Columnist

Act now to avoid a last-minute tax scramble 

Businesses across the North West have dealt with no shortage of change in recent years.

Inflation, higher employment costs and continued economic uncertainty have forced business owners to focus on day-to-day trading, often leaving little time for anything that doesn’t feel immediately urgent. 

Making Tax Digital requires sole traders and landlords to keep digital records and send regular updates to HMRC through compatible software, rather than relying on a single annual tax return.

The first phase began on April 6 for those with qualifying income from self-employment and property of more than £50,000. 

The changes are being introduced in phases and won't affect every business owner immediately, but those due to join the regime should start preparing now. 

Making Tax Digital for income tax is changing how sole traders and landlords across the region keep records and report to HMRC, yet large numbers are still unprepared. 

More than half a million people who should have registered had not done so by the deadline.

That level of inaction matters because the new system will affect day-to-day financial administration, rather than a single annual task. 

Affected taxpayers will need to keep digital records, use compatible software and submit information to HMRC several times during the year.

Those who already maintain accurate and up-to-date accounts may only need to adapt existing processes, while those who rely on paper records, disconnected spreadsheets or year-end bookkeeping will face a larger change. 

Preparation should begin with a review of current records and responsibilities. 

North West business owners need to know whether the rules apply to them, when their obligations begin and whether their existing software can support digital reporting.

They should also decide who will maintain the records, complete submissions and check the information before it reaches HMRC. 

Time will present one of the main challenges.

Research shows many owners expect to complete Making Tax Digital-related work during normal trading hours, while the first year could absorb several days of administration.

For small businesses, that time comes directly from sales, customer service, staff management and planning, so leaving the work until the first deadline will increase disruption. 

A phased approach gives businesses more control.

Owners can start by checking the quality of their records, reconciling bank transactions regularly and making sure they capture expenses consistently.

They can then test the software, identify gaps and give staff time to understand the process before live submissions begin. 

Better digital records can also improve financial management. 

When owners maintain accurate and up-to-date records, they gain more reliable management information on cash flow, margins and costs.

That gives them a stronger basis for decisions on pricing, recruitment, borrowing and investment, while helping them identify problems earlier and respond before they affect performance. 

The North West has always been home to ambitious businesses that adapt when conditions change. 

Making Tax Digital is another example. 

Those affected need to confirm when the rules apply to them. 

Seeking advice early gives owners time to understand their obligations, review their systems and make improvements in a planned way, rather than under the pressure of a deadline. 

James Bruce is a partner at national accountancy and business advisory firm Xeinadin 

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