Making Tax Digital: Top tips for trades

What is Making Tax Digital?

The ‘Making Tax Digital’ initiative is something the government has implemented to simplify and streamline the tax-paying process.

It’s no secret that we’re living in a digital world, and the days of paper returns are officially over.

So, what does this all mean?

In short, if you own a business, micro-businesses, are self-employed, a landlord, or an individual taxpayer, you need to register for Making Tax Digital and join the digital revolution.

For tradespeople, this will include using an online software program to complete your digital tax returns. But never fear. We’re here to make this transition as painless as possible.

Why is the tax law changing?

HMRC has said that making tax digital is an essential part of the government’s plans to “make it easier for individuals and businesses to get their tax right.”

Under the initiative, taxpayers will submit returns four times a year using integrated accounting software. This can include an accounting app, an accountant with an app, or a pre-approved spreadsheet that meets HMRC’s technical requirements.

Although it sounds like a lot more work than doing it all the day before it’s due, these changes should mean fewer mistakes. It’s also far more environmentally friendly.

Making Tax Digital deadlines

For now, you only legally need to join if your taxable turnover is more than £85,000 per annum.

However, from 1st April 2022, any VAT business needs to sign up regardless of yearly earnings.

For sole traders earning above £10k per annum, you’ll need to join by 6th April 2024.

How will Making Tax Digital affect your business?

Just like it’s a legal requirement to submit your tax return each year, it’ll be a legal requirement to keep the same records digitally and in a format HMRC is happy with.

Before you register for making tax digital, find software that’s compatible with MTD for VAT and then sign-up here.

How to keep tax records digitally

You must keep your digital records up-to-date using an HMRC-compatible software package (such as Powered Now for trade businesses). It needs to hold all your records in one place and allow you to submit your VAT returns digitally. You can also use other ‘bridging software’ to connect your spreadsheets to HMRC.

Will HMRC provide free software for making tax digital?

We understand how overwhelming it is when it comes to choosing the right software for your business. HMRC has provided a list of digital tax software companies that offer compatible apps in line with their new legislation.

We personally recommend Powered Now for trade businesses because it allows you to invoice, quote, schedule your jobs and team, and keep certificates and paperwork all in one place.

Checkatrade members get the invoicing app for free

All Checkatrade members get free access to Powered Now’s invoicing app, 1 Trade App*.

The 1 Trade App allows you to manage your business on the go, create nice looking invoices and quotes, and lets customers pay you quickly.

Or, you can get 30% off if you upgrade to the full Powered Now app in your first year with Powered Now**.

The upgrade to Powered Now adds team scheduling and tracking, the ability to accept card payments, and to submit VAT returns directly to HMRC.

There are many other benefits to becoming a Checktrade member, including savings on insurance, vans and discounts at wholesalers.

Keep things as simple as possible

We get it. No one likes admin. We all have much better things to do. However, no matter how small your business is, maintaining an up-to-date list of expenditures and processes throughout the year will save you a headache further down the line.

Not only will you be able to provide accurate records, but it’ll stop the last-minute rush that makes it easier to make mistakes and risk sanctions or fines for badly submitted accounts.

4 tips for staying on top of your digital tax records

• Create a filing system on your computer to store invoices, payslips, and expense receipts (this can even be a folder on your email account)
• Where possible, update your records every month. Clear a day in your diary and add it to your calendar so you don’t forget. (Protect your time!)
• Implement a system that allows you to keep your earnings, receipts, and other paperwork safe and organised. In the case of MTD, utilise a new digital tax software like Powered Now.
• Learn to use your online software effectively in advance.

If you are looking for any more assistance on how to ensure that your business runs smoothly behind the scenes, take a look at our exclusive member’s area for further help and information.

*Offer is valid until midnight December 31st 2022. Offer is valid for non-current subscribers to Powered Now.

**The offer is valid for new subscribers to Powered Now only. The offer will be applied to the first consecutive subscription up to 12 months. All new subscribers will receive an initial 2 weeks free of charge trial period. The offer cannot be used in conjunction with any other offer.