Making tax digital: Top tips for trades
December 20, 2019
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December 20, 2019
If you are self-employed and are running a business, then you must keep adequate records of your business income and expenses in order to provide an accurate tax return at the end of each year. Although you are likely familiar with the process of keeping paper records, in 2020, things are changing: Tax is going digital. This change means that businesses will need to keep up to date with the new rules and regulations for their tax records to meet the latest legislation. Tradespeople will now find themselves having to use online software to complete their digital tax returns. We understand that this change may initially appear daunting and have put together this helpful guide on how making tax digital will affect your business.
The law is updating to bring tax returns up to date. We are living in a world which is increasingly more reliant on the latest technologies by the day; a paper system doesn’t appear to fit so smoothly into the rest of our lives anymore. HMRC have 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”.
By making tax digital, the tax administration will become more effective, more efficient and simpler for taxpayers to get things right. Not to mention the positive environmental effects of cutting back on the amount of printed paper we are using.
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One key element of the making tax digital initiative is that you will be legally obliged to keep these records digitally. To do this, you will need to keep your digital tax records in a format which is compatible with HMRC’s system for uploading and sending off your records.
You must keep your digital records using a compatible software package which will allow you to keep all of your records and submit your VAT returns. You may also use other bridging software to connect your spreadsheets to HMRC.
To assist you with making the right decisions, HMRC has provided a list of digital tax software which is compatible with the new legislation. This list is growing day by day and offers a range of different products provided by a variety of organisations. Although they are all different in terms of appearance and functionality, the result is the same – they will assist you with keeping your digital records in a way which meets the latest legislation.
Keep things as simple as possible.
From day one, no matter how small your business is, you must maintain an up to date list of expenditures and processes throughout the year. This will ensure that you can provide accurate records. It’s essential to be organised to stay on top of the process, even if you despise admin. Leaving it all until the last minute will undoubtedly make it worse.
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.
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