Don't wait for 'Making Tax Digital' to become more productive
A brand new tax year (and hopefully warmer weather) is almost upon us, but what does that actually mean for you and your small business?
Here's the top four expenses related updates that we think small businesses need to watch out for, including Making Tax Digital.
1) VAT registration is staying the same, while at first glance this might sounds okay, it's actually a decrease in real terms, since inflation continues to rise at over 2%. The VAT registration threshold will also stay at £85,000 for a further 2 years.
2) The 0% tax allowance for dividends is plummeting from £5,000 to £2,000 a year. So if you run a limited company, your tax bill could easily go up.
3) Productivity continues to be a thorn in the economy's side, especially with current inflation levels and wages pressure. We see this as an increasing focus for businesses, as it's a conversation we are having with new customers on an ever growing basis.
4) Finally it's time to get ready for Making Tax Digital (MTD). Yes this is the government’s plan for a fully digital tax system, and at the time of writing it is on schedule. Some selected accounting platforms, accountants and businesses are 'lucky' enough to take part in what is essential a live trial from April 2018.
So if the trial goes well and the giant Brexit elephant in the room doesn't trample over everything come 29th March 2019, Making Tax Digital will role out just a few days later for VAT-registered businesses with taxable sales above the VAT threshold. Like Easter (How is it Easter already?) it will be here before we know it, only with a lot less chocolate!
"Once fully implemented, business owners will no longer be able to manually pay tax via pen, paper and post – a process that causes over £9bn worth of tax to be “lost” every year due to human error." Shane Donnelly, startups.co.uk
When MTD does become law in April 2019, most small businesses will be required to submit data about their revenue, expenses and profit online every quarter to HMRC, but it won't fully roll out until 2020. Confused yet?
That sounds like a lot of extra work, but is it? It doesn't have to be, especially with the rise of cloud accounting tools and more accountants taking on the role of Virtual Finance Director. Small businesses can easily act now to make sure they are ready for the changes.
So while it's an important change and will be enshrined in law, it's also a great opportunity to ditch the old time consuming and inefficient processes that often hold small businesses back and stop them from being more productive. Our research into the expenses economy also highlights the impact that poor expense management is having on employees and businesses across the UK.
The benefits of being ready for Making Tax Digital goes far beyond simply being compliant, it's an opportunity to invest in new productivity tools.
For many, it's likely that your accountant is already pestering you to ditch the mountains of paper, shoe boxes of receipts and even the trusty spreadsheet, they might even be using MTD as an excuse. If not, you should probably ask yourself and them why not.
For those who are being pestered, it's not only because they want you to be compliant, but also because they dislike admin as much as you do. Truth be told, most accountants would prefer to focus on helping to grow your business, than going through your spreadsheets and mountains of old receipts.
"With MTD being phased in for businesses earning above the £85,000 VAT threshold as soon as April 2019, accountants who are not already offering their clients support with cloud accounting software, or helping them get up to speed with online bookkeeping, need to start doing so ASAP." Sharon Mordecai, Accounting Web
So yes change is coming, but if it all works as planned, there's no reason to panic as long you tackle it head on, and don't put your head in the sand. Laying the ground work now and being prepared is the best course of action for your business.
Here at Expend, we have developed our solution to automate and fully digitise your expenses management and company spending using our smarter Mastercard, mobile app and dashboard. This not only helps businesses and accountants to tackle the age old expenses problem, but also gives a real-time view of what's being spent and helps them make better business decisions faster.
Plus with our first-class Xero integration and support for other leading accounting software, it works nicely with your current tools.
So don't just get ready for Making Tax Digital, use it as an opportunity to eliminate one of most tedious and time consuming tasks that your business and employees face. With the added bonus of saving you time and money in the process.