Making Tax Digital: How to get your business prepared
HMRC’s Making Tax Digital (MTD) initiative is a mere 8 months away. And yet, I still find myself speaking to business owners who are completely in the dark about what MTD is and how it will affect their business.
Rather than submit tax returns annually, Making Tax Digital will require businesses to keep regular digital records using online software to submit tax information every three months - information such as revenue and expenses.
Who will be affected by Making Tax Digital?
MTD will affect the vast majority of businesses and individuals at some point over the next couple of years.
From April 2019, all businesses with a turnover above the VAT threshold (currently £85,000), will need to keep digital records and submit VAT returns using compatible software. The first monthly VAT returns will submitted digitally in May 2019.
Businesses with a turnover under £85,000 and voluntarily VAT registered businesses may be asked to keep digital records from April 2020. MTD for income and corporation tax could come into force as early as this date too.
If you’re still updating records manually and using Excel spreadsheets, there is no better time to review your current processes for record keeping. Although it’s not compulsory to use online software, HMRC encourages that your business does so - because it will be a whole lot simpler!
How to get your business ready for MTD
If you own a business or you’re self employed, it is your responsibility to make sure you are MTD compliant. If you’re unsure where to start, follow these steps:
Find out when your business is affected by Making Tax Digital. You’ll need to move quickly if you’re yet to take the necessary steps to get MTD ready and your business is over the current VAT threshold of £85k. Even if your business is yet to hit the threshold for VAT, it’s worth considering making the transition to digital record keeping sooner rather than later, as your business is more than likely to affected at some point. MTD is a good opportunity to futureproof your accounting processes and avoid any unnecessary stress further down the line.
Move from spreadsheets to compliant online accounting software. There are over 40 software suppliers to choose from, including popular brands such as Quickbooks and Xero. As mentioned above, as much as there are ways to use spreadsheets and still be MTD ready, it isn’t a long term solution.
3. Reassess your accounting support. Accounting is going digital. In fact, it already is! Is your accountant tech-savvy? Have they told you about Making Tax Digital? If you can’t answer yes to both of these questions, it’s perhaps time to look at other accountants.
Change is always a little daunting, particularly when it involves new technology. However, moving to online accounting software should make accounting compliance and your life a whole lot easier.
If you have any questions on what you have just read, please don’t hesitate to drop me a line to firstname.lastname@example.org