Businesses across the UK are preparing for one of the biggest changes to the tax system in recent years: Making Tax Digital (MTD).
The scheme was mandatory for VAT from 1 April 2019, so if your business is VAT-registered and has an annual taxable turnover above the £85,000 VAT-registration threshold, you’ll need to comply.
Even if you’re not included at this stage, mandatory digital reporting for income tax and corporation tax could become a requirement soon – so the sooner you get ready, the better.
Requirements of MTD for VAT
There are two main requirements to remember before the deadline. Businesses that are included will need to maintain digital records for VAT, and use MTD-compatible software to submit VAT returns to HMRC.
The date you need to start these returns will depend on how your VAT return quarters fall:
|VAT return quarters||MTD start date|
|Ending 31 March, 30 June, 30 September, 31 December||1 April 2019|
|Ending 30 April, 31 July, 31 October, 31 January||1 May 2019|
|Ending 31 May, 31 August, 30 November, 28 February||1 June 2019|
How will MTD help your business?
Shifting to a new system isn’t always a simple task, but it should make your accounting processes quicker, more accurate, and easier to manage once MTD is in place.
Having all of your tax information stored digitally should improve security and accessibility, while, and HMRC says the system will help prevent errors and tax evasion.
Once other taxes are included, MTD is eventually expected to replace the annual tax return – meaning you won’t have to collect large quantities of receipts and paperwork throughout the year, and you won’t have to sort through it all in one go.
Choosing your accounting software
The most important thing to consider as you get ready for MTD is how your accounting software will interact with the new system.
You can use a mix of software, as long as it meets the key requirements, but in most cases it’s easier to use one solution for both.
When you’re choosing software, consider your tax reporting requirements. This could depend on the size and complexity of your business, and whether you would benefit from industry-specific software.
If your business is growing, these requirements will develop over time, so give some thought to how the software could adapt to your needs in the future.
As well as meeting reporting requirements, accounting software can help you monitor the performance of your business. Think about the type of management information you’ll need to measure your progress.
Another important question to consider is how user-friendly the software is, and how much time it will take for you and your staff to pick it up.
Whatever stage you’re at in preparing your business for MTD, we’re here to help. We can explain the details of the change, and help you choose the right software.
Talk to us about getting ready for MTD, or call 020 8643 1166.