When Making Tax Digital (MTD) was first announced it was dubbed “the death of the tax return”, sounds great doesn’t it! But from April 2019 businesses will need to be ready to deal with the biggest change to taxation in a generation.
We know that for businesses like yours that kind of change brings uncertainty and a great many questions. Will MTD go ahead, I heard it will be postponed? Do I need new software or can I stick with spreadsheets? If I’m on Xero already I don’t need to do anything, right?
We’ll look to answer all those questions for you over the next few blog posts but for now, let’s return to the beginning and cover the main question: what is MTD and what do you need to do about it?
What is Making Tax Digital?
So, here’s the factual boring bit, stick with us!
On the surface you might think MTD is just about filing online, you probably already do that and so you’re wondering what all the fuss is about. We hear you so let’s debug that…
The idea of MTD is to make tax easier, more efficient and more effective (accurate) for you.
When you file tax online, via the HMRC website, it’s disconnected from your data. Most of the time this might not be a problem but we all know that from time to time things change. When that happens, if your data isn’t connected there is a risk you might not claim all you can and we don’t want that!
MTD will create a link between what’s filed (and indeed what isn’t) with your returns so you can be sure you’ll claim every last penny!
So what does it actually mean for businesses? For now it’s about VAT, so if your business is VAT registered with turnover above £85,000, from 1 April 2019 you will have to keep digital records and submit VAT returns using compatible software.
So, what’s compatible software?
In short, it’s software that helps you meet the requirements of MTD. The great news is, Xero has already met that standard.
Why is it great news? Well, if you don’t use Xero already we think it’s by far the best accounting software out there. It helps you create efficiency through automation (no more typing into annoying spreadsheets) and integration with other software (linking to CRM, e-commerce and much more). That automation lets you do things in real-time and that means it’s easier to make decisions, so when it comes to real-time accounting vs. the old way, there’s only one winner.
What do you need to do now?
Well firstly, don’t panic! We do think you should start planning but there is still time to make a change if needed.
The next step is to assess your current position in terms of how you keep your businesses financial data. Do you use spreadsheets? If so, is it time to research the software available?
If you will switch to software, work out the best time to do so. It’s best done at the start of a new VAT period or accounting year, so check out when that might be.
When that date comes round make sure your data is up to date, it can get a bit messy if you make the move to software and then have to make corrections, it’s best done before you move!
If you’re still not sure how best to go about it, you can read more on our website or get in touch below and we’d be more than happy to chat about how we’ve prepared our clients for MTD, why we love Xero and why we think it’s the best solution.
