There's nothing new in submitting your taxes online, with the majority of tax returns and VAT returns submitted this way. However, HMRC is launching 'Making Tax Digital' which will change the way tax is reported and paid. Here's the 5 ways you can be ready for the switchover.
Making Tax Digital addresses these key areas
- Together: Centralising all tax information in one place online, giving a full and transparent digital view of your taxes
- Individuals: Every individual and small business now has a digital tax account, making it easier to submit and pay tax
- Business: Moving business taxes online, to collect and process financial data in as close to real time as possible, and speed up the process of paying those taxes
- Simpler: Making it easier and simpler to submit tax data online, while centralising how financial data is stored and used
The only way this will work is when tax returns are submitted in digital format, which means switching to a cloud based accounting package is vital for those who haven't already done so. We've listed five ways you can get your business ready for digital taxation.
1. Switch to cloud accounting
When you switch to cloud accounting, you store all your transactions securely in the cloud, allowing instant access to real-time data. Invoices and receipts can be scanned and uploaded to your cloud accounts keeping all the information you and HMRC need together in one place.
This allows your accountant or bookkeeper to be able to load your digital tax data into the relevant tax return template and submit it directly to HMRC, all in real time.
2. Use apps to work more efficiently
One of the biggest advantage of cloud accounting is the availability of add-on apps and tools that automate the hard work and tedious jobs, such as:
Collecting recurring payments by Direct Debit, such as GoCardless, payments are collected and automatically marked as paid in your accounts
Automatic credit control - automatically send out reminder letter before invoices are due, and stronger ones when they're overdue. Our clients have reported significant reduction in late payments since using automated credit control
Receipt scanning and entry, with apps like Receipt Bank you simply photograph a receipt and it's automatically uploaded to you accounts and totalled at the end of the month
Remember, these apps only work with cloud accounting software, and don't work with older software like Sage that's installed and saves your data on just one computer.
3. Encourage your clients to pay online
Keeping your accounts up to date is crucial for Making Tax Digital, and one way to achieve this is to embrace cardless and online methods of payment
Moving to online Direct Debit such as the previously mentioned GoCardless is a fast an convenient, and can also be used for one off payments as well as recurring payments
Most cloud accounting software integrates you bank statement using a live feed, meaning your transactions from your bank statements are automatically uploaded to your accounts. You quickly and easily match the statement transactions to your invoices and purchases, saving you time entering payments
4. Get help switching to the cloud
Migrating your accounts from older desktop software to cloud software is easier with help from someone who has experience doing this, such as Stonehouse Bookkeeping Services. We work with all the common cloud accounting software daily as well as the commonly used apps and add-ons
We can help you setup your cloud accounting system, and tailor the software and apps to your specific needs
We can train you and your team in using the new software and help you refine your processes to be as fast an efficient as possible
We can either give you ongoing support and training for a small monthly retainer, or we can give you the option to outsource your bookkeeping altogether for the most hassle free approach
5. Submit your taxes online
Once you've made the switch to digital cloud accounting, submitting your tax return is the easy part - a couple of clicks and you're done. Now you just need to decide what to do with all the time you've saved