Making tax digital for hair and beauty businesses
Making tax digital (MTD) is the way in which HMRC are streamlining the tax system and attempt to close the tax gap.
Some business owners will already be familiar with making tax digital as VAT registered businesses are already complying with the Making tax digital concept.
Under the MTD rules HMRC state that businesses will need to;
Keep digital records
use software that works with Making Tax Digital
submit updates every quarter, bringing the tax system closer to real-time
MTD For Sole traders and Landlords
Next year HMRC will require sole trade businesses and landlords to comply with MTD:
Business Income or Property Income over £50,000 from April 2026
Business Income or Property Income over £30,000 from April 2027
Some businesses are already keeping digital records of their data so the transition should be fairly simple.
The challenge in the first year for hair and beauty businesses owners will be in getting used to new software or using a bookkeeping software correctly to allow the submission of data to HMRC every 3 months under the new MTD rules.
A bookkeeping system and booking systems are two separate pieces of software but most hair and beauty businesses will need to utilise the two to ensure that they have correct figures included in the submissions to HMRC.
An example of a bookkeeping software is Quickbooks and Booking software Timely or Phorest to name two that we see often in the hair and beauty space. We have another article coming soon on the different booking software systems out there and how they work with your financial data.
MTD Compliant software will be needed to comply with the new rules. Software such as Quickbooks will allow hair and beauty businesses owners to stay on top of their finances and comply with the new MTD changes.
Barriers to Making Tax Digital
HMRC Research report 587 explores some of the barriers to making tax digital being lack of knowledge, information and skills. The report also identified that whilst many people in the research were keen to comply with the MTD rules and putting in a lot of effort in doing so, gaps in knowledge or skills or lacked key pieces of information to continue with the compliance journey with success. The key factors driving the gaps in knowledge and skills were as follows:
Misunderstanding of the term ‘digital’ and ‘digital links’.
Struggling to adapt to compliant software.
Fear of the unknown and resistance to change
Feeling like they needed just need one more piece of information.
You can read the full report here
Other factors that are affecting the action towards MTD was also reported as the cost of MTD Compliant software and or training to set systems up for Making Tax Digital.
Another factor that is adding to the resistance is the extra cost of Making Tax Digital compliant software or training as most software charges form part of a monthly subscription that business owners may feel that they cannot afford or may not see the value in purchasing.
Making tax digital is on its way and hair and beauty business owners will need to take steps now to ensure that they are ready to go once the chages come into play next year.
To help hair and beauty businesses, and any virtual assitants or staff supporting with the numbers side of business here at The Beauty Accountant we are offering both training and affordable software subscriptions as part of our Making Tax Digital campaign. For more information on how you can learn more about Making Tax Digital on our Live Masterclass 02 February 2025, Access Making Tax Digital software and have one to one support in getting set up get in touch, we can help you from as little as a one off payment of £33.
You do not have to set this up on your own we are here to support you.
See Also our handy Making Tax Digital guide here