Technological hitches and Brexit-related delays aside, Making Tax Digital (MTD) is going to happen. One way or another, the UK’s tax system is going digital, and it’s vitally important that you take the correct measures now to avoid scrambling at the last minute two years from now.
In this brief blog post, we explain why switching to cloud accounting today can make MTD a smoother, more effective transition in the future.
A reminder: What is Making Tax Digital?
We’ve previously blogged about what Making Tax Digital is and how it will affect you, but if you’re still not sure, here’s a quick reminder:
Making Tax Digital is a government initiative designed to streamline and simplify tax, and bring about the end of paper accounting for millions across the UK. Instead of a yearly tax return, businesses will be tasked with setting up a digital tax account and filing an online return once per quarter.
If it all works as intended, MTD will make tax more straightforward, accurate, and far less stressful.
Why make the switch now?
From a compliance point of view, if your business does not exceed the VAT threshold, you will not be mandated to keep digital records and submit quarterly returns via digital accounting software. Or, in other words, if you’re not turning over £85,000 and above, you can breathe easy about implementing new software.
However, there’s still an argument that you should make the switch to a cloud-based accounting system well in advance of the inevitable expansion of MTD, set to take place in or around April 2020.
Why? Well, cloud accounting can save you time and save you money. It makes financial admin easier, and will ultimately result in a more effective and efficient tax return, regardless of whether or not your business is compelled to comply with MTD.
It might be tempting to dismiss MTD as yet another HMRC obligation, but the truth is, the move towards a fully digital and largely automated accounting process will improve your business tenfold. You’ll have instant access to real-time, up-to-date numbers which will, in turn, help you make better decisions in your pursuit of growth and profit.
So, the question ought to be “which cloud accounting software do I choose?” and the answer is simple – Xero.
How can Xero help?
Xero is by far the most popular cloud accounting software in the UK – and with good reason. It acts as the financial hub of your business, bringing together important functions such as bookkeeping, accounting, invoicing, and reporting.
Whether you have MTD in mind or not, making the switch to the cloud with Xero will undoubtedly bear fruit for your organisation. In fact, the features and benefits are there for all to see:
- A clean and clear dashboard provides an at-a-glance overview of your key numbers, meaning you’re always in control.
- A live bank feed keeps everything up-to-date.
- Online invoicing means you can invoice directly to customers, log sales straight into Xero, and follow up with late payers in a timely and efficient manner.
- Financial reports give you the opportunity to see your balance sheet, profit and loss, or cash report at any given time, and all with real-time, accurate numbers.
Where Making Tax Digital is concerned, Xero is already a step ahead. It can:
- Automatically calculate tax (including VAT and payroll tax).
- Pull financial data directly from your bank, invoicing software, or point of sale system.
- Update transactions daily, keeping you on top of bank reconciliation.
- Create digital records of paper receipts and bills via its smartphone app.
All of this combines to provide you with a clear picture of your business’s financial performance and tax liabilities, keeping you organised and ready to meet your next tax payment, or sidestep your next cash flow concern. In short, by introducing a cloud accounting system like Xero, you’ll take the change to Making Tax Digital in your stride.
Get Ready for MTD with Saint and Xero
There are no two ways about it, change is scary. Especially if it means implementing technology you’ve never used before. But Making Tax Digital could be a huge positive for your business. Filing returns quarterly could make tax less taxing, and allow you the opportunity to better plan for the future.
And by making the switch to Xero, not only will you be prepared for MTD, you’ll also have accurate financial information at your fingertips, helping you spot opportunities and threats faster than ever before.
If this sounds like something you’d be interested in, simply click the link to Get Started with Xero, or call us on 01228 534 371 to chat with one of our friendly advisors.