If you haven’t heard about Making Tax Digital (or MTD) yet, then it’s time to take notice and get stuck in! More even if you’re VAT registered and over the VAT threshold (currently £85,000), as you will need to comply with it from April 2019 onwards.
An overview of Making Tax Digital for salons & spas
In a nutshell, HM Revenue and Customs (HMRC) are dragging themselves into the 21st century and are pulling us all there too, whether we want it or not. They are disabling their Gateway for VAT submissions. This means that you will no longer be able to log in to the Government Gateway and file your VAT from the paper or spreadsheet information you have.
You will now have to keep your VAT files electronically, meaning a lot more work for you if you’re not prepared.
Spreadsheets will be allowable if you have bridging software that allows you to transmit from the spreadsheets to HMRC electronically.
Bear in mind…
- You won’t be able to use spreadsheets after 2020, so start looking into alternatives now.
- You won’t be able to keep working with your paper system and retype the information into a software package.
- If you currently have an exemption from filing VAT online, then this will be carried over. Reasons for this could be religious, age, disability or location. However, if you currently file online with HMRC, you will have difficulty persuading them that this exemption should now apply.
Your first MTD submission start date is the first VAT accounting period on, or after 1st April 2019. So if your VAT period is 1st Apr to 30th June, this will be due 7th August 2019.
Getting ready in time for April 2019
- If you have an accountant or bookkeeper who currently does your VAT for you, make sure they are prepared. We – as in Murray Associates Accountants – wrote to our clients months ago to let them know we were on top of this, but don’t take it for granted your accountant will do the same. It’s your responsibility to make sure they are keeping on top of it.
- If you do your own bookkeeping and VAT returns and everything is on paper or spreadsheets, look at moving to an online software solution like Quickbooks Online, Kashflow or Xero. It will make your life easier once you know what you’re doing. The software can download your bank statement information from the bank and ‘learn’ how to categorise them. That alone could save you hours of your time.
- Check your software is compatible with Making Tax Digital and test it to ensure there are no problems. Don’t wait until a couple of days before your VAT return is due.
Making Tax Digital for VAT is only the first step to all of this. Next, the government will tackle income tax. Meaning that if you’re a sole trader, you will have to account for your profit quarterly, and if you’re the director of a limited company, you will have to submit your earnings each quarter (including dividends).
If you’ve thought of getting your bookkeeping done for you but never taken the plunge, now might be a good time to revisit. MTD means a lot more work for you, particularly if you are not prepared.
Watch the ‘Making Tax Digital’ webinar on-demand!
Got questions about the new legislation? Watch this hourlong session with hosted by Gloria herself. Learn what the ‘Making Tax Digital’ initiative is, how it affects your salon, what you need to do to be compliant, and the risks of not complying.
Looking for personalised advice? You can always join Gloria’s Facebook group Knowing Your Numbers. It’s a safe place to ask questions and find out more about numbers in a supportive environment. Got general feedback? Let us know either in the comments below or tweet us @ThePhorestWord! (Pssst! We’re on Instagram too!)
Thanks for reading! #LetsGrow