Tax is going digital – are you ready?
You may have already heard the news. The government is ‘Making Tax Digital’ from 1st April 2019. This is nothing to worry about. If anything, it can be a great way to help your business become more organised and efficient with less paperwork to do. To put your mind at ease, we are going to take a look at the changes, and see what it means for your business.
Making Tax Digital
We’ve already discussed how HMRC had made changes to PAYE tax procedures. As of January 2019, businesses must complete real-time reporting of tax information to HMRC through the use of accounting software. This was a step towards leveraging automation to make the tax process more efficient by HMRC.
In a separate move, in April 2019, the government plans to Make Tax Digital when it comes to VAT and income tax.
What does Making Tax Digital involve?
From April 2019, businesses registered for VAT with a turnover above the VAT threshold (£85,000) need to use the Making Tax Digital online service. It will help them keep records digitally and use software to submit their VAT returns online.
For income tax, many businesses already keep digital records. Soon those who are self-employed or a landlord will have to use the Making Tax Digital system. However, for now, the system is still in the pilot stage, so the focus for April 2019 is on VAT.
Why are these changes coming into place?
This change is the most significant change to come into place since the ‘90s for tax. It’s a part of the government’s plan to make HMRC one of the most digitally advanced administrations in the world. These changes focus on improving three things in particular when it comes to the way businesses do their taxes:
Recent tax gap statistics show that inaccurate tax filings are costing over £9 billion per year to the Exchequer. The new online way to submit VAT is more straightforward. It’s also intended to help you organise your taxes better, creating less confusion in the process, and to store your tax information safely.
The benefits to your business
While this change comes into place for VAT in April, it may only affect businesses that are VAT registered. More changes in the way enterprises submit and manage their taxes are likely to follow over the years. As such, it’s better to prepare early for coming changes. You can do this in ways that help your business become more productive and efficient.
There is accounting software available that can send real-time updates to HMRC, store your financial information automatically and safely, and calculate your taxes without you having to lift a finger. It frees up your time to focus on growing and developing your business. It reduces stress, and computers rarely make mistakes. You’ll be able to keep up with your competitors who are favouring a modern approach to their taxes, and if you have an employed accountant, you’ll free up their time too, reducing your bill.
Making Tax Digital is beneficial to many UK businesses as it helps you be more accurate, efficient and productive. Hiring an accountant can maximise these benefits by doing all the hard work for you and providing the most up-to-date knowledge on how best to pay your taxes.
To get started with a reputable accountant, get in touch with Big Hand today on 0161 327 2911.