Making Tax Digital

What small businesses need to know

It’s billed as the future of tax, designed to make filing and paying up simpler, faster and more convenient. When everything’s in place, Making Tax Digital will mean that both individuals and businesses will need to get their electronic ducks in a row, using specialised software to report to the taxman. While HMRC is talking up the convenience factor, they’ve still got at least one eye on the £9 billion they believe taxpayer mistakes are costing them each year. Here’s a run-down of what you need to know right now:

What’s Making Tax Digital about?

HMRC’s planning to become one of the most high-tech tax administrations in the world. For self-employed people and businesses, that means the old Self Assessment system is going to shift from yearly to quarterly filings. Under MTD, you’ll need to keep your business records digitally, and send updates to HMRC directly from your software. It’s not all bad news, though. At any point, you should be able to get an overview of your tax situation, and get an estimate of what you’re likely to owe at the end of the tax year. You can actually send your updates more often, or even pay your tax bill as you go if that’s easier for you.

What about Making Tax Digital for VAT?

Making Tax Digital for VAT was the first major leap HMRC took in its new scheme. Most businesses registered for VAT with a turnover of £85,000 or more now have to use MTD-compatible software for their VAT returns from the 1st of April 2019. MTD for Income Tax and Corporation Tax were announced to come into force at some point on or after April 2020.

What kind of software will I need?

Once Making Tax Digital’s in full swing, you’ll need to be prepared to talk to the robot taxman. Those quarterly reports are just the start of things. Along with the year-end statement and final confirmation, you can expect to be chatting digitally with HMRC 6 times a year or more. You’ll need to learn to live without your familiar old paper records, if you’re still clinging to those. The software you use will depend on your needs, but it’ll have to be able to:

  • Keep records of your expenses and income.
  • Send Income Tax updates directly to HMRC.
  • Submit your VAT returns (if you’re VAT registered).

What can RIFT do to help?

If you’ve got RIFT Accounting on your team, then Making Tax Digital won’t cause you any sleepless nights. We’ll guide you through every step of the transition to keep it smooth and simple. Of course, you’ll still get the same great, year-round service you always do from RIFT. As your official Agents with HMRC, we’ll keep on tacking the taxman on your behalf to protect you and your business. Remember, you can always come to us with your questions and problems, so get in touch whenever you need us.

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