In April of 2019, the UK government introduced Making Tax Digital (MTD) with the aim of digitizing tax filings and enforcing digital records.
This scheme will ensure that all businesses, including self-employed business owners, keep their tax accounts in a way the UK government approves.
The MTD programme is designed to simplify tax submission for both individuals and businesses. The scheme also aims to transform HMRC into a leader in taxation.
As part of the government’s initiative, digitalisation will benefit business owners in ensuring their taxes are submitted correctly and in transforming the way that HMRC operates.
What does this mean for your business?
Despite being more geared towards small businesses, MTD can have significant impacts on both small and large businesses. With the right software, it will make it much easier to prepare tax returns and manage daily accounting.
The system will be convenient for small businesses rather than having to keep track of multiple records in different systems, allowing them to manage their finances and VAT in one place rather than having to keep track of multiple documents and receipts.
The transition to MTD will be easier if your business already uses accounting software.
To incorporate MTD into your business, you will need to alter existing processes if your business uses manual records, spreadsheets or outdated software. MTD requires that you find new software that is MTD compatible and you will need to complete a VAT return before MTD becomes mandatory this year for all VAT-registered businesses.
Using MTD is an opportunity to move away from manual records and into the computer age. Landlords can go one step further by using accounting software such as Xero to submit their MTD returns. In addition to reducing admin time, these systems can be integrated with property management software to centralise company activities and responsibilities Lofti are partnered with Xero in order to ensure that accounting becomes a seamless process.
Importance for landlords
Using MTD will help landlords stay compliant with HMRC requirements since it will be mandatory. In order to avoid a rush, landlords should integrate with MTD before the deadline, as well as give themselves more time to become familiar with and learn how to use the new system sooner.
In addition to preserving records, MTD will ensure that changes will be saved in the software, and VAT records must be preserved by law, so manual creation can cause legal issues.
Through cloud-based accounting platforms, your business can view assets and liabilities digitally, and MTD allows invoices and payments to be reconciled.
Benefits for landlords
Incorporating MTD into your business will help you better manage your time and money by eliminating time-consuming spreadsheets.
You will be able to avoid penalties if you provide incorrect information with the help of MTD. Calculations made with manual spreadsheets can also be inaccurate and prone to human error.
By using MTD-compatible software, you will be able to send documents to HMRC in the approved API format, which will save you time with manual conversions.
Accounting duties can easily be performed digitally with the use of MTD, reducing time spent on accountancy. You and your business will ultimately save money if you are able to save time.
In addition, you may even be able to save on accounting fees! Your accountant will be able to easily review your records before submission if you use accounting software alongside property management software.
Concerns around safety?
Using MTD, landlords can store their personal and business tax information on a secure government portal.
Accountants will also have access to digital tax information, but not all information due to security concerns. Only the information necessary to perform their duties will be provided to them.