Making Tax Digital Software
Making Tax Digital (MTD) is a Government initiative that shows great promise. It sets out with a promise for the UK to possess "one of the most digitally advanced tax administrations in the world."
The main aim of this initiative is to digitize the tax administration system for VAT, corporation tax, income tax, and aid businesses in their tax affairs. The vision is to make the process more efficient and effective for taxpayers to get their taxes right. All businesses must start prepping for Making Max Digital (MTD) before it is mandatory for VAT-registered businesses starting the 1st of April 2022.
An independent study conducted recently revealed that 69% of the 2,000 businesses interviewed reported having experienced great benefits from MTD. Digitalization provided the companies increased confidence in their speed and accuracy in getting their taxes correct. 67% of the businesses also reported that MTD helped eliminate human errors that are otherwise abundant in the record-keeping process.
The positive impact of Making Tax Digital
This program will help make tax returns fast, convenient, and entirely error-free! Gone will be the days of juggling thousands of traditional paper files full of errors, lacking considerable precision, and are tedious to store and access. Her Majesty's Revenue and Customs Body (HMRC) strongly advocates for this scheme precisely because they allege witnessing a steep decline in reporting costs and avoiding losses in tax omissions.
A study by Karaawy conducted a systematic literature review that showcased that MTD is indeed a technological innovation that will be extremely beneficial for all current and future economies. Digital mobility, ease of access to information, and real-time tax reporting will be a game-changer for organizations.
Furthermore, MTD also entails increased business productivity. According to Lloyds Bank Consumer Digital Index 2019, digitization of tax could save an entire day per week for business administrators. Additionally, the reduced stress and worry with filing tax returns could be greatly minimized. The time saved could be redirected to other important tasks and could be really beneficial for the organization as a whole.
How will MTD impact my business?
For businesses to comply with MTD, they first need access to an MTD compliant software like EasyBooks. This software will help to keep track of all digital accounting records. MTD was first introduced in April 2009. This required that all VAT-registered businesses in the UK with a turnover above the VAT registration threshold, file VAT returns using software compatible with MTD and store all financial records related to VAT digitally. As the rollout for MTD continues, here is what businesses can expect.
Making Tax Digital for VAT
Making tax digital for VAT is going to be further expanded in April 2022. All VAT-registered businesses with a turnover below £85,000 will need to follow MTD rules for their first VAT return starting on or after April 2022.
MTD for Income Tax Assessment
MTD for Income Tax will be unveiled in 2024. This initiative will require all self-employed businesses and landlords to comply with all the rules of MTD. Additionally, property income above £10,000 is also required to comply with all the rules of MTD. Partnerships will have to comply with the rules from 2025.
EasyBooks: Making Tax Digital Software
While it is entirely possible to use spreadsheets or other software to manage taxes, many organizations prefer to use a more comprehensive software that is compliant with MTD, like EasyBooks. This software is a great tool to document your day-to-day activities and illustrate an accurate picture of your tax data in real-time.
Moreover, EasyBooks helps highlight all possible human errors that are otherwise overlooked. The software compiles the data, and it is then immediately transferrable directly to HMRC via any device.
HMRC states that: “…users will get the maximum benefits from MTD – fewer errors, increased productivity and better financial planning, by using dedicated MTD software.”
EasyBooks will help you transform your Tax system by managing all expenses, preparing customer invoices, and helping manage your bookkeeping more efficiently.
Streamlining your bookkeeping using EasyBooks, is guaranteed to make better and well-informed decisions for your business in the future.