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What Does Making Tax Digital Means For Small Businesses In The UK?

Making Tax Digital

When you’re a small business owner, your primary focus is likely on growing your company and keeping operations streamlined so you can continue to produce quality goods or services. Keeping tabs on all the necessary tax forms, accounting procedures, and annual taxes can take up a lot of your time. For example, when it comes to VAT returns as a small business owner, there are specific criteria that you need to meet before submitting your VAT return to HMRC. If you fail to meet these criteria in a timely manner, there are penalties involved. Making Tax Digital for Small Businesses in the UK is essential to stay compliant with annual tax obligations as a small business owner. Here’s what you need to know about this new initiative.

What is Making Tax Digital?

Making Tax Digital is a government initiative that is designed to make tax administration more efficient. While most people will not notice any significant changes, this initiative will have a significant impact on businesses. Making Tax Digital will make tax administration more streamlined, and it will make it easier for the government to keep track of all the necessary tax payments.

Why you should care about Making Tax Digital

As a small business owner, you need to be aware of this initiative because it will impact your business in a number of ways. It will require you to adopt new accounting and tax filing methods that are designed to be more efficient and less time-consuming. The initiative will also make it easier for you to track your company’s financials and to accurately file your taxes. Making Tax Digital will significantly reduce the likelihood that you miss a tax payment or other deadline.

How will Making Tax Digital affect small businesses?

Making Tax Digital will require businesses to go through a transition period when they’re switching to a digital accounting system. During this transition period, businesses will be required to submit their VAT returns on paper. It will initially be necessary to manually complete your tax return, but once you’ve completed your transition to digital accounting, you’ll be able to file your VAT return electronically. Businesses will have to start keeping their accounting records digitally by 2020. Note that there are a few exceptions to this rule, but most businesses are expected to transition to digital accounting by 2020.

Electronic VAT returns

By 2020, every business in the UK will be required to submit their VAT returns electronically. This will significantly reduce the chance of errors when it comes to calculating your VAT return. As a result, businesses that submit their VAT return electronically will be entitled to receive their money more quickly than businesses that submit their VAT returns on paper. Making Tax Digital will also make it easier for the government to cross-check your VAT return and ensure that you’re not engaging in tax fraud or failing to pay the correct amount of tax. This can be beneficial to both you and the government.

Electronic payments

Businesses that are Making Tax Digital will be allowed to submit their VAT payment electronically. This will make it much easier to track your VAT payments and ensure that you don’t miss any deadlines. Making Tax Digital will also make it easier for the government to detect fraudulent payments. As a result, you’ll be able to receive a faster response to your payment inquiries.

Electronic tax accounts

Making Tax Digital will require businesses to set up a digital tax account with HMRC. Your tax account will show details about your tax payments, including your payment history and upcoming deadlines. Making Tax Digital will also make it easier for you to keep track of your tax deductions, and it will allow you to submit your tax return on the go.

Summing up

There will be numerous benefits to MTD for both businesses and the government, checkout the Making Tax Digital Guide to understand more. It will be easier to detect fraudulent activities, and businesses will be able to submit their payments and VAT returns in a timely manner. Making Tax Digital for small businesses in the UK will also reduce the amount of time and money that businesses spend on accounting and tax compliance. If you’re a small business owner, it’s important to keep tabs on Making Tax Digital. This initiative will affect the way that you manage your company’s finances, and it will have a significant impact on the way that you retain your customers and grow your business. Another important impact that Making Tax Digital will have on how businesses operate is how they go about managing their day-to-day business accounts. In absence of MTD, businesses would not worry so much about digitizing their accounts. However, with it becoming the norm, there is no way how businesses can now stick to the old methods of business accounting. In essence, now is the correct time for moving to digitized solutions for accounting that not only help you stay compliant, but also ensure that your books are maintained properly. 


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