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​Digital tax-reporting is here. If you’re a VAT registered business, you should already be complying with Making Tax Digital (MTD). Still, MTD will soon be compulsory for all businesses, whether you’re a Sole Trader or Limited Company.

The next deadline in the MTD transition is 6th April 2024. It applies to anyone who completes a Self Assessment Tax Return and has an annual income of £10,000 or more. As yet, the MTD date for Corporation Tax remains undefined.

At first glance, the whole process may feel a bit like a pain in the proverbial. You think you’ve got more important things to do than spend valuable time poring over accounts and trying to understand yet another software system. Think again. In this blog, we’ll show you how to take advantage of the transition to digital reporting, so you’ll be wondering what all the fuss is about.

Why Make Tax Digital?
The overall aim of Making Tax Digital is to create a leaner and more simplified tax reporting system that leaves less room for error. In the Government’s words, it’s “a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs”.1

For SA Tax Returns, this means quarterly reporting of your business and personal accounts using approved software. In addition to this, you’ll submit an ‘End of Period Statement’, which wraps up all the information from your submissions for that year plus your ‘Final Declaration’, which confirms that all the information supplied is correct.

Glass half empty or half full? The advantages for you and your business.
If you’re the pessimistic sort, you might think the transition to MTD all seems a bit much. More energy is swallowed up by admin rather than running your business and doing what you love. However, if you’re an optimist, you’ll be searching for those all-important advantages that will make the transition not only easier but more desirable.

Think about all the business-related information you regularly input into your accounting software. That’s income, perhaps from various sources; expenses, from the bare necessities to larger-scale investments in equipment or outsourced services; your business’s turnover and profit, and taxes payable.

Your tax return represents a mine of useful information. Using that data to the benefit of your future success is eminently sensible.
Expert accounting for a growing business.
With this level of categorised digital data, you can answer some pretty darn important questions about your business. When is your most profitable time of year? When do you see a lull in income? When’s your cash flow at its highest? How about the times when you’ve got least in the bank? These kinds of questions allow you to analyse your business performance throughout the year and make critical decisions to support improvements.

Let’s say you’re spending a lot (too much?) on marketing. During which quarter? Did the campaign work, or was it unnecessary expenditure? Could you market your business at another point in the year more successfully? Whatever your expenditure is on, you can analyse the performance of that money and weigh up whether it’s worth it.

A final word.
If you’re not excited by this information and the prospect of capitalising on it, perhaps you don’t want a more efficient or growing business. But understanding your numbers will allow you to predict what lies ahead, manage your money and track the success of your expenditure so far.

Your accountant should be able to support your business through the transition, advise you on the most appropriate software to use, and should even be able to help you analyse your figures. If they can’t (or won’t!), give us a call on 01482 408585. Or you can email us, schedule an appointment or visit us at 277 Anlaby Rd, Hull HU3 2SE.

For further information on Making Tax Digital, visit
Making Tax Digital – GOV.UK. https://www.gov.uk/government/publications/making-tax-digital ​​

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