Making Tax Digital: Your six step checklist
If you’re a business owner, chances are you know about Making Tax Digital (also known as MTD) and how it impacts how businesses do their taxes.
As part of MTD, all VAT-registered businesses are required to keep digital records and use software to submit their VAT returns.
Whether you’re new to VAT returns or looking for a refresher on MTD, here’s a quick checklist to help you get your VAT returns ready to go.
1. Find out if your business is impacted by MTD
Not sure whether your business needs to be VAT-registered? If your total VAT taxable turnover for the last 12 months is above £85,000 (the VAT threshold), or you expect your turnover to go over £85,000 in the next 30 days, you must be VAT registered. All VAT registered businesses must submit their returns digitally via software. More information on VAT registration is available here.
2. Get MTD-recognised accounting
For MTD, you need the right tools for keeping your financial records in digital format so it’s important to make sure your accounting software is compatible with MTD for VAT. To check your current software is compatible, speak to your accounting software provider, or check the list of compatible software here.
If you’re considering accounting software, you can access special Cashplus Bank Marketplace offers with Sage Accounting and KashFlow Accountancy software via Add-ons in Online Banking or the Cashplus Bank App.
If you’d prefer to continue using spreadsheets to keep records and have decided against moving fully over to an accounting software package, you can use a ‘bridging software’ instead. This is a tool that connects with HMRC’s systems for Making Tax Digital, whilst not requiring you to abandon your spreadsheet records. It extracts transactional data from your spreadsheet records and files it digitally to HMRC in a compatible format.
If you have a Cashplus Business Account or Business Credit Card, you can now file your VAT returns through Online Banking with our MTD-approved VAT Returns tool. Learn more here.
You can also find a list of bridging software here, just use the filter on the left-hand side to narrow your results down.
3. Know your deadlines for MTD
It’s important to know when your next VAT return is due. If you’re not sure, check the HMRC website or contact your accountant if they do your MTD returns on your behalf.
4. Review your processes for Making Tax Digital
Take a moment to think about how you currently manage your VAT returns as some of these processes will need to be digitalised.
If you’re buying new software, make sure you and other staff members know how to use it. Any issues will need to be ironed out before your first return is due.
It can also help to make payments digitally where possible, via bank transfer, or using your card, as opposed to cash. By doing this, it’ll be much easier to audit any statements or provide evidence for any purchases.
The switch from manual processes to a more streamlined and digital way of doing your VAT returns will help you keep a better audit trail and make your tax processes easier and more effective.
5. Speak to your accountant (if you have one)
Is your accountant managing your VAT Returns? No worries, they can continue to do this even after you (or they) sign up your business for MTD for VAT. You will still need to use software for your VAT accounting and keep your VAT accounting records digitally. Talk to your accountant to see how they can help you.
6. Get ready for future MTD changes
Check what’s coming down the line for MTD via the HMRC website – it might affect your business. To stay prepared, it’s worth keeping these proposed updates in mind when designing changes to your accounting processes and the software you use.
Cashplus Bank does not provide tax, legal or accounting advice. The information contained in this article is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Furthermore, Cashplus Bank makes no representations or warranties of any kind, explicit or implied, with respect to the contents of this article.
This content was created on 20th October 2022
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