What is Making Tax Digital (MTD) and Digital Record Keeping?
What is Making Tax Digital (MTD) and Digital Record Keeping?
Making Tax Digital or MTD is HMRC’s initiative to make preparing and paying tax easier. The first phase started 1stApril 2019 and is applicable for VAT registered businesses with over £85,000 VAT-able turnover. It requires by law for a business applicable or businesses doing it voluntarily, to submit additional quarterly statements similar to a profit and loss account via HMRC approved software.
Digital Record Keeping means that businesses must now keep their records digitally. Handwritten and spreadsheets are no longer acceptable records as HMRC’s new MTD system requires quarterly reports for which each figure can be traced digitally. The simplest solution is to use a cloud software for bookkeeping that is compatible with HMRC’s MTD system to be compliant, as this software will be able to generate reports on every transaction entered.
The long term goal for HMRC is to have all taxes paid real time and for individuals and businesses to have an overview of all taxes due in one tax account log in. HMRC plan to get rid of the annual tax return in the future so that taxes are paid more frequently. VAT has been the first tax that HMRC have digitised and Corporation Tax is thought to be next. In the future self-assessment personal tax will also become digitised.
For more information please see:
https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Why Xero?
Firstly Xero is HMRC compatible for Making Tax Digital purposes.
Secondly in my opinion as cloud accounting software goes, it is the best. I find it is both user friendly for both client and accountant/bookkeeper and it has so many functions to speed up data entry. It is the cloud accounting software that has been around the longest and the other accounting software companies have been playing catch up to adapt to cloud technology making them a bit clunky to use.
As a Xero practise I can also offer competitive subscription prices to you depending on your businesses needs. Please see our downloadable pdf price list of services for further information.
For more details on the benefits of Xero please see: