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September 28, 2020

Making Tax Digital – Big Brother or Big Benefit?

Big Brother is watching as we make the biggest change to the way taxpayers engage with HMRC since the introduction of PAYE in 1944. The roll out of MTD (Making Tax Digital) sees the UK’s tax system effectively transferred online, requiring businesses to future proof and comply with the digital age in order to avoid incurring penalties.

Since April 2019, business with a taxable turnover above the VAT threshold (£85,000) are required to follow the Making Tax Digital rules by keeping digital records and moving to the brave new world of online software to submit VAT returns.

Beyond that, by April 2022, MTD will apply to all VAT registered businesses, regardless of turnover. Self-employed businesses and landlords with annual business or property income above £10,000 will all need to follow the rules for MTD for Income Tax from their next accounting period commencing on or after 6 April 2023.

At James Hair & Co, our view is that Making Tax Digital (MTD) has various advantages and makes sense in terms of centralisation of information. We understand that there will be costs to comply with the requirements and there is a sense of ‘big data’ being looked at by a ‘big brother’ state. However, these changes are coming and so pragmatic thinking leads us to embrace change and take advantage of the potential positive outcomes.

Investment in an online accounting software package has many benefits;

Remote working

Crucial in the current climate – online accounting gives the advantage of working anywhere as long as long as you have an internet connection.

Value for money

There are different packages out there with a wealth of features available – many offer simple, low cost options with a relatively low monthly subscription charge. Your online subscription also means your software will always be up to date with no need for constant upgrades.

Time saving

One of the key benefits to going digital is that it saves time, which in turn saves money, as your time is both valuable and often chargeable. Online accounting links directly to your business bank accounts, drawing the data and saving hours of time in the initial data-entry. Also, as an intuitive software, it remembers how you analyse certain costs and therefore, when they come through your bank regularly, it knows how to efficiently allocate them.

Secure data

With records being stored online in the cloud, you can relax in the knowledge that your data is safe, backed-up and can’t be lost.

Real-time reporting

Up to date data in real-time gives an accurate snapshot of financial health with deeper insight on profits, losses, cashflow, expenses, tax summaries and more – allowing for more detailed business planning and pre year-end decision making.

Better collaboration

Multiple user capability allows owners, bookkeepers and accountants to access the data from different locations providing seamless team work and more efficient working.

How to choose the right online accounting software?

There are many options in the marketplace with the most common names being Quickbooks, Xero, Sage, FreeAgent and KashFlow.

Selecting the right one will mean considering the size of your business, the features you require and ease of use of the online interface.

James Hair & Co have been working with various online accounting packages for many years and have extensive knowledge of the main players in the market. Our staff are trained and certified on each package to ensure a thorough understanding and provide top level service to our clients.

The future is here and now. If you haven’t jumped on the online accounting bandwagon, we can help future proof your business ready for MTD. Please contact RH@jameshair.co.uk for more information.