If you are an SME, then you have probably heard about Making Tax Digital (MTD), a Government Initiative that will make it much easier to file your tax returns online. This initiative will affect income and corporation taxes in the future. While income tax has already been subject to the pilot project, corporation tax will be coming soon. Until then, you can prepare yourself by learning about the goals of MTD, and the recommended accounting software.
MTD is a Government Initiative
MTD stands for Making Tax Digital, and it is a government initiative that will replace annual tax returns. Instead of a single, full tax return, businesses will instead make quarterly submissions, which include their income tax and national insurance obligations. They will not be full tax returns, but they will have much more accurate data to submit to HMRC. By eliminating the need to wait until the end of a tax year to find out how much money they owe, businesses will have the opportunity to make more informed decisions about their tax obligations.
Step Toward Digitization and Automation
In the UK, the MTD programme is a major step toward digitization and automation. In the digital age, businesses are increasingly being forced to use new technologies to reduce paper and rekey data. Businesses must also electronically transfer information to HMRC and share it quarterly. It is a time-consuming and expensive process, but it is essential for making the economy ready for the digital age. Making Tax Digital is a step toward that goal, but it is not without its challenges.
MTD-Compatible Software
MTD is a major step towards digitization of the UK tax system. Businesses with taxable income must make use of MTD-compatible software in order to submit their quarterly figures to HMRC. This new system is aimed at reducing basic errors and preventing the loss of billions of pounds in tax revenue. Businesses will have a lot less paper to worry about, and they will also save time by not having to send paper-filed tax forms to HMRC.
Businesses to Convert to Digital Records
Making Tax Digital is a government initiative that will change the way businesses file their tax returns. It will require all businesses to convert to digital records, including those that use Excel to maintain their records. Businesses that are currently using Excel and manual accounting systems will be particularly affected by MTD. For those businesses, it is the end of paper-based accounting. It is the new era of tax reporting. And for individuals who are struggling to keep up with the changes, the transition is likely to be smooth and easy.
The Objective of Making Tax Digital in the UK
In the U.K., the tax authority, Her Majesty’s Revenue and Customs (HMRC), is working to make tax administration digital. VAT stands for value-added tax and is an annual fee that businesses must pay to HMRC. Companies can use software products to help them digitally record information and send it directly to HMRC, making the process of filing tax returns easier and more accurate.
Make Tax Administration Simpler
The MTD programme has been introduced to make tax administration simpler and more digitally-friendly for businesses. It is a long-term process, but is necessary to prepare the UK economy for the digital age. The government’s goal is to create a tax system that is easy to use and understand for everyone, regardless of industry. Making Tax Digital is a vital part of the process of modernizing the UK tax system, and businesses need to be aware of the benefits.
Easier to Use
The objectives of the Making Tax Digital initiative are to provide businesses with a modern digital service that is easier to use, less expensive, and more secure. The goal is to reduce the costs of contacting HMRC and losing valuable tax money as a result of avoidable mistakes. Making Tax Digital began with the VAT system and will be fully implemented by 2024 for all businesses with a taxable turnover over PS85,000.
Update In the UK Tax System
MTD is an initiative of the government that aims to update the UK tax system. The new system will require businesses to use software and apps that will help them to file their tax returns in a digital format. This new system will make tax administration more accurate and efficient, and will remove errors that cost the UK PS10 billion annually. A number of contractors aren’t aware of how this initiative will affect them.
How to Prepare for Making Tax Digital in the UK?
If you own a business in the UK, then you must be ready to make the transition to the new digital tax system. Making Tax Digital (MTD) is a government initiative that aims to simplify the UK tax system. Businesses that are VAT registered must keep a digital record, which updates automatically and stores all pertinent company data in one place. This is to improve transparency and reduce errors that often arise in paper tax filing. All businesses will have a digital tax account and be required to submit information to HMRC on a quarterly basis. The deadlines for this change are January 2019 and April 2020.
Accountants and Software Providers
As the deadlines nearer, accountants and software providers will be increasingly busy. And of course, there are penalties for non-compliance. Luckily, HMRC has created resources to help business owners prepare for Making Tax Digital in the UK. If you have a business, you can sign up for a webinar on Making Tax Digital. There are also plenty of free resources available to business owners. Make sure you read the terms and conditions thoroughly before committing to the new system.
HMRC’s Digital Record
The transition process requires businesses to make the move from spreadsheets to software that connects with the HMRC’s digital record. This means switching from manual spreadsheets to HMRC’s REST API and submitting returns digitally. You can also use SAP Business ByDesign’s built-in integration capabilities to integrate Making Tax Digital with your accounting system. Make sure you register early for the first deadline in April 2019.
The Suggested Accounting Software for MTD
The first step in getting ready for MTD is to get a piece of software that integrates with the new regulations. This software should not only help with bookkeeping duties, but also compile data so that tax returns can be filed more easily. It should be approved by the HMRC, so that you can rest assured that your records are MTD compliant. Here’s a look at some suggested software.
QuickBooks
QuickBooks is one of the most popular players in the market. It offers a range of packages for small businesses and the self-employed. Its packages can be tailored to fit the needs of different types of users, and are often competitive. Its features are extensive and it has options to suit a variety of budgets. However, it is important to make sure that you’re using an MTD-compliant accounting software.
Approved SoftwarePackages
The proposed accounting software for Making Tax Digital in the UK should be compatible with HMRC. These software packages have been updated to take MTD into account. The HMRC website has a list of approved packages. This guide will point you in the right direction in choosing the best MTD software for your needs. It is important to consider investing in finance software to stay on top of your taxes. The software will make your account management and tax payments easier, while you’ll have fewer paper records.
Digital Interface that Connects to HMRC’s Website
MTD is an initiative by the government. Once implemented, businesses will be required to keep digital records for VAT and Income Tax. The process of reporting to HMRC will be entirely digital. The software where you keep records must have an API or a digital interface that connects to HMRC’s website. This will make it much easier for you to make decisions and budget for potential tax liabilities. It is also much easier to communicate with HMRC than ever before.
Getting Help from a Tax Accountant
In order to comply with the new requirements for Making Tax Digital, businesses and individuals must switch to digital record keeping. While spreadsheets are still an option, it’s important to make sure that all records are kept in the right format to avoid penalties and interest charges. If you’re not familiar with digital record keeping, here are some tips to get you up to speed. The UK has recently introduced new legislation that will make the process easier for everyone.
Avoid any Potential Hiccups
To avoid any potential hiccups when moving to Making-Tax-Digital, it’s recommended that you move your data ahead of time. It’s better to move ahead than to wait until the first deadline to make the switch. You can pick a date for moving, such as accounting year-end, as long as it’s before the first Making-Tax-Digital due date.
Conclusion
While it’s true that the Making-Tax-Digital deadline is fast approaching, it’s still vital to have an accountant with you as your guide. Making-Tax-Digital involves a significant change in the tax system and has a big impact on business and individuals. For local tax accountants in southport, making this switch can be a big challenge, but it’s also a huge opportunity. With digital records, you’ll be able to streamline processes and improve accuracy.