As from 1st April many businesses need to make their tax digital, so we thought we’d answer a few of the questions that business owners may have about the new system.
What is Making Tax Digital?
Making Tax Digital is a Government Initiative to make the administration of tax easier and more efficient. To achieve this most businesses and self-employed professionals will be required to maintain their accounting records digitally on compatible software.
Do I need to make tax digital?
If your business is VAT Registered with a taxable turnover above the VAT Threshold, you will need to record your accounts on the compatible software.
What is the compatible software?
There are many compatible software products and you can see a full list on the HMRC website. All the most commonly used accountancy software such as Sage, Quickbooks and Kashflow are compatible. If you are one of our clients we will have been working with you to make your accounting digital on Sage.
My business is not-for-profit, do I need to Make Tax Digital?
Yes, you will have to make tax digital, but you may be able to defer it until October 2019 if you are not set up as a company. Examples of other organisations that may be deferred by 6 months include Trusts, public sector organisations and traders based overseas. If you are not sure whether you can defer making tax digital, please call us on 01751 475810.
When will my first payments be made through the new system?
In 2019, the only taxes that will be collected through the system will be VAT, so your first payment will be made when your first VAT return is due in the new tax year, e.g from 1st April 2019. Other taxes will not be collected via the system until 2020/21 financial year.
I am setting up a new business, will I need to Make Tax Digital?
We would recommend that you set your accounts up on compatible software right from the start of your business so you do not have to worry about changing your system, however new businesses will not be included until after 2020.
I am Self Employed, do I need to Make Tax Digital?
No, if you are below the VAT threshold or are not registered for VAT you do not have to Make tax Digital in 2019. However, if you are a self-employed business, small company or landlord you can voluntarily use the software to send income tax updates to HMRC. This will be instead of filing a self-assessment form and may well make tax management more efficient for your business.
Where Can I get Advice?
Your accountant should be able to give you advice and support on making the transition. If not, please get in touch with us and we would be delighted to provide you with advice.