As a business owner in the United Kingdom, you have likely heard about changes to UK tax policy. For now, the present tax system in the UK is seen as unwieldy, fraught with errors and inaccuracies. It has become a major problem for many business owners and is likely to cause headaches all-year round. The challenge and stress of doing a year-end tax return, too, can be quite a frustration. For any business owner, then, you might be happy to hear about the coming changes to the UK tax system.
Coming in the next years, the new system is called Making Tax Digital. As the name implies, this new system will transform how we file our returns. Instead of using paper returns to do a year-end tax return, things are changing. Instead, we will undergo a new system that will see us file multiple smaller returns. This will see you spend more time doing your taxes throughout the year, but each tax return should be much simpler and shorter to fill in.
Why is Making Tax Digital coming into force?
There are numerous reasons for it. For one, the UK government claims to have lost a lot of revenue through incorrect taxation. The belief is that, with more tax returns being filed for smaller periods of time, mistakes and errors are less likely to occur. This will mean that the government gets to tap into those tax revenues more than once throughout the year, too, offering a top-up to government coffers instead of one lump sum payment.
This is why, for many people, Making Tax Digital is an essential modernisation. It will also help to reduce problems with things like tax returns being lost or damaged during transit. If everything is sent and connected surely online, then there is less chance of documents being damaged, lost or tampered with.
Making Tax Digital, then, is going to change how we deal with our day-to-day bookkeeping. If you look to do everything at the end of your respective tax year, then you will need to become more proactive. You’ll need to also start using one of the designated MTD-compliant software systems. Many present accounting tools are not going to be MTD-compliant, so it might be a good time to look around for alternatives.
As MTD comes into force, we will see more and more software options arrive on the market. Keep that in mind, as it will make it easier for you to find a software system that you can use. For now, though, especially if your business pays VAT, you will need to get used to the upcoming MTD system. It’s not yet in place but is moving closer with every passing day.
Once in place, it will change how UK taxation works for years to come. Keep this in mind, as it will become an essential part of managing and controlling your financial affairs. For now, though, concentrate on finding accountancy software which is ready for Making Tax Digital.