Making Tax Digital: Get in control of your finances now

The Coronavirus pandemic has shown businesses how vital having up-to-date management accounts really is to aid important business decisions. Never before has monitoring your financials regularly been so vital to your business survival!

MTD is a Government initiative to transform the tax system and move it online. The primary aim is to make tax administration more effective, efficient and easier for taxpayers. But of course, it also allows HMRC to get a closer look at your business data and reporting trends, leaving you at a higher risk of enquiry if you don’t keep complete and up to date records.

From April 2022, Making Tax Digital (MTD) will be extended to all VAT registered businesses (with a taxable income below £85,000). It has already been rolled out to VAT registered businesses above the £85,000 threshold.

Whilst this may not impact you right now, it’s not only important you are well prepared for these changes in the future, but with MTD you have the ability to gain a closer look at your business and cash flow planning, aiding business growth and more informed business decisions.

How will MTD impact you?

From April 2019, all VAT registered business, trading above the VAT limit of £85,000, were required to submit quarterly VAT information digitally.

From April 2022, all VAT registered businesses (with a taxable income below the £85,000 threshold) will have to comply with VAT and keep VAT records in digital form. This will mean recording on approved software like Xero to provide electronic submission for VAT to HMRC.

From April 2024, HMRC will widen the scope by including all businesses (limited companies, LLPs, partnerships, sole traders and landlords) with a gross income greater than £10,000.

These businesses will need to submit a profit and loss report and balance sheet electronically on a quarterly basis to HMRC, with the option to pay as you go.

At the end of the year they will be able to add any non-business income/information to complete their tax affairs using MTD compatible software. This should ultimately replace the need for a self-assessment tax return.

Whilst this is not compulsory yet, if you complete a Self-Assessment tax return, you can sign up for a digital tax returns pilot scheme.The pilot allows you to keep records digitally and send Income Tax updates to HMRC instead of filing a Self-Assessment tax return. So far it is estimated 30% of businesses and landlords have signed up voluntarily.

This may seem quite daunting, but in reality, embracing this new tax system will have many benefits for your business, including:

Future-proofing your company: This initiative ensures all UK businesses are safeguarded against the future, as the digitisation of tax (among many other things) is inevitable
Increased efficiency: By using software for this task, much of the tax return process is automated, and therefore becomes much quicker and easier
More control and reduced stress: Having access to a digital tax account allows you to have more control over your affairs. By submitting returns at least four times a year, you will have a clear picture of exactly how much you owe. As opposed to having one stressful period of time each year, at which point you might discover you’ve massively underpaid
Environmentally friendly: This scheme is also good for the planet. Having millions more people doing tax digitally reduces the use of paper

From April 2026, MTD will be extended to include corporation tax. The government has welcomed feedback on this and are reviewing this currently, so we will update you once we know more details.

Get ahead of the game

If you haven’t yet made the move to a Cloud Accounting software, it’s not only important you do so to ensure you’re ready and compliant for the MTD deadline in the future, but to help your business reach its full potential and aid your decision making.

Our team of experts can offer free demos of various cloud accounting packages and add-on apps, provide training and support with setting up and using the software package.

We can also build a bespoke dashboard so you can have everything you need in one place, with one click, help you to understand what the figures are telling you and go a step further by finding tools to help you automate your processes, leaving you more time to do what you do best.

Why wait to get in control of your finances? Call 01474 853 856 or email discovery@a4g-llp.co.uk.