Making Tax Digital: What you need to know
PUBLISHED: 10:16 29 August 2018 | UPDATED: 16:46 24 October 2018
There is a big tax deadline looming. The Government is Making Tax Digital (MTD), meaning the end of manual tax returns for millions. The first phase starts on April 1, 2019, but who does it affect and what should you do next? John Cunningham, manager of the Fakenham office of chartered accountants Larking Gowen, explains how Making Tax Digital will work.
Q. How will Making Tax Digital affect accounting?
Making Tax Digital is going to be a major change for all businesses and landlords and anyone else who normally submits a self-assessment tax return. From April 1, 2019, all VAT-registered businesses with a turnover of £85,000 (the current VAT registration threshold) will need to use software which will directly submit their accounting information on a quarterly basis to HMRC.
Q. How will Making Tax Digital work?
In the past, individuals have prepared tax returns from scratch, filling in boxes for things like bank interest, pension income and employment earnings, all of which HMRC are already aware of. Under MTD, the tax return will be replaced by an online ‘Personal Tax Account’ whereby this information will already appear. The individual will simply need to review and confirm the information. Clearly some information won’t be known by HMRC and will need to be entered on the tax account, such as dividend income from private limited companies.
Q. What does Making Tax Digital mean for businesses?
Businesses currently maintaining manual records are going to have to make a significant change and that may be quite a scary prospect. Businesses will need to use software which will directly submit their accounting information on a quarterly basis to HMRC – they call this ‘functional compatible software’.
Q. What is the Making Tax Digital timeline?
April 1, 2019, is the start date for Making Tax Digital for VAT-registered businesses whose turnover is £85,000 or more. All other businesses, charities, landlords and everybody else within the self-assessment regime, will need to be ready for the changes by April 2020.
Q. What software packages could I use for Making Tax Digital?
HMRC are working with more than 150 software suppliers who are expecting to provide software for Making Tax Digital for VAT in time for April 2019. That number continues to increase, so there will be plenty of options available.
Q. How can I prepare for Making Tax Digital?
The best advice is not to leave it until the last minute. If businesses do leave it until next March or April, accountants and advisors may struggle to help with any software conversions or training requirements.
Q. What is the best accounting software?
Larking Gowen recommend QuickBooks or Xero for the majority of our small business clients. In our opinion, they are the leading providers for the small business market. Both QuickBooks and Xero are fantastic, easy to use, standalone products, but there are also huge amounts of bolt on apps (applications), which can really help a business to save time and money eg. data entry, stock control, CRM systems, mileage and expenses trackers, credit control and many others.
Q. Where can I buy good accounting software?
It’s easy to buy directly from the websites of most of the leading software providers. However, because Larking Gowen work in partnership with both QuickBooks and Xero, we offer a discount on the RRP making it cheaper to buy through us than it is going directly to them.
Q. Which accounting software is easy to use?
Larking Gowen believe that both QuickBooks and Xero are easy to use, but it depends on the capabilities of the user to some extent. However, we have a team of dedicated digital advisors who can offer ongoing training, advice and support to help you get set up and make life as easy as possible for you.
Before recommending any software solution, firstly we look at the business needs to help us to ensure the right fit. We offer bespoke solutions to suit your business so that you know you have the right product to give you exactly what you need.
For more information, and to arrange to speak to one of Larking Gowen’s digital advisors, go to www.larking-gowen.co.uk/mtd