HMRC has recently published more information on the Making Tax Digital scheme, along with consultation documents for small businesses.
The scheme was announced in the March 2015 Budget, and is planned to come into force on April 2019.
Until the release of the consultation documents, little information was given about how Making Tax Digital would work in practice. The documents disclose more information, and ask small businesses to put in their two-penneth.
Who Making Tax Digital will affect
The consultation documents have stated that Making Tax Digital will only apply to those with an annual income or turnover over £10,000. If you’re a business owner of two companies, each with a £7,000 turnover, Making Tax Digital will apply to you as your annual income will be £14,000.
HMRC stated that “The small minority who genuinely cannot use digital tools will not have to do so,” for instance for religious reasons, or for those where “online filing is not reasonably practicable for reasons of disability, age, remoteness of location, or any other reason”.
The Making Tax Digital proposals
The consultations ask small businesses to offer information on how they would like Making Tax Digital to work, and which areas will need more attention than others. You can see all the questions in the Making Tax Digital consultation documents.
HMRC has confirmed that they won’t be creating their own accounting software for the change. Instead, they will pre-approve a list of accounting software recommended for use by small businesses.
Currently, the Making Tax Digital proposals only apply to sole traders and partnerships, as the documents do not address limited companies.
How will Making Tax Digital work?
HMRC have made a point of stating that the scheme will not result in four tax returns a year, as some had believed.
Instead businesses will receive updates to remind them to fill in information about their return on a quarterly basis, with the goal being to give businesses a better idea of how much money they need to set aside for tax.
There will also no longer be an annual Self Assessment Tax Return, as instead businesses will regularly update information electronically.
The summary that you send to HMRC will include total income and expenditure, with a breakdown of the expenditure into categories such as advertising and travel.
How Pandle can help you Making Tax Digital
Earlier this year, a report by ICAEW found that currently 75% of businesses do not maintain their accounts electronically, or use accounting software.
41% of manufacturing and construction businesses still rely on pen and paper records.
By submitting returns through the Making Tax Digital scheme, businesses will be required to become electronically savvy with their taxes pretty quickly. That’s where Pandle comes in.
Our aim is to make online accounting simple for the small business – so you can use with a system that’s catered specifically for you, rather than one that has complex capabilities that you don’t need.
Other cloud accounting software with similar features is often more complicated, and more expensive. Pandle’s focused right on you, the small business owner. It’s affordable, simple and easy to set up.
If you’re unfamiliar with using online accounting software, see below for a quick and easy introduction into some of the main features you’ll need to use.
Creating an invoice
If you want to be able to send invoices to your customers, you’ll need a place to create them.
To create a new invoice in Pandle, simply navigate to ‘Enter Transactions’ and under the ‘Customers’ tab, select + New > Invoice.
Here you can input all the relevant information, including the invoice reference, description and price.
If you wish to create another invoice, you can simply select ‘Save and Next’. You also have the options to ‘Save and View’, ‘Save and Finish’ or ‘Save and Recur’, where you can create a recurring transaction.
Adding a new customer
As your company grows, you’ll need to be able to easily add and remove customers.
Adding a new customer follows the same basic navigation to + New. Instead of selecting ‘Invoice’ from the drop down menu, you instead need to select ‘Customer’.
Here you’re asked to input both basic details and contact details for the customer. Once input, you can save the customer.
They will then appear in the ‘Customers’ table.
Once you’ve input all your data, it’s likely that you’ll want to see you balance sheet and profit and losses.
You can find these under the ‘Reports’ tab at the top of the page. There is also and easy access to all your reports in the ‘All Reports’ section of the drop down menu.
Pandle’s Managing Director, Lee Murphy, commented, “Once it becomes compulsory for businesses to update their date information quarterly, we’ll have an integration included for you to send all the relevant information straight to HMRC.”
Are you planning how you’re going to go digital? Have a chat with one of our advisors by emailing firstname.lastname@example.org. Or you can catch us on Twitter and Facebook for Pandle updates, info and industry news!
Article has been edited in line with the Making Tax Digital deadline extension published on 5th September.