Tax is one of the scariest words for small and medium size business. Undoubtedly, it can make or break your business. Tax is mandatory for every person to pay who is earning a certain limit of amount where tax is applicable. Whatever country you live in, if you’re earning beyond the limit then you are required to pay tax. But paying tax isn’t that easy as it sounds because tax administration is not that effective and efficient that can make it easy for tax payers to pay tax. That’s the reason why UK government had launched ‘Making Tax Digital’ in its country.
If you live in UK, you would know about this system. This is a great initiative that the UK govt took for making tax system more effective. So if you haven’t adopted this system then you might be wasting your time to pay tax by visiting tax administration.
Why to waste time when everything is possible online? Yes guys, with Making Tax Digital you can manage your taxes digitally. So before you get ready for making it digital, let’s discuss everything about it in this article.
Let’s understand what Making Tax Digital is all about
Simply putting, Making Tax Digital is a crucial part of the UK government’s plan to make tax reporting easier for individuals and businesses. HM Revenue and Customs (HMRC) launched the first phase of its new digital tax initiative, making tax digital on 1 April 2019. In fact, this system was originally announced back in 2015. The HMRC confirms that the main objective of MTD is to make tax administration more effective, more efficient, and easier for taxpayers. In fact, HMRC’s aim is to become one of the most digitally advanced tax administration in the world.
Why UK government has designed this system? The main purpose of the govt is to make tax system faster and easier for people to record, understand, and file their taxes digitally.
What Making Tax Digital means to small business?
If you’re running a business then here are some points that you must know about MTD…
- Making tax digital is mandatory for every business based on your business circumstances.
- You can record different types of tax affairs electronically with the help of online software or an app.
- You or your accountant can also provide electronic information to HMRC on a quarterly basis.
- With MTD, it will help you reduce amount of time, stress, and effort that you put in preparing tax files.
- In fact, you can also view tax information, entitlements, and liabilities, so you have proper record of everything.
How the MTD system reduces the amount of paperwork and information provided to HMRC?
One thing is clear here that tax paper is almost endless. Without the help of accounting software, you may not record everything properly on your work. When it comes to whether MTD will reduce the paper work or not – so yes, the good thing about making tax digital is that it does reduce the burden you have of paper work. In fact, it brings information on a single table and makes it available to HMRC department automatically.
For instance, HMRC can collect details from employers, banks, societies, and other parts of the government. Moreover, they gather earning details from your employees which can reduce the reporting work of yours.
Let’s move further and know how to get ready for MTD.
What you need to do to get your business ready for making tax digital?
After reading half of the article, you would be quite interesting to know how you can get your business ready for MTD. Here are some points that you need to know for this:
- Firstly, make sure you are using accounting software that can comply with HMRC’s Making Tax Digital system.
- Next thing is that you must talk to your accountant who can help you get your business ready for MTD.
With these points you’re ready for Making Tax Digital system.
Some important points you must follow related to MTD
- You are required to keep a record of you taxes digitally through accounting software or tools.
- Give details of your business to HMRC via electronic tools.
- Make sure you’re working with your accountant to ensure that everything is recorded in a proper and accurate way.
- Also provide tax data to HMRC quarterly with the help of digital tools.
With MTD, the digital marketing sector has literally enhanced the way marketers do or run their business.
Guys, Making Tax Digital might sound gruelling process for every first time listener. Isn’t it? But this process isn’t that cumbersome task as it sounds. In fact, MTD literally reduces your stress by helping you in paperwork and making information easily available to HMRC. If you have not integrated with MTD then you should go for it right away.
I hope the article is enough helpful for you to understand the concept of MTD. If you have any query related to this article just get in touch with us.