“Making Tax Digital”
A key part to the government’s plan to make it easier for businesses and individuals to get their tax right and to keep on top of its affairs, is Making Tax Digital (see gov overview). This is a scheme that will require online tax filing, payments and digital record keeping.
Making Tax Digital is going to fundamentally change the way the tax system is operated.
Although the scheme is only currently for VAT, Making Tax Digital for income tax is due from April 2023.
Making Tax Digital for VAT
This came in for VAT registered businesses over the VAT turnover threshold of £85,000 from April 2019. These businesses are required to maintain their accounting records digitally.
Paper records ceased to meet legal requirements. HMRC’s online VAT return remains available only to businesses not within the scope of MTD for VAT. MTD for VAT is due to be extended to all VAT registered businesses from April 2022.
Making Tax Digital for Income Tax
MTD for income tax will apply from April 2023.
Business falling into the scope of MTD will then also need to maintain digital accounting records and submit information quarterly to HMRC using digital software.
Catherine Bennett Accountancy
Wheal Harmony House
With “making tax digital” there are a number of software packages available to help with the process. Our preferred provider is FreeAgent, although, we are happy you work with any package that works for you.
We can review the package before you commit to ensure it will meet yours and HMRCs requirements. Please contact us about any software you are intending to use as we may be able to offer discounts
With the rise of digital accounting software, automation of data entry for invoices and receipts has also been rapidly changing. While many software packages provide their own app so that you can photograph and upload receipts and invoices, an external OCR programme such as Autoentry and Receipt Bank will include data extraction, to save you time from having to enter a lot of the information yourself. This is not a one size fits all solution, so talk to us about how one of these add-ons could benefit you and your business.