Not sure on something?
The government’s new plan, Making Tax Digital, has been designed to be the most digitally advanced tax system on the planet. As of 1st April 2019, businesses that turn over more than £85,000 are now required to submit their VAT records digitally, instead of using the traditional HMRC portal.
Businesses turning over less than the £85,000 threshold can opt-in the scheme, but it is not compulsory.
If you’re not prepared yet, here we outline the steps you need to take ASAP:
Firstly, if you don’t already have a digital tax account with HMRC, you’ll need to sign up for one. You can do this through the HMRC website or ask us to help. The account will allow everything to be kept in one place and for tax to be submitted digitally.
Secondly, you’ll need to find compatible online accounting software to record your transactions and invoices, or bridging software that can collate transactions recorded in an Excel spreadsheet.
Most bridging software is free for the first year. While online accounting software, such as Xero or QuickBooks Online, incurs a monthly fee or upfront charge. However, what you spend on software, you may save in time spent filing accounts, plus you can claim the costs as a business expense.
Many banks have digital integrations with online account software providers, e.g Xero, so that your bank transactions can automatically sync with your accounting software meaning your bank feed will be automatically updated in Xero, in real time. This way you can keep track of transactions instantly without manually downloading or uploading any documents.
The full list of online account software providers that are compliant with HMRC can be viewed on their website.
Next you must create digital entries for paper invoices. If someone sends you an invoice in the post, this needs to be entered into your system or spreadsheet to digitise it. You’ll need to extract and record four key pieces of information: the net sales figure, the net cost figure, the net purchase figure and the net VAT figure. Other business details such as your business name and directors will also need to be recorded digitally.
Even if you haven’t yet hit the VAT threshold, we advise that the sooner businesses start filing tax digitally, the better. This will give you some practice with the new system before it becomes mandatory. If you have an accountant, you’ll have more time to ask questions and iron out any problems.