Making Tax Digital is a government initiative that aims to see close to three million small businesses migrate to a new digital tax system. This modernised and streamlined 21st-century system provides companies with a convenient record-keeping structure to manage their tax affairs. The system will also allow HMRC to access information more readily and easily.
The outlined changes that are necessary for the Making Tax Digital initiative apply to a vast variety of taxpayers. Landlords, businesses, self-employed people and individual taxpayers are all included in the list.
Making Tax Digital will be necessary for VAT-registered businesses with a taxable turnover above the VAT threshold (currently sitting at £85,000). For a smooth transition, it is advisable for businesses to start the procedure well in advance.
1. Understand When The Deadline For The Changes Is
Making Tax Digital for business (MTDfb) begins on 1 April 2019. A VAT-registered business whose turnover exceeds £85,000 will have to keep digital records and subsequently submit VAT returns using compatible software.
The vast changes will affect numerous UK businesses, and as such, a lot of IT support and diligence will be required. To avoid delays and stay updated, it’s a good idea to regularly check HMRC news and developments.
3. Choose The Right Software
The scheme allows you to file your VAT returns digitally and keep a digital record of your information. Therefore, if you have different pieces of software for storing your VAT information and filing your VAT returns, then you will need to link them digitally as you prepare to integrate the new digital tax system into your processes.
4. Impact Of Making Tax Digital
The new initiative is being introduced to make paying taxes easier and more efficient. This advanced tax system is also meant to help businesses stay on top of their day-to-day accounts. Some of the benefits include:
The excellent tax recording system is more accurate. This means that the chances of errors and miscalculations are significantly reduced.
Through the use of an automated process accountant, businesses and HMRC will enjoy a high-speed system and save valuable time.
Ease Of Recording
Incorporating the right software with the digital tax system will make it easy for businesses to record and file their online returns.
The tax submission process can be a hectic and stressful part of the year for most business owners. However, with the Making Tax Digital coming into play, you will no longer need to keep manual records which will mark the end of paper accounting reign in Britain.