The biggest change to the UK’s tax system for a generation is happening right now – but do you know how your business will be impacted? Here’s a quick rundown of the things you need to know.
No more annual tax returns
Making Tax Digital is intended to make the reporting of your business’s financial information to HMRC more efficient, with no more ‘bureaucratic form filling’. This includes the end of the annual tax return as we know it for everyone impacted by MTD – instead, you will send information to HMRC digitally at least four times a year via your digital tax account. This doesn’t mean that you’ll have to complete four tax returns per year, you’ll simply need to provide more regular financial updates online.
Making Tax Digital has already started
There are a lot more changes to come in the next few months that we already know about. Here’s a timescale highlighting the biggest changes
- The live pilot of Making Tax Digital for VAT has begun.
- Businesses with a turnover above the VAT threshold are required to keep digital records and submit quarterly returns for VAT purposes only.
- Most businesses are able to voluntarily keep digital records for ‘other taxes’.
HMRC looks to widen the scope of Making Tax Digital.
You will need to submit your business’s figures using software
You will need to keep HMRC informed of your business’s finances digitally through some form of accounting software. HMRC has stated that spreadsheets will be OK for this but the spreadsheet you use will need to be able to connect to your digital tax account, through some form of software. It’s worth bearing in mind that there are a number of reasons to ditch spreadsheets when it comes to recording your financial data.
Tax updates will happen in ‘real-time’
HMRC have said that once MTD is up and running they’ll provide you with your business’s tax position in ‘as close to real-time as possible’. To help prevent errors and stop tax due or repayments owed from building up, HMRC will collect and process the information you provide throughout the year. This means that you shouldn’t have to wait until the end of the year to find out how much tax you owe.
A few groups are exempt from MTD
The Making Tax Digital requirements will apply to all VAT registered businesses for their VAT obligations from April 2019 where their turnovers are in excess of the VAT threshold (currently £85,000). – If your business’s annual sales fall below this figure then you won’t have to take part; however, you can opt in if you want to.
A few more groups have been given an exemption including the ‘digitally excluded’ charities and those who cannot interact with digital technology for religious reasons.
How we can help
With a wealth of experience gained from digital tax submission in the Nordics, Xledger is working with HMRC to provide the perfect solution for our existing and new clients available from April 2019.
Xledger already offers a range of accounting solutions that will help you manage and grow your business, including issuing invoices, taking care of VAT, getting paid faster and managing your cash flow on the go – allowing you to spend more time on your business, rather than on your books.
For more information on how Xledger can help, contact firstname.lastname@example.org