Making Tax Digital: How to Embrace the Future of Tax Reporting

With the implementation of Making Tax Digital (MTD), businesses are being pushed towards a digital revolution in tax reporting. But what exactly is Making Tax Digital, and how can it benefit your business?

We’re exploring the benefits of Making Tax Digital and showing you how to effectively navigate this new era of tax reporting. MTD aims to streamline the tax system by requiring businesses to keep digital records and submit their tax information online. 

Benefits of Making Tax Digital

By embracing MTD, your business can enjoy improved accuracy, efficiency, and transparency in tax reporting. With digital records, you can say goodbye to loose receipts and paperwork just and reduce the risk of errors and saving valuable time. Additionally, MTD provides real-time updates on your tax liabilities, ensuring you always have a clear view of your financial position.

One of the key benefits of Making Tax Digital is improved accuracy in tax reporting. With digital records, you can minimise the risk of human error that often occurs when manually transcribing information from paper documents. By keeping digital records, you can ensure the accuracy of your tax calculations and eliminate the need for time-consuming manual checks and corrections.

Another advantage of MTD is increased efficiency in tax reporting. With digital records, you can easily access and organise your financial information, allowing you to quickly generate accurate tax reports. This eliminates the need to search through piles of paperwork and manually enter data into spreadsheets, saving valuable time and resources.

Additionally, MTD provides real-time updates on your tax liabilities, giving you a clear view of your financial position at any given time. Instead of waiting until the end of the tax year to assess your tax liabilities, MTD allows you to monitor your tax obligations throughout the year. This enables you to make more informed financial decisions and avoid any surprises when it comes to tax payments.

At FiguresUK we are already compliant with Making Tax Digital and can not only feel the benefits and seamless accounting ourselves, but our clients can tell the difference too. Making Tax Digital is something that we are passionate about in terms of its benefits for all.

Compliance requirements under Making Tax Digital

To comply with Making Tax Digital, businesses are required to keep digital records of their income and expenses. This means recording transactions electronically using compatible accounting software or apps. Digital records must be kept for a minimum of six years.

Businesses must also submit their tax information to HM Revenue and Customs (HMRC) using compatible software. This includes sending quarterly updates of income and expenses, as well as an end-of-year declaration. The use of spreadsheets to submit tax information is allowed, as long as they are linked to compatible software.

Steps to embrace Making Tax Digital

Embracing Making Tax Digital may seem like a daunting task, but with the right approach, it can be a smooth transition for your business. Here are some steps you can take to embrace MTD:

1.  Assess your current systems: Start by assessing your current systems and processes for tax reporting. Identify any areas that may need improvement or digitisation to comply with MTD requirements.
2. Choose compatible software: Evaluate and choose accounting software or apps that are compatible with Making Tax Digital. Look for software that meets your business needs, is user-friendly, and allows for seamless integration with your existing systems.
3. Digitise your records: Begin by digitising your existing records, such as receipts and invoices. Scan and save them electronically, ensuring they are easily accessible and organised. This will help you transition smoothly to digital record-keeping.
4.  Implement digital processes: Integrate the chosen software into your business operations. Train your staff on how to use the software effectively, and establish digital processes for recording income and expenses, generating tax reports, and submitting information to HMRC.
5.  Monitor and review: Regularly monitor and review your digital records and processes to ensure compliance with MTD requirements. This will help you identify any issues or areas for improvement and make adjustments as needed.

Choosing the right software for Making Tax Digital

Choosing the right software for Making Tax Digital is crucial for a successful transition. Here are some factors to consider when selecting accounting software or apps:

1. Compatibility: Ensure that the software is compatible with Making Tax Digital requirements. It should be able to generate reports in the required format and seamlessly integrate with HMRC’s systems.
2. Features: Look for software that offers features that align with your business needs. This may include automated data entry, customisable reporting, and real-time updates on tax liabilities.
3. User-friendliness: Consider the user-friendliness of the software. It should be intuitive and easy to navigate, allowing your staff to quickly adapt to the new system.
4. Integration: Check if the software can integrate with your existing systems, such as payroll or inventory management. This will ensure a smooth flow of data and minimise manual data entry.
5. Support and training: Evaluate the level of support and training provided by the software provider. Look for resources such as user guides, online tutorials, and customer support to assist you during the transition.

At FiguresUK we use Xero for our accounting software, we strongly believe that this is the software that best meets all the needs of us and our clients, allowing us to work cohesively and keep up to date at all times . You can read more about accounting software options here. 

Training and support for Making Tax Digital implementation

Implementing Making Tax Digital may require training and support to ensure a smooth transition. Here are some options to consider:

1. In-house training: Provide training sessions for your staff to familiarise them with the new software and processes. This can be done in-house or by bringing in external trainers.
2. Online tutorials: Take advantage of online tutorials and resources provided by the software provider. These can help your staff learn at their own pace and address specific areas of concern.
3. External training providers: If you’re a larger business with an in house accountant or business manager, then it’s worth considering hiring external training providers who specialise in Making Tax Digital implementation. They can provide customised training sessions tailored to your business needs.
4.  Software support: Ensure that the software provider offers ongoing support to assist with any technical issues or questions that may arise during the implementation process.

Tips for successful transition to Making Tax Digital

Transitioning to Making Tax Digital can be a smooth process if you follow these tips:

1. Plan ahead: Start the transition process well in advance to allow for a smooth implementation. This will give you sufficient time to evaluate software options, digitise records, and train your staff.
2. Test the software: Before fully implementing the software, conduct thorough testing to ensure it meets your business requirements and is compatible with HMRC’s systems.
3. Monitor and review: Regularly monitor and review your digital records and processes to ensure compliance and identify any areas for improvement.
4. Stay updated: Keep up-to-date with any changes or updates to Making Tax Digital requirements. This will ensure that you remain compliant and take advantage of any new features or benefits.

Common challenges and how to overcome them in Making Tax Digital

While transitioning to Making Tax Digital can bring numerous benefits, there may be some challenges along the way. Here are some common challenges and how to overcome them:

1. Technical issues: Technical issues may arise during the implementation process. Ensure that you have access to technical support from the software provider to address any issues promptly.
2. Data security concerns: Digital records and online submissions may raise concerns about data security. Choose software that offers robust security measures, such as encryption and secure data storage, to protect sensitive information.
3. Integration challenges: Integrating the new software with existing systems may pose challenges. Work closely with the software provider and your IT team to ensure a smooth integration process.
4. Lack of training: Inadequate training can hinder the transition process. Invest in comprehensive training for your staff to ensure they are confident and competent in using the new software and processes.

Embracing the future of tax reporting

Making Tax Digital brings numerous benefits to businesses, including improved accuracy, efficiency, and transparency in tax reporting. By embracing this digital revolution, you can stay ahead and ensure compliance with HMRC requirements.

Take the necessary steps to embrace Making Tax Digital, such as assessing your current systems, choosing the right software, and implementing digital processes. Provide training and support to your staff to ensure a smooth transition and address any challenges that may arise.

Unlock the benefits of Making Tax Digital and pave the way for a successful future of tax reporting with us.

At FiguresUK, as an accountancy business, we are already using software that ensures our clients’ accounts are digital, accurate and always up to date. If you’re not ready for Making Tax Digital then contact us today to learn more about how we can help you comply with the new regulations.

Jason Cannon
Managing Director and Figures UK Founder

No matter the size of your business, whether you’re a sole trader or a Limited company, when it comes to accounting, it can be a little confusing to say the least.
That’s where we come in. We’re on hand to listen, advise and provide our expert support.

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