Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their taxes right and keep on top of their affairs. But are you and your small business ready?
To paraphrase the renowned polymath and Founding Father of the United States, Benjamin Franklin, ‘by failing to prepare you are preparing to fail’ – and this is most certainly the case when it comes to Making Tax Digital (MTD). We at X-Forces Enterprise are hard at work ensuring that our business is in the best possible place to both comply with, and reap the benefits of, MTD. So, let’s have a look at what all this means.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is more effective, more efficient, and easier for taxpayers to get their tax right.
Self-employed businesses with annual income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) from 6 April 2024. This was initially scheduled to come into effect in April 2023 but the Government, recognising the challenges faced by many UK businesses as the country emerged from the pandemic, pushed the MTD ITSA requirement back 12 months.
However, as of 1st April 2022, VAT-registered businesses are required to follow the MTD rules by keeping digital records and using software to submit their VAT returns. This means it’s time to act and, importantly, to get it right. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, will reduce the amount of tax lost and the consequent headaches for small business owners.
Keith May, an ex-military XFE beneficiary, is a Chartered Management Accountant with over 20 years of experience in HR and finance roles. His bottom-line message on Making Tax Digital is: you have to comply!
“MTD for VAT has become mandatory for all VAT registered businesses since 1 April 2022. But what does this mean? Basically, VAT registered businesses will need to maintain records digitally and file VAT returns through approved software – failure to comply may result in penalties from HMRC.
“There are various ways to comply with the directions – the best way to do it is to speak to your accountant or bookkeeper and get advice on the best and most cost-effective way to digitise your VAT Returns and records.”
Our Military in Business® Virtual Networking Event on 12th May features guest speaker Rebecca Mackellar, who served in the Army during the 1990s (WRAC/AGC/RA), before embarking on an entrepreneurial journey that took her to the beautiful Cairngorms National Park in the Highlands of Scotland. She now runs Red Tag Admin and Bookkeeping, training business owners to set up and take control of their own cloud accounting systems. It’s vital that the self-employed are MTD-aware and compliant, so be sure to register for your free place at our May 12th event here and heed the words of our expert keynote speaker.
Additionally, the XFE Knowledge Exchange Hub has a wealth of information on accounting and finance issues for small business owners – membership is free, so why not join today?
Further information on MTD is available on the Government website.