How much will Making Tax Digital cost me?
You may have heard about Making Tax Digital (MTD for short) from us, from a colleague, on the news, or from HMRC (unlikely). But you may be wondering what it means to you, and more importantly, how much will Making Tax Digital cost?
I understand your concerns, any new regulation that involves a change of processes is bound to cost you more, right? Well, not necessarily. In this post I’ll take you through your options. To find out more about what MTD is all about, click here for our previous article.
if you’re a client of Kinder Pocock’s, Making Tax Digital won’t cost you any more. We are already finely tuned and ready for Making Tax Digital, and already filing all of your VAT returns online, directly from Xero.
Let’s assume you’re not a client of ours (get in touch if you’d like to be!) So what are the costs you’ll be looking at:
1. Online accounting software costs
The main feature of Making Tax Digital is that you will have to file your VAT return directly from your accounting software. No more entering your totals into HMRC’s online portal. This is a big problem for businesses with handwritten records, spreadsheets or desktop software.
We are big fans of Xero “beautiful” accounting software, but others are available. There are free accounting softwares out there too, but you’d need to consider whether they have the features and functionality that you need, how regularly they’re updated, and how well they’re supported. Here’s a list of HMRC’s approved MTD software which is a good starting point for you.
Xero has a range of subscriptions, starting at £10 plus VAT for their Starter subscription. This allows you to send up to 10 invoices per month. Xero Standard is £22 plus VAT and has unlimited transactions and users. Xero Premium is £27 plus VAT per month, the same as Standard, but has multi-currency features, fab if you trade outside of the UK.
2. Receipt Capture Software
You may also wish to take advantage of receipt capture software, which is a huge timesaver. We are big fans of Receipt Bank which lets you snap photos of receipts and invoices, to be pushed across to Xero. Subscription costs start at £20 per month plus VAT, depending on how many receipts you snap. More info here on Receipt Bank’s pricing, but do come to us, as we can offer discounts.
3. Moving from an old Record Keeping System to an Online Record-Keeping System
This could be a biggy, depending on what your current process is, and where you are in your financial year. It’s always easiest to start a new system at the beginning of your financial year, so that you have a complete year in one place, and you know you’re starting with the right balances for your bank account, customers, suppliers etc.
However, Making Tax Digital is coming into force April 2019, so now’s the time to make a change, if you haven’t yet!
Moving from desktop software to online software:
If you’re moving from a desktop software like Sage or Quickbooks to Xero, we can convert this for you and the cost is covered by Xero #winning! This brings across up to 2 years’ data into Xero, and there’s the option to bring more years across at £60 per extra year.
If you’re a new client to us, we will also perform a HealthCheck of your Xero data, that has come across from Sage or Quickbooks. There’s a one off fee of £250 plus VAT for our HealthCheck, but if there’s nothing to adjust, this fee will be credited against our next invoice to you.
Moving from spreadsheets or handwritten books to online software
The only cost involved will be the time it takes to enter in any opening balances at the beginning of your financial year, or entering all transactions from the start of your year to date. A good bookkeeper will charge at least £25 per hour, and may charge VAT too. You could also consider doing this work yourself, but consider 2 things:
1 this isn’t cost free – think of the time it will take you, time that could or should be spent on other things like running your business, making your products, caring for your customers, making money!
2 you want to be sure that you have a fabulous start to your new online processes. This could mean paying the experts to get it right for you.
4. Regular Record-Keeping and Submissions to HMRC
You may want to maintain your records yourself, or employ the services of a bookkeeper. We can also manage your bookkeeping and VAT submissions for you.
If you’re thinking of the DIY approach, consider my thoughts above, it’s not cost free, and you may well benefit from getting the experts in.
A good bookkeeper is going to charge upwards of £25 per hour, and we can include bookkeeping and VAT returns with one of our monthly packages. Our SupportMe package starts at £105 plus VAT per month, and we also charge bookkeeping on a fixed fee, currently based on £1 per transaction.
5. What Other Costs could there be?
This will be down to you and what you need, but here are some ideas to think about:
New laptop – especially if you have handwritten records)
Smartphone – Xero and Receipt Bank both have apps, as do the major high street banks)
Internet access – usually a monthly fixed fee, but shop around
Mobile phone contract
Hopefully the above has given you some idea about how much Making Tax Digital will costs you. Jot your costs down for each of the different points above:
1. Online accounting software costs
2. Receipt capture software costs
3. Moving from your old system to your new online system
4. Regular record-keeping and submissions to HMRC
5. Other costs
You may have some extra costs if you’re not already using accounting software. However, if you’re moving from desktop software to online software you could be making quite a saving!
If you feel you’ve got extra costs, I recommend comparing the extra costs with the benefits you’ll be experiencing. These can include: easy but secure access to your data anytime anywhere, more free time, real-time access to your financials by your accountant, info at your fingertips to make better informed decisions. The list goes on!
Thank you for reading, and do get in touch to see how we can help, and to chat about the benefits of getting online.
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