Early next year the government will start to introduce its Making Tax Digital (MTD) initiative which is designed to make the tax system easier and more efficient for businesses.
We are already very proactive about helping our clients discover the benefits of moving their accounting processes online and we will continue to support the businesses we work with to improve efficiency and reporting by making the most of the superb technology that is now available.
However, we thought it would be useful to give an overview of the MTD changes and a step by step guide to how this might affect your business and what benefits it can bring.
MTD in a nutshell
Making Tax Digital will start to be introduced in April 2019 with MTD for VAT. This first stage will only affect VAT registered businesses above the threshold of £85k. MTD for income tax, which affects sole traders, is expected to be introduced in April 2020. No date has yet been set for the introduction of MTD for corporation tax.
The benefits of MTD
The key message is that businesses do not have to wait for the introduction of MTD to take advantage of the benefits of managing tax online, which include:
- Less year-end stress – reporting won’t be crammed into the end of the financial year
- Less paperwork as your systems shift online
- More clarity about your business finances throughout the year
- With better information there is more scope to reduce tax bills through strategic decision making
Businesses can start making changes in the way they operate their accounts now. , We’re supporting many of our clients to make this transition and get their business running efficiently now, rather than waiting for the change in requirements to come into force.
For example, we’ve recently spoken to a number of long-running businesses which still use a simple spreadsheet to keep track of their cashflow – or even a hand-written ledger and a box of receipts. Transferring to a cloud accounting system will not only prepare them for Making Tax Digital whatever it involves, but will also make life much more straightforward now.
With cloud-based accounting, we have a real time picture of our clients’ finances and ensure any potential problems and opportunities are spotted early enough to react positively. It also means you can also quickly run off reports for set periods, submit your VAT reports online, and link your bank account up so your invoices are checked off automatically when they are paid.
Once you’re up and running, we guarantee you’ll soon see significant benefits, not only in the overview it gives you of your current situation, but also in the time it will save you. We’ll also be able to support you actively as we can see an accurate picture of your position and advise you on ways to lower your tax bill through sensible tax planning.
Going from a traditional accounting system to cloud-based software may seem like an upheaval at the outset, but we’re happy to help make it as simple as possible and to offer you all the support you need until you feel comfortable using it.
At Wild & Co Chartered Accountants, we recommend Xero software for cloud-based accounting. If you’d like to know more about how it might benefit your business, we can talk you through it.
We’re also happy to discuss Making Tax Digital and the ways you can ensure your business is ready for the changes ahead – just contact us for more information.