How the making tax digital changes affect your business?

The UK government has introduced the Making Tax Digital (MTD) programme. It aims to digitise important businesses and help them submit their tax records. If you have your business registered for VAT, you can submit your VAT return electronically to HMRC. You will not have to file for the return annually but quarterly.

The government aims to move tax filing digital. All these methods will be made digital such as Corporation Tax, Self-assessment tax VAT and more. As the business owner, you should be aware of what your business profits are. You should opt for the points system too. The MTD compatibility is available for a limited company and sole traders.

Making tax digital for VAT

MTD, or Making Tax Digital is a move applicable for businesses above the VAT threshold. All such businesses must maintain a record of the details like VAT so they can file their returns online via software. You may contact your business accountant, who will help you keep a record of these details.

In 2022, all VAT-registered businesses should move to file their VAT returns online. Irrespective of whether your business belongs to the above or below the VAT threshold, you will need to file for returns online. You may also choose to register for the business voluntarily. You should understand the process completely so that you can file for it.

Making tax digital for income tax

As of now, the Making Tax Digital for Income Tax has been delayed until 2024. The unincorporated businesses may also have to deal with it till April 2024.

It will be applicable for businesses of all sizes with a business income threshold of over £10,000 yearly. The delay was declared to ensure the landlords and businesses get enough time to prepare for the MTD procedure.

Making tax digital for corporation tax

As of now, Corporation Tax is still in the discussion phase. The government is looking for suggestions from agents and small business owners. Currently, there is no information about when Making Tax Digital for Corporation tax will be announced.

The government will also invite businesses so they can join a pilot program.

How will making tax digital affect the business?

Making Tax Digital is a prominent move by the UK government to ensure faster development. It will contribute to the growth of businesses. The MTD move aims at modernising how taxpayers will pay taxes to the government. It will help to digitise all the important commercial services.

Businesses that go for Making Tax Digital move can get significant benefits. Some of the common benefits that businesses can by opting for the MTD move include the following:

1. Real-time information updated

Earlier, the tax filing procedure was completely paper-based. Implementing MTD will help remove the need for paper and make it completely based digitally. It will help to lower the mistakes. The agents can easily operate the businesses on their own. The digital accounting procedure will ensure whatever information is sent to HMRC is accurate. Furthermore, your business’s financial records will be updated in real-time.

2. Easy operation for business

Online software will play an important role in ensuring the easier functioning of the business. It will help remove or lower the changes causing any errors in the business record. The manual computations will always have room for error. Digitising the information will therefore help in getting rid of it.

3. Simplification of process

Digitising the business will ensure it helps to simplify the process of managing the company’s finances. Most people are using the process of paying bills, banking and engaging online. The accountants will get an opportunity to maintain the tax records. Therefore, the companies will get complete control and plan their finances accordingly.

4. Updated information

Taxpayers will get updated information about their taxes using the Making Tax Digital initiative. All data will be transmitted digitally, reducing human error risk. With the help of the method, businesses can lower the risk of making mistakes on their digital records.

Can any business opt-out for making tax digital?

If you still want to keep all your financial records on paper, you may want to opt-out of Making Tax Digital. You may be able to file all your returns via post when you opt out of Making Tax Digital.

However, it is crucial that Making Tax Digital is a universal scheme that will apply to all businesses. All businesses with a turnover above £10,000 will need to opt for MTD. If you’re a sole trader and your income is below £10,000, you may be able to opt-out of Making Tax Digital. However, you should opt for the scheme.

If you aren’t comfortable keeping a record of your digital accountants, you should consider outsourcing it. Numerous accountants can help you maintain a digital record of your taxes. These accountants will submit your digital tax returns. Therefore, you don’t need to manage the digital bit of accounting for your business.

Is making tax digital only applicable for VAT?

Currently, Making Tax Digital is being rolled out for all UK businesses. When you turn to digital, you must opt for compatible digital accounting software for business. Currently, the Making Tax Digital initiative is only effective for VAT. As said above, MTD for corporate tax and income tax will be rolled out in the future.

The main aim of introducing Making Tax Digital is to reduce the risk of human error. The business owners must be familiar with the latest updates in the MTD section. You must ensure that your business doesn’t get behind and become prone to any penalties by the HMRC.

Conclusion

The new MTD scheme will have a positive impact on the business. Almost all businesses above the VAT threshold must account for and submit their tax returns online. The scheme will also be introduced for other taxes such as Corporation Tax and Income Tax in the near future. You should be familiar with the latest developments in the MTD scheme. There are various online digital accounting software that will help you keep a record of all the accounts digitally.