Making Tax Digital Is Coming - Are You Ready?
What is Making Tax Digital?
You might have heard the rumblings of a new change coming that is going to affect businesses over the next couple of years.
This is Making Tax Digital. It is a government strategy to reduce the admin time of collecting data. The aim is to turn this process into a real-time submission, directly from the source itself; and it includes accounting software, banks, and employers, etc.
Instead of having to submit one tax return each year, an individual will have an online portal that they can access at any time. Here, the income will start to compile from the sources mentioned above, so it gives you, the taxpayer, an idea of how much tax you are expected to pay, or if you’ve overpaid at all.
This saves you having to worry about budgeting an unknown figure of tax to pay way in advance. You’ll know your position, and it’ll be more readily available.
For businesses, you will be required to update HMRC on a quarterly basis at the very least, and this will be done via your accounting software. Businesses that are under the VAT threshold (£85,000) will not need to join Making Tax Digital until April 2020, although you can choose to do voluntarily.
For most businesses, MTD will start in April 2019.
The big question here is what if you’re not using accounting software as a small business? Shoeboxes and spreadsheets are already outdated, but at least 22% of companies still don’t use accounting software to keep their records. Cue panic!
However, if you’re not a client and would like to discuss how you can start using Xero, or to go over any questions on Making Tax Digital and how it affects you, then please feel free to contact us here.
About the author
Ben Nacca is an accountant but is nothing like the stereotype you have visualised in your mind! He has worked in the accounting industry for almost a decade and is CEO here at Cone.
Ben loves travelling the world, playing video games and playing his acoustic guitar whenever he finds the time between spending time with his two chihuahuas, Hugo and Pablo!