As HM Revenue and Customs (HMRC) urges businesses with an annual turnover above £85,000 to sign up to Making Tax Digital (MTD) before the August 7th VAT filing date, research has found the most common way of managing finances for UK SME owners (32 per cent) is to manually write down expenses in a notepad and keep receipts in a bag.
Small business owners admit this causes mistakes, with the most common including; submitting the wrong amount of taxable income (43 per cent), losing paperwork (22 per cent) and incorrect expenses calculations (17 per cent).
Every VAT-registered business above the £85k threshold is now required to file their tax digitally with compatible software, and many of the 1.2 million business affected by the MTD laws will be required to submit their first quarterly VAT return to HMRC using software by 7 August.
According to UK small businesses, digitisation has saved them time (27 per cent) and money (22 per cent), with 1 in 5 (22 per cent) saying that digitisation encouraged entrepreneurism and would help trigger future start-ups.
HMRC’s reminder comes as it reveals:
- Currently around 10,000 businesses are registering for MTD every day
- More than 600,000 businesses have signed up in total with some 400,000 submissions already successfully made using software
- Businesses in the agriculture sector (such as farmers) have been one of the fastest groups to sign up to MTD with 50% already registered
- The financial sector has been one of the slowest to sign up with nearly 75% yet to sign up
For further information on Making Tax Digital for VAT and how to comply, visit Xero’s Making Tax Digital hub.
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