Use tax software to manage your HMRC tax returns.
Using an accountant can be expensive for many small businesses, especially for those that are self-employed. However, to accurately manage your tax returns without an accountant may be a struggle. This is where tax software comes in.
Running a business is stressful at the best of times. With all the day-to-day admin tasks, keeping on top of tax is crucial to ensuring you don’t overpay for tax and pay on time. Thankfully, there is software that is designed to ensure your taxes meet HMRC requirements.
But what is tax software? What are its benefits? How do you choose the right product for your business?
Today, we’ll look at everything related to tax software, bringing you a complete guide to get you started.
What Is Tax Software?
Tax software is computer software that is designed to help both individuals and businesses to prepare and file tax returns. The software can be used for all different types of taxes, such as corporation tax, income tax, VAT as well as others.
What Are The Benefits Of Using Tax Software?
So, you’ve heard about tax software for your business, but you’re unsure what the benefits are. Tax software is used by many businesses around the world and below are some of the reasons why.
| Later Deadlines | One of the biggest benefits of using online software is the extended deadline. Paper tax returns must be filed by 31 October, however, online forms have until 31 January the following year to submit your return. Also, provided you owe less than £3,000, if you submit your online tax return by 30 December, you can opt for any outstanding tax to be collected through PAYE. This means that rather than a lump sum, your tax will be collected in 12 equal instalments over the course of the tax year. |
| Can Be Used Anywhere | Being able to do your tax forms online allows you to save both time and money, all from the comfort of your own home. Some apps allow you to file your taxes via your smartphone, all on the go and completed in just minutes. You can even save your tax return at any time, letting you return later to complete it. |
| Makes Filing Tax Easier | Doing your taxes can be overwhelming, however, good tax software is user friendly and easy to use. Tax software removes the leg work, as it can transfer relevant information from previous returns. It will simply ask questions about your business, then calculate any tax deductions and credits due. |
| More Accurate | HMRC tax software will highlight any mistakes you’ve made. This can be crucial to avoid fines for incorrectly filled out returns. For those that find numbers stressful, the software takes the guesswork out of the tax return process. It’s similar to having someone guide you through the process, ensuring you receive all the possible credits and deductions you deserve. |
| Instant Refunds | Those using tax software to submit a tax return know straight away how much is owed due to the automatic calculation. An added bonus is that if HMRC owes you money, you’ll get a faster repayment. The fastest way to receive your tax refund is by filing your taxes online. Also, from HMRC you’ll receive an on-screen confirmation message and a reference number, ensuring your return has been received and won’t be lost in the post. |
| Gain Tax Knowledge | Any do-it-yourself activity will provide you with more knowledge and doing your taxes is no different. By using software, it gets you thinking about more ways to save money. For a business owner, any incentive to save money is useful. By showing you all the tax credits and deductions you’re eligible for could make you more aware of ways to impact your everyday life to receive efficient tax deductions and credits in the future. |
| Personalisation | Most tax software will react to the answers that you give, taking away any areas that aren’t relevant to your individual tax. By using paper returns, this part won’t be done automatically, meaning you will have to work out by yourself which sections don’t apply to you. The software will also have information from previous forms, such as your address and National Insurance number, saving you time as well as avoiding errors. |
Is Online Tax Software Safe?
All tax software that is officially recognised by HMRC should be protected by 256-bit secure connections. If it is backed by HMRC, you can be assured that it will be as safe as possible.
What Tax Software Is Compatible With HMRC?
When deciding which tax software to use, you’ll want to have the most assurance it has the security needed to protect your information. We recommend using software that is backed by HMRC.
Before signing up to Making Tax Digital, you’ll need one of the following types of software:
- A compatible software package where you can submit VAT returns and keep digital records.
- A bridging software that can connect non-compatible software to HMRC systems.
What Types Of Software Are Available?
- Record-Keeping Software – this will store and update your tax records online, working with HMRC systems to file a tax return.
- Bridging Software – this works with non-compatible software like accounting systems and spreadsheets to send information digitally to HMRC in the required format.
How Do I Choose The Right Tax Software?
Picking the right tax software can be a challenge, with so many options on the market, it is overwhelming. More products enter the market each year, with businesses becoming reliant on better services.
When it comes to considering which software to use, there are a few factors to think about.
Firstly, for those who are making standard deductions and usually have a straightforward return to file, we’d suggest that a cloud-based solution will be your best choice to get the job done efficiently and at the cheapest cost.
For those that have challenging tax returns to file may need something that is more sophisticated and packs more muscle. You should be looking for a cloud-based package that has all the premium features to deal with your tough tax returns.
Finally, you need to think about what budget you have. How much are you looking at spending on your tax software? Later on in the article, we have sourced a list of free software packages, however, you’ll likely find more features and functions on those that cost.
What Should I Do Once I Have The Right Software?
Once you’ve found the right software, the next step is to sign up for Making Tax Digital. For agents that are working with a client’s business, you’ll need to create an agent services account.
The software will give you access to submitting VAT Returns straight to HMRC without having to use HMRC’s website.
Here is a list of all the tax software that is recognised by HMRC. They have all been screened through HMRC’s recognition process, however, HMRC does not recommend any individual software provider. You must research and find which one suits you best.
There are some free solutions on this list, with the majority coming with some sort of cost. Some of the software has features that are suitable for those with accessibility needs too.
What Free Tax Software Is Recognised By HMRC?
We have saved you the trouble of searching, as below, there is a list of the free solutions you can use.
| #GoFile |
| #My Digital Bridge |
| 100PcVatFreeBridge |
| ABC VAT Bridge by ABC Self Assessment Ltd |
| Adminsoft Ltd |
| Anna Money instant filing |
| Bokio |
| Brightbook |
| BusinessGT |
| Bx |
| Cirrostratus Exedra |
| Countingup |
| FreeAgent |
| FSB Making Tax Digital |
| MAGIC TAX |
| MTDsorted |
| Open Answers Limited (Portico Free) |
| PWC spreadsheet |
| QuickFile |
| SafeAccounts |
| VATIFY |
| Zoho |
Who Can Do Their Own UK Taxes?
Self Assessment tax returns can be done online if:
- You are self-employed.
- You aren’t self-employed but send a tax return. E.g – you receive income from renting out a property.
The online service can be used if:
- You are viewing previous returns.
- Checking your details.
- Printing your tax calculations.
You are required to register for Self Assessment before using this service if:
- It is your first time filing for it.
- You’ve previously sent a tax return but didn’t send one the last tax year.
You cannot file a Self Assessment tax return online if:
- It is for a trust or estate.
- It is for a partnership.
- If you lived abroad as a non-resident.
- You are reporting multiple ‘chargeable gains’.
- You get income from a trust.
So, to conclude. We recommend that before you choose a product, remember to check that the accounting package you’ve selected is fully compatible with HMRC’s Making Tax Digital vision.
Tax software can be useful for all businesses, ensuring you are paying the right level of tax. There are plenty of free products out there for you to research, as well as paid options for those looking for more premium features. Do your planning, see what suits your business and reap the benefits of online tax software.