Get ready for Making Tax Digital
The end of the financial year is just around the corner, and with it come some changes that the government is making to VAT returns for businesses – an initiative called ‘Making Tax Digital’.
If you’re not sure whether or how the changes will affect your business, don’t worry. Here’s what you need to know to prepare for this new way of managing your business’ taxes.
What is Making Tax Digital?
The first thing to note is that, this year, Making Tax Digital (MTD) will only apply to VAT-registered businesses with an annual taxable turnover above the VAT threshold (currently £85,000). If your business falls into this category, you will be required to use MTD for your first VAT return after 1 April 2019, and thereafter.
According to the government’s policy, MTD is a digital service for keeping records and submitting your VAT return online, as part of a plan to make tax administration “more effective, more efficient [and] easier for taxpayers to get right”.1 The idea is that, by using MTD-compatible software, VAT returns will come directly from a company’s digital records – rather than having to be transferred over from private records – and this will mean fewer errors, and thus less money lost to mistakes.
What do I need to do?
There are four main things you will need to do in order to be compliant with the new MTD rules (you can find out more information about these steps on the Gov.uk website):
- Check whether your business will be required to use MTD from 1 April 2019, or if you are part of the ‘deferral group’ (which does not have to comply with the new rules until October 2019).
- Find MTD-compatible software, which you will use to keep your records and submit your VAT returns.
- Authorise that software through the supplier.
- Sign up for MTD on the government website, linked above.
How long do I have?
The new changes will be enforced for VAT returns from 1 April, so you have until then to get your business onto the system.
Remember, these new rules only apply to VAT-registered businesses with a turnover above £85,000. However, there are plans to roll out the scheme further in 20202 – at that point it will be introduced for income tax, corporation tax, and potentially to all other VAT-registered businesses. So even if MTD does not concern your business yet, it may be worth familiarising yourself with it over the next year, to be ready for 2020.
Do you need help with your business accounts at the end of the financial year? Get Ahead VA can pair you with a virtual assistant who will handle your accounts at this crucial time, or all year round. We’d love to chat with you and find out exactly how we can help, so please give Get Ahead VA a call on 01483 332220 or email us at email@example.com. We pride ourselves on being the staff you don’t see, but the difference you do.