Making Tax Digital will change the way your business pays its taxes to HMRC. It is a scheme by the UK government to make it easier for businesses and individuals to manage their taxes. The first stage comes into play on 1st April 2019 and is called Making Tax Digital for VAT.
From that date, VAT-registered businesses (those companies with their turnover over the VAT threshold, which is currently £85,000) will be required to digitally submit their tax records to HMRC. They will no longer be able to do this via HMRC’s Government Gateway website.
What does that mean for businesses?
If you are VAT registered, then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered, then digital record keeping is optional for the time being.
If you are VAT registered and do not yet use software to record your VAT information (invoices to customers and from suppliers) you need to start planning for Making Tax Digital. The implementation date is 1st April 2019.
My company uses spreadsheets for business records – what will that mean for me?
You can still continue to use spreadsheets to digitally record and store your business records. However, you will need to make sure those spreadsheets can digitally submit any necessary data to HMRC.
My business is not VAT registered and I don’t know if I will earn £85,000 this year. What should I do?
You will only be required to follow the rules of Making Tax Digital if your turnover exceeds £85,000 – the VAT threshold. You will need to keep track of your turnover over the last 12 months on a cumulative basis, and if at any point your total turnover exceeds £85,000 you will need to register for VAT.
What if I temporarily go over the VAT threshold?
If your business isn’t VAT registered and you do go over the threshold, you will need to comply with the requirements of Making Tax Digital. If your taxable turnover then drops below the threshold, you still need to continue complying with the legislation.
My business is under the VAT threshold, but I want to be part of Making Tax Digital. Is that possible?
Yes. Your business can choose to waive exemption if you wish to voluntarily follow the requirements of Making Tax Digital.
It’s important to note that “Making Tax Digital” is only coming in to play for VAT registered businesses in April 2019. For all other businesses, it comes into force in April 2020.
With this in mind, it’s a great idea to get started on digital bookkeeping so you are ready for the change. Starting early will help you to understand the workload involved and you will have plenty of time to decide if outsourcing to a well prepared Bookkeeper would be the best option for you.
Outsourcing is actually a very realistic option for business owners so don’t be scared. If you’re still not sure, Rosemary Bookkeeping are more than happy to come and help you find out about making tax digital or just do a 1-2-1 health check with you and give you the opportunity to decide for yourself if you think you could benefit with no obligation, contact your local Rosemary Bookkeeper today.