Like a lot of parents, I’m super busy and don’t have time to trawl the Internet researching a topic, let alone understanding it in my sleep deprived brain fug. So I’ve done the work for you, condensing topics down to the essentials you need to know plus more detail if you need it.
What You Need to Know
- Making Tax Digital is a scheme introduced by HMRC, meaning that all VAT and tax returns will be submitted digitally
- Your accounting software will link into your HMRC account to transfer data
- It will be mandatory for businesses with a turnover above £85,000 to start using the system from April 2019 for VAT only
- Other taxes will be introduced from April 2020 at the earliest
- If you do not already have accounting software, you should get some!
In More Detail
OK, stop panicking! Yes I know it sounds scary and loads of extra work, but really it’s not. Once you’re set up with accounting software and linked to HMRC then you’re good to go. And let’s face it, having accounting software is a good option for all businesses – as opposed to spreadsheets or bits of paper!
What do I need to do?
If your business earns more than £85,000 or you expect it to earn more than this amount by April 2019, this does affect you but only for VAT. Your quarterly VAT returns will now be submitted to HMRC through your accounting software.
So if you don’t have accounting software, start looking for some now! There are plenty of options available, and lots of book-keepers and accountants can give you advice.
Having software doesn’t need to mean extra time and effort, in fact it should save you time, especially at year-end as everything will all be ready to go. It also means that you can keep an eye on your financial performance through the year and take action where necessary. Once the new scheme is fully operational, you’ll be submitting tax data quarterly so you can see how your liability is building up and be able to plan for this. The payment timescales will not change.
If you do already have software, keep it up to date with all of your transactions and wait for the call from HMRC!
If you’re super excited about the scheme, you can voluntarily register to start using the new online accounts. You will need to meet the new obligations though, which will be submitting quarterly VAT returns and quarterly returns for income and corporation tax if you register for that part too.
It may be sensible to wait though, as the system has not been fully tested or piloted. HMRC have said that they will delay the rollout to all businesses and taxes until it’s all working properly, even if that is beyond April 2020.