How Do You Prepare for MTD Bookkeeping?

In amongst the disruption of the pandemic last year, the government declared that they will be launching ‘Making Tax Digital’, for self employed people with income above £10,000 within two years.

This means that if you file Self Assessment Returns for your Trade or rental business and your income from trade or rents equals or is above £10,000 in a tax year, you will have to file quarterly tax returns, as of the year beginning April 2023, instead of annual returns as you may do now.

Unlike businesses with a turnover of over £85,000, who are probably familiar with MTD as they are currently filing quarterly VAT returns, most small business owners usually have a simple Excel spreadsheet, or a manual book in which they put all their income and expenditure during the year, and sit down at the year end, total it all up, and file their returns from there, or just give them to accountants like me, and we do it for them.

This will have to change, so what do you do?

In recent years there has been a lot of marketing by cloud based bookkeeping software providers, who claim that they can ‘do it all for you’, and whilst they certainly do make life a lot easier for competent and qualified bookkeepers and accountants from all backgrounds, this oversimplification of the bookkeepers role has also led to errors in many tax and VAT returns.

In all fairness, once you sign up with the software companies themselves, they will support you in setting up the system and will hold courses in how to run the software to help your business, but in order to be able to follow what they are telling you, you should have a basic understanding in bookkeeping and how it works. Especially when it will have to be up to date quarterly, not annually.

There are also many courses held by well known schools, such as BPP https://www.bpp.com/ and Kaplan https://kaplan.co.uk/about/locations/reading?utm_campaign=&utm_source=google&utm_medium=local or even my own favourite First Intuition https://www.firstintuition.co.uk/

However, if you are running a small shop or plastering business and just want to record your income and expenditure, you don’t want to spend money and time training to be a mini accountant. Likewise, not everyone wants to employ an accountant or external bookkeeper to do what they consider very simple accounts.

The Evening Class

There is another way, and this was how I started many moons ago, the traditional evening class will show you how double entry works and the basics of recording income and expenditure, usually running for 12 weeks or so and as it will be government funded education, the fees are usually cheaper than in the private sector.

These days when you google ‘Bookkeeping courses’, you will find you are being directed to the Software providers, the Accounting courses and the more technical ‘Technician’ courses, but if you look locally to see what your own schools or Colleges are providing, you might be pleasantly surprised. When you know the basics of how to account for your income and expenditure, taking on software to help you ‘do it all’ will become a lot easier!

I have often also observed friends and colleagues, who have started with a basic course and who have then gone on to do further courses and secure more fulfilling jobs as a result. The common misunderstanding is that bookkeeping is all about maths, and although you do need to be able to add up, it is actually more about balance. In fact people are often surprised about how little technical maths is required to become a good bookkeeper.

Further guidance from the HMRC about MTD for Income tax can be found here:-

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

You Can Always Call a Professional

Don’t worry, if you still aren’t sure about how to get your accounts in order, and would rather do a course on something else such as life painting or music, there are plenty of us qualified accountants and Bookkeepers out there who can give you a hand. I enjoyed the art courses I did, but have been banned from the music rooms….!