Benefits of Making Tax Digital
The bold move by the UK government of Making Tax Digital has impacted both business owners and accountants.
Just what is making tax digital? What are the benefits?
Digital tax is the HMRC programme to switching from traditional paper-based forms of tax administration to a digital platform. It touches on VAT, income tax, company tax and self-employment tax.
Benefits of digital tax
- Reduced strain and worry when it comes to filing tax returns
- Increased business productivity.
- Less paperwork for both accountants and business owners
- Real-time visible tax data on mobile services (available tax liabilities)
- Increased accuracy and fewer errors when submitting tax returns
How Businesses comply with MTD for VAT?
Currently, only VAT registered businesses with a taxable turnover of £85,000 or more must follow MTD regulations for VAT. Yet, VAT registered businesses with lower turnover can do so voluntarily. Also, VAT returns should be made quarterly electronically.
Costs associated with digital tax
Making tax digital comes with lots of cost savings due to less time used to prepare manual tax returns. However, on the balance sheet side, there are additional costs for software compatibility and record-keeping imposed on businesses.
Most cloud accounting software systems like QuickBooks and Xero charge a monthly fee dependent on the package you choose.
The future of Making Tax Digital
In 2021, HMRC is looking to set up MTD for income and corporation tax. The next phase of MTD for VAT returns takes effect from April 1, 2021. It will be relevant for most UK VAT registered organisations.
Has Making Tax Digital been a success so far? Yes! Despite a few hiccups, HMRC has affirmed that over 84% of affected businesses have signed up with a smooth 95% successfully making their first return on time.
If you need help making your taxes digital, do get in touch and we can set you up on an appropriate MTD compatible software and process all your bookkeeping and accounting.