Being digital and embracing technology isn’t new. 

We have become increasingly reliant on it in our personal lives and over the last eighteen months, most businesses have had to implement some form of digital solution to continue operating during lockdown.

However, your digital journey should not stop as lockdowns begin to lift and life returns to a sense of semi-normality, and for businesses who have not yet started their journey… the time is now.

A lot of businesses believe that digitising will be expensive, complex and time consuming.  However, in the vast majority of cases, this simply isn’t true. Initial measures can be put in place at a low cost, and need not be a particularly complicated path to tread.

What does becoming digital really mean?

Becoming digital does not need to be a daunting complex process. The following details the basics of what becoming digital actually means:

Compliant accounting software (for example, Xero) must be used. Gone are the days of manual cashbooks, noting down each transaction under several columns and handing these records to your accountant. Software is designed with the user in mind and is easy to follow, clearly showing the key aspects of processing invoices and bank reconciliations. There are various help guides online for all leading software platforms, or we can provide training at the outset on a range of recommended software products. Typical software costs range from between £20 to £50 + VAT per month.

Less paper. Most of the ‘paperwork’ can now be sourced digitally. From supplier invoices to bank statements, these documents can be transferred easily and efficiently into software. No more having to bag and box all your paperwork and drop off at one of our offices.

Bank feeds can be used. This is a digital link between your bank account and software, saving you valuable time as the bank transactions will automatically appear in your software, removing any manual data entry and posting errors. Software will even offer suggested matches to your bank transactions, for example, paying off a supplier invoice with the same amount paid from your bank.

Additional time saving solutions can be used, such as Hubdoc (free with Xero) and AutoEntry, which capture and publish financial documents to your software. This will enviably save you time processing your documents, removing manual input errors and allowing you more time to focus on other business needs.

Tax submissions directly linked to the HMRC Government gateway. Once all data has been processed within your software, returns are simple to submit digitally.

Why now?

Most notably, due to the MTD (Making Tax Digital) agenda.

As a result of HMRC’s ambition to transform tax reporting, some businesses no longer have the option to continue as they are. MTD is part of the Government’s ongoing plan to ensure all taxpayers use compliant software for accounting and reporting. 

Some businesses will have already gone through the first phase of MTD, as MTD for VAT became mandatory for all VAT registered businesses above the VAT threshold from 1 April 2019. Digital link compliance (removing the need for the manual transfer of data between systems) came into effect from 1 of April 2021. The next two phases of MTD will mandate the majority of businesses to a digital way of working and this will only increase with the further planned phases of MTD. Digital is now, where the world is going, and is critical to progress.

Next key digital dates

MTD implementation for all remaining VAT registered businesses, mainly those below the current VAT threshold of £85,000 – 1 April 2022 (excluding any businesses who have successfully been granted an exemption). Find out how to apply for an exemption here.

MTD implementation for Income Tax Self-Assessment (ITSA) for mandated businesses – 6 April 2024. Further details are below.

These dates may seem far away, however we recommend all affected businesses start their MTD planning as soon as possible to give you enough time to implement, train and become comfortable with the new digital systems.  

Businesses mandated by MTD for Income Tax Self-Assessment (ITSA)

The majority of businesses and landlords with business or property income above £10,000 will be required to sign up for MTD for ITSA.   

In other words, MTD for ITSA will affect those who would normally declare more than £10,000 in the self-employment or property boxes of the Self-Assessment tax return.

Early adoption to digital practises will mean any ‘teething’ issues are ironed out well before the next key phases of MTD. It will also allow time for any software training to occur and changes to processes to be implemented as you learn the software.

Simply becoming digital has a huge number of benefits, including:

• Data is transferred more easily – all documents will be held electronically and do not need to be sent to one of our offices. Furthermore, interactions with your normal Johnston Carmichael contact will become more transparent and streamlined.
• Increased business productivity and profitability – once your digital approach is in full swing, the administrative burden is removed allowing you to focus on what really matters; strategic decision making and growing your business. 
• Ease of reporting to HMRC – reduced stress and direct submissions to HMRC through compliant software, with instant confirmation that the submission has been successful.
• Increased and immediate visibility – from the software, you will be able to see at a glance how your business is performing. Many software platforms work on mobile devices so you can view your records wherever you are. This can be real-time information with the right setup.
• Those businesses that fall under MTD for ITSA will have, during 2024, a Self-Assessment return to complete, as normal for the 2023 to 2024 tax year, due by 31 January 2025. In addition, they will also be required to submit ITSA quarterly reports from April 2024, for the 2024 to 2025 tax year. Adopting a digital approach now will reduce the burden during this overlapping period.

How to start your digital journey

Becoming digital may seem like an expensive and time-consuming task, however, small changes go a long way. Think of your current processes - which parts are already digital? Were they difficult to adopt? What did you learn from implementing these? How much more efficient is the process now it is digital? 

It’s key that you do your research and embrace a compliant accounting software solution which is appropriate to your business. The first step to your digital journey has begun!

Get in touch

We’ve been helping businesses of all sizes prepare for some time now and have a dedicated team ready and on hand to assist at any level required, whether that be with your MTD sign up, digital journey advice or software training. If you’re unsure of where to start, please do not hesitate to get in touch with myself, a member of our Business Advisory team, or your usual Johnston Carmichael adviser to arrange an initial chat.

It’s important to note that we expect demand will be high and as such cannot guarantee we will be able to support you, should you leave your digital transition to the last minute.