Antur Cymru Enterprise is keen to share the latest developments in Digital Tax with our stakeholders and took time out to chat with LHP Chartered Accountants who prepared some key points to clarify the latest position for us.
What is Making Tax Digital?
Making Tax Digital is fast approaching for many, comes with penalties for those that don’t comply and involves big changes for most businesses. But what is it, how does it affect finance operations and how can businesses prepare?
Making Tax Digital is a compulsory UK government initiative, fuelled by a vision to have one of the most digitally advanced tax administrations in the world. It represents a big change to the way businesses will record financial information and submit tax returns – and most businesses will be affected.
The scheme promises to make tax administration more effective, efficient and easier to get right. Put simply, Making Tax Digital requires businesses to adopt compatible software to manage tax affairs with HMRC. This in simple terms, means businesses moving to cloud accounting software.
Who does it affect?
UK government plans are underway to modernise our UK tax system. Businesses are either already digitally filing VAT and accounts quarterly or will need to in the near future. Those with an annual turnover of above £10k will need to use specific software or apps to keep their business records in the future. The days of manual record-keeping will be over!
All VAT companies over the £85k threshold will already have moved to digital tax. All remaining VAT-registered businesses with a taxable annual turnover below £85,000, need to follow Making Tax Digital rules now, to comply in time for April 2022. Making Tax Digital for Income Tax will be introduced in 2023. So, all self-employed including landlords and individuals earning over £10k a year will need to comply.
All types of businesses should act soon, to avoid a stressful transition and to fully benefit from cloud accounting.
What are the steps businesses need to take?
Businesses need to speak to their accountants early to prepare for the change to digital accounting and explore the wider benefits that cloud accounting systems can provide including a clear real time view of your finances, the ability to run your business from anywhere and automatic recording of bank receipts, payments and invoices .
To explore further cloud-based subscription models to enable your business to reduce costs, facilitate remote working and maximise collaboration opportunities, speak to Aled from our IT team at Telemat on 01239 712345