Making Tax Digital is on the way – are you ready?
Making Tax Digital or MTD, is HMRC’s digital revolution of the UK tax system and it’s going to mean big changes to reporting for VAT and Income Tax.
From April 2019, all businesses with a turnover above the VAT registration threshold (currently £85,000), will be legally required to submit quarterly updates to HMRC via a Business Tax Account and MTD approved software.
The move is aimed at reducing errors, omissions and tax fraud and will eventually see the abolishment of the annual income tax return.
So what do you need to do to be prepared?
The first thing to do, is review your current systems; are you using paper ledgers, are your records being kept up to date, do you already use a computerised accounting package?
The main drive of this new legislation is digitalisation, as the name suggests; keeping your books on a cloud based system than can communicate with HMRC regularly throughout the year. So, if you are still using a ledger book to record your incomings and outgoings, now is the time to start thinking about making the switch to a cloud based system that will support MTD in the future.
There are a number of options available for businesses of all shapes and sizes; from one man bands to larger limited companies with ten or more staff, it’s just about finding the right fit for your business. And whilst the HMRC only lists four current approved suppliers, including parent company of Kashflow, Iris; Sage, QuickBooks and Xero have all confirmed they are currently finalising solutions for the launch of MTD, as have lesser known suppliers such as Pandle.
If you currently have a solution in place, it’s a good idea to check with your supplier if their software will be MTD compliant. If the answer is no, a move is on the cards and this takes time to implement and migrate on top of learning a new system, so the earlier you begin to start to make changes, the more prepared you will be when April 2019 comes around.
Hire a Bookkeeper
We would also (being biased of course), suggest accessing the help of a bookkeeper!!
All joking aside, as MTD requires all records to be as up to date as possible prior to making quarterly submission updates, this will be an additional cost of your time, meaning other tasks my suffer or the work/life balance you promised yourself when you created your business, may disappear.
A bookkeeper who is also a HMRC approved tax agent can also assist you with reviewing your current systems, signing you up for a Business Tax Account and even get you involved with the private VAT trials currently in progress, so you can be one step ahead and truly prepared for the changes coming your way.
For more information on MTD, visit our MTD section or contact us on 01395 320316.