liabilities facing them or their company close to the time of their VAT payment date, their self-assessment tax return, and so on. Someone might think they owe £5,000 in tax only to find out too late that the figure is close to £10,000. This lack of knowledge sufficiently in advance of the reporting and payment deadlines increases the likelihood of someone not being able to pay their tax on time. This, of course, can result in your business receiving a fine or penalty.

The way many business owners are circumventing this problem at the moment is by putting away a third of everything that they earn throughout the year. While this will definitely cover their tax liabilities in most cases, doing it this way can have major cash flow implications.

Real time tax is an attempt to remedy this problem. Once a taxpayer has a firm idea of how much tax they’ve accrued because it’s available online all the time, forward financial planning should become a lot easier.

The disadvantages of real time tax

The only problem that some people may have is that it requires you to submit your taxes digitally.

Although the vast majority of businesses in the UK do this anyway, there are still some people who will take the paper and pen option whenever it is available by claiming that they’re digitally excluded.

What will I have to do for Real Time Tax?

Our team will take care of all that for you so please do get in touch. Call us today on 01235 768 561 or drop us an email to enquiries@pantheraaccounting.com – we’ll be back in touch with you shortly.

What our clients say

For us, there is nothing better than a happy customer. Here are just a few that let us know how much we mean to them.

Pete Dungey

Simple, efficient and most importantly, hassle-free.

We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

Pete Dungey Kaleido Grafik Limited
Anita van Eijndhoven

Talk Our Language

The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

Anita van Eijndhoven Quidne-IT
Ash & Tim Lane

Panthera brush aside the stereotype of the typical accountant

We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
John Baker

Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
John Castle

Professional and Friendly

I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

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