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Making Tax Digital – What Small Businesses Need to Know
Making Tax Digital is more than just a buzzword – it’s a reality for small businesses throughout the UK. More than 2 million small businesses are already doing their taxes online, and it’ll soon be an obligation for all 5 million SMEs in the UK.
Here’s what you need to know about the UK Government’s plans for online digital taxes.
What is Making Tax Digital?
It’s a huge overhaul of the HMRC tax system.
The HMRC tax system is out of date, and needs a radical transformation to bring it into the digital age.
Currently, there’s far too much paperwork and duplication. Everyone’s in a mad rush at the end of the year, people miss deadlines and incur unnecessary penalties.
This is the biggest UK tax revolution for 50 years.
What will the new digital tax system be like?
The details are still being worked out. But broadly:
- tax in real time – no more end-of-year surprises
- digital taxes – no more paperwork, round-the-clock access
- a single financial account – instant snapshot of your tax position
- better use of information – avoiding duplication
In short, everything will be done online, and in real time.
What do digital taxes mean for small UK businesses?
Again, the details are still being worked out. But in brief, you'll need to:
- Must interact with HMRC digitally
- file quarterly reports
- need to get up to speed with digital filing
The new system is just getting started, with a pilot study underway. Small businesses and landlords are the first in line to take it up. The UK’s 5 millions SMEs will all have digital accounts with HMRC by April 2018.
It’s not yet clear what the revenue threshold for mandatory online filing will be, though possibly £10K – again, that’s still being worked out. The UK Government has just pushed back the roll out by 12 months, to give the process more time.
But it will happen! It’s already happening in other countries. The future of tax is digital.
What do You have to do?
If you’re already with Hayhoe Webb, nothing at all! All our clients get free Xero online accounting, which means they’re already up to speed. When Making Tax Digital kicks in, they’re barely notice the difference.
But if you aren’t geared up yet for online accounting, now’s the time! 2 million UK small businesses are already handling their tax affairs digitally. The rest aren’t far behind.
What's great about digital tax and accounting
It’s far more straightforward than paperwork, and gives you a clear, up-to-date snapshot of your business as it proceeds, rather than at the end of the year.
Our clients say it’s far easier to handle than an end-of-year system, and there are no nasty tax surprises. You can also access your accounts at any time using your laptop, tablet or phone.
There are many online digital accounts packages out there, including Sage, Iris, and other familiar names. We’ve tried the main ones, and reached the conclusion that Xero is one of the the best, in terms of both client-friendliness and accounting performance.
Why we love XERO for online bookkeeping and accounts
Reasons to choose XERO include a simple, intuitive interface, and a superb accounting back end. In our opinion, it’s the best small business online accounting system out there.
Above all, we like its flexibility. Some clients use it just for books; others like regular detailed reports and working closely with us on their business growth strategy. It works for both.
As accredited XERO partners, we offer a XERO service (worth £22 per month) free to all our partners, whether they use us just for book-keeping, or for our full accounting and tax service.
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