Making Tax Digital - update
Making Tax Digital has been given another new timetable for its introduction in a recent announcement from HMRC.
Whether this will be stuck to is something we’ve got to wait to see, but here’s the latest information you need to know.
What is Making Tax Digital?
Making Tax Digital is the beginning of a profound change in the way that you report your and your company’s earnings to HMRC.
HMRC, in their own words, wish to “modernise the tax system to make it more effective, more efficient and easier for customers to comply.” In addition, they estimate that “avoidable taxpayer mistakes” cost the Exchequer over £8bn in lost taxes with, in 2014-2015, £3.5bn of those mistakes coming from VAT returns.
Previously, multiple timetables for its introduction have been proposed. Each one of these timetables has been met with opposition from accountants, bookkeepers, trade associations, and businesses themselves for various different reasons, including software for the new regime not being ready and producing inaccurate tax returns.
When Making Tax Digital is introduced, every individual and every business will have their own digital tax account which they must keep updated.
Making Tax Digital – what’s the new timetable?
From April 2019, any business with a turnover of more than the VAT threshold (currently £85,000) will need to keep digital records for VAT purposes.
Unless yours is one of the few businesses on annual VAT, not much will change. You’ll still have to report your VAT every quarter and make payment for it, just as you do now. All that will change is that there’ll be a different digital portal to do it from.
Anyone below the VAT threshold will be exempt from quarterly reporting requirements until the Government has had a chance to think again about their plans. HMRC insiders however speculate that Making Tax Digital will be introduced for non-VAT-registered businesses before 2020, although that is subject to change.
For the smallest businesses, Making Tax Digital will be available on a voluntary basis for VAT and for other taxes.
Making Tax Digital – should my business and I start preparing now?
Most definitely, yes.
The introduction of Making Tax Digital may again change but it definitely pays to be ready.
Your business and how you run it benefit greatly from having the very latest accounting and financial available to it. That’s why we strongly urge you to keep using your Xero package at least once a week.
Take time once a week to keep all your invoices, incoming and outgoing, up to date.
Particularly if you keep your expenses up to date and you correctly classify them, Panthera will be able to properly identify the expenses you can claim back on and that will reduce the amount of tax you pay because your profit will show as lower.
Better and more up-to-date numbers also means that you’re better able to predict how much cash you’ll have available in the coming weeks and months based upon the amount of money you’re receiving and paying out.
You’ll know better whether there’s money in business to put towards growth or whether you need to save money because times ahead may be leaner.
If you have any questions about Making Tax Digital, the cloud, Xero, or getting your tax bills down, please call Panthera on 01235 768 561 or email the team at email@example.com.