Recently, Making Tax Digital (MTD) has been creating a lot of buzz in the tax system of the United Kingdom. So, what is it exactly? Making Tax Digital will provide real-time tax information without any worrisome paperwork and fewer mistakes.
From a certain point, every business must use the Making Tax Digital service of the UK government to keep and submit the records digitally if their business is VAT-registered. Initially, it can be overwhelming, but it can also benefit your business in several ways.
What is Making Tax Digital?
Making Tax Digital is an initiative by the UK government to modernise and reform the UK tax system. It has been created to make tax reporting for your business easier. If you have a VAT-registered business, you must maintain a digital record that automatically updates and stores all your company information in a single place.
The online system of Making Tax Digital was introduced to eliminate errors and boost transparency with paper tax filing. Under this initiative, you can access a digital tax account as a business owner. From there, you can submit all your tax information to the HMRC every quarter. This way, the HMRC will become one of the most advanced tax administrations worldwide by marking the end of annual tax filing.
What Changes Will Making Tax Digital Create for Businesses?
With Making Tax Digital, a business can easily follow the standard record maintenance practices and file quarterly reports. In fact, most businesses in the UK have already begun preparing to move online for higher accuracy and efficiency.
Under the Making Tax Digital initiative, if you file with HMRC, you can utilise digital tools instead of paper forms for recordkeeping to avoid getting charged and penalised in case of the misplacement of papers. Making Tax Digital is not only ending all kinds of paper accounting, but it is also ending the annual returns filing in the UK.
Advantages of Making Tax Digital for Businesses
The Making Tax Digital initiative has been introduced keeping in mind the various benefits that businesses can gain. Hence, some of these advantages include the following:
● Have less paperwork!
At one point, it can become challenging to sort through tons of documents, invoices, and receipts you may have gathered over time. In this case, Making Tax Digital will make it easier for you when you can keep an eye on your business’ outgoings and incomings online. You can check the correctness of the data and update it quarterly. With Making Tax Digital, you will never have to put up with any unwanted paperwork.
● Easier bookkeeping
Bookkeeping digitally is much easier and less time-consuming than doing it with traditional methods. You can keep track of your owed repayments, tax dates, and any upcoming bill in seconds by logging in to your account. The tool offers immediate access to the business’s financial information with Making Tax Digital, allowing you to make informed decisions for your business.
Using the software, you can use other digital tools to help your business greatly. For instance, you can use the growth powered by the cloud and data analysis to expand your business. With Making Tax Digital, you can simplify and modernise your systems to get better control of your finances.
● Fewer errors
Tax returns have always been a complicated and time-consuming process. And even after submission, there are few chances that these manual reports are error-free. Further, you may be fined in case of late filing of tax returns. However, with Making Tax Digital, you will have a higher chance of not causing any errors in your information and filing your tax returns on time.
● Real-time tax data and immediate access to financial information
Since with Making Tax Digital, you submit your tax return quarterly, you can observe the financial information throughout the year. Implying, you can consider your real-time tax information for the full year to understand your debts. It also gives you sufficient time to comprehend every aspect of the transaction before the deadline for tax returns.
You can also receive reminders and an overview of your reports from the HMRC system. The system will also provide relevant support and advice whenever needed. It will help you understand the tax filing process to complete it quickly.
● Adds value
Making Tax Digital adds value to your business. For instance, using Making Tax Digital saves you a lot of time you could spend on other areas of your business. When you can access your financial data digitally, it also becomes easy to identify and analyse how to boost your profit.
Making Tax Digital is a great initiative by the UK government. It will benefit any business immensely. At the same time, adapting to new technologies and methods, you can further maintain your digital financial records, file VAT returns to HMRC, eliminate compliance worries, reconcile your bank statements, and more easily.