Taking the stress out of Making Tax Digital
Read time: 5 mins Added: 06/01/2023
HMRC introduced Making Tax Digital in April 2022, requiring all VAT-registered businesses regardless of turnover to report digital VAT records. While “the majority of customers want to get their tax right”, HMRC believes their figures show many are finding it difficult to do so.
We know that small business owners are already having to cope with soaring energy costs, supply chain issues, post-Brexit complications and rising inflation rates. The tax year end and following the new regulations could potentially add further stress.
Worried about the future?
According to research carried out by Mental Health UK in January 2021, more than eight out of ten (83%) small business owners carry out multiple job roles; two-thirds say they work long hours; and over 50% are concerned about the future of their business.
Mental Health UK found that 54% of small business owners experience stress; two-fifths say they’re exhausted; and more than a third are anxious and suffer disrupted sleep or insomnia several times a month.
Making Tax Digital requirements are a considerable step change and could increase those worries – particularly if you’re not tech savvy.
Some small business owners have been known to use their personal accounts to manage their business finances. This may seem convenient, but it’s best practice to operate a separate business bank account. In addition, the finances of Limited Companies must be kept separate from personal accounts, and a business account will be required to work with digital accountancy software.
Help to lighten the load
While there are undoubted challenges to ensure you meet these new tax rules, small business accounting software provides the organisational tools to keep your business HMRC compliant and help avoid costly mistakes.
Failing to comply with HMRC’s rules can certainly be costly, as one small business owner shared: “I didn't really know what I was doing. I submitted the declaration online, listing only expenses with zero income. I got a call from HMRC saying that I was under investigation for the next three years.”
Bank of Scotland business customers can register for Business Finance Assistant (BFA). It enables you to manage your accounts digitally with a technical support team available to help you get the most from the system. The automation tools save valuable time so you can focus on what matters most – growing your business.
Switching to custom-made accounting software reduces the pressure on business owners to understand the complexities of the new legislation. When it’s time to file your VAT return, Making Tax Digital will have already calculated what your business owes. You can then use the software to connect directly to HMRC, so you can easily check and monitor your tax records before sending them.
If you find learning a new system daunting, BFA provides videos, FAQs, and a technical support team who provide 1-2-1 assistance. Switching to digital can also be cost effective. BFA, for example, is accountancy software that is free to use, you just need to have a business current account to get started.
BFA benefits
Once registered, you can access the BFA platform on any device, either directly or through your existing Bank of Scotland Internet Banking homepage.
You’ll be able to see all your accounts, all in one place. A summary panel offers a high-level overview of your monthly incomings and outgoings and displays reminders for accounting activities. Tools like Business Finance Assistant provide a centralised view of all your accounts, and, if you consent to sharing via open banking, can include those from other bank providers too.
You can grant access to an unlimited number of users, including your accountant, at no extra charge. This collaborative approach can benefit your business – you can delegate actions to others while keeping an overall eye on the progress of any tasks.
Cash flow confidence
Managing cash flow is a major concern for most business owners with 80% worried about it, of which 15% were “extremely worried”, and many claimed they couldn’t get any help, according to Mental Health UK.
The software’s fully adjustable cash flow forecasting facility makes it easier to understand your business’ financial position. It highlights any predicted shortfalls in advance, enabling you to plan ahead and make informed decisions.
An easy-to-use flexible invoicing system is invaluable to small businesses. BFA lets you customise and issue quotes and invoices, with automated triggers to alert users when they are overdue and send a chaser when actioned.
Once the invoice is paid, the transaction is instantly reconciled, so you can carry on running your day-to-day business. It can also record and process expenses rather than relying on the usual paperwork – just simply upload a PDF or photo and it will be saved.
The next step
As a small business owner in these uncertain times, there are plenty of challenges to navigate – and submitting accurate information to HMRC in your year-end reporting is an essential one to get right.
In moving to effective accountancy software, you can reduce stress with a cost-effective way to manage your tax affairs and enhance your business’ efficiency.