MTD is an HMRC service that needs companies to have digital records and ask for VAT returns filing by utilising proper software. Making Tax Digital is an incredible help for businesses to move digital. It is obligatory for most organizations with an available turnover over the £85k VAT limit however discretionary for those beneath the threshold. This is a huge chance to move the accounting work of your business to cloud-based accounting tools.
You should know that from April 2022, every single VAT-registered company will have to follow the MTD for VAT returns. Moreover, HMRC also declared that from April 2023, self-assessment taxpayers will be responsible to strictly adhere to Making Tax Digital guidelines for Income Tax.
Why you should set up MTD on XERO?
There are multiple advantages of HMRC’s MTD on XERO software, some of them are:
- Expanded business efficiency: As per the Lloyds Bank UK Consumer Digital Index 2019, going digital could save one day of the seven days of business organization
- Less desk work
- Options to divert staff to other business work.
- Option to see tax information even on cell phones
- Decreased pressure and stress with regards to documenting tax returns
- More prominent precision and fewer blunders when submitting tax returns
How to set up MTD on XERO?
Here we have talked about the stages to set up MTD in the XERO accounting software.
#Stage 1: Sign Up for MTD with HMRC for VAT returns
You will have to apply with the HMRC, this is done on their page online and normally takes between 48-72 hours to get finished. You’ll get an email from the HMRC to tell you that everything has been set up effectively. Try not to file your VAT return until you have that affirmation.
When your annual income for any one-year time frame hits over £85,000, you need to enrol for VAT or the HMRC may automatically enlist you. Ensure you’ve got the complete details of the business you are enrolling for and the Government Gateway ID and Password.
#Stage 2: Integrate your software with HMRC for VAT
When you start configuring XERO with HMRC for your VAT returns, ensure you have the below-mentioned things in your hands:
- The affirmation email from HMRC saying that you have been moved over to the MTD.
- The Government Gateway ID and Password
- Verify whether your VAT number in your Xero Financial Settings is right.
Now, you’re prepared to use MTD in Xero. Just Log in to your XERO accounts and choose the VAT return and set it up. Also, don’t forget to connect it with HMRC and grant authority.
Stage 3: Checking MTD for VAT Returns in the software
Now that you’ve set up everything. Just go through your dashboard once, it will be your XERO homepage dashboard. Check all the VAT Returns and which ones are due. You will get notifications on your mobile phones and emails from XERO regarding your deadlines and other things.
As we have also said above, you can save money related to MTD because of the decreased measure of time needed to plan manual tax returns and less paperwork. Indeed, there are some extra costs that MTD may force on firms, including the expense of viable software, like- XERO (for record-keeping) but that is not a big amount.
Get in touch if you need help setting up!