Compliant Software for Making Tax Digital: Your Guide to the Right Tools.
After diving into Getting Started with Making Tax Digital, MTD for VAT, MTD for Income Tax (ITSA), MTD for Corporation Tax, and Specific Audiences, you’re ready to choose the MTD-compliant software that makes Making Tax Digital (MTD) a breeze. Whether you’re self-employed, a landlord, or running a small business, this chapter covers everything you need to know about HMRC-approved software, bridging solutions, and popular tools like Sage, Xero, and QuickBooks. Let’s find the perfect fit for your MTD compliance needs!
HMRC-Approved Software
To stay compliant with Making Tax Digital, you must use HMRC-approved software for VAT, Income Tax Self Assessment (ITSA), and potentially other taxes. Here’s the essentials:
What It Does: MTD-compliant software keeps digital records, calculates taxes, and submits returns directly to HMRC via the Government Gateway.
Approval Process: HMRC tests software to ensure it meets MTD standards for accuracy and security.
Who Needs It: VAT-registered businesses (over £85,000 turnover), self-employed, and landlords under MTD for ITSA (from April 2026 for incomes over £50,000).
Finding Software: HMRC’s approved list includes tools for all business types—more on specific options below.
Need help setting up software with the Government Gateway? Check [Registration and Setup]. For niche cases, see [Specific Scenarios]. Browse HMRC’s list of MTD-compatible software.
Bridging Software
Not ready to switch your accounting system? Bridging software is a game-changer for MTD compliance:
What It Is: Bridging solutions connect non-MTD-compatible software (e.g., spreadsheets) to HMRC’s systems for VAT or ITSA submissions.
Who It’s For: Businesses or individuals using legacy systems or preferring manual methods like Excel.
How It Works: It “bridges” the gap by formatting your data for HMRC submission, ensuring digital record-keeping compliance.
Cost-Effective: Often cheaper than full software upgrades, ideal for small businesses. Learn more in [Specific Audiences].
For challenges with software transitions, see [Challenges and Considerations]. HMRC’s bridging software guidance explains approved options.
Xero for MTD
Xero is another powerhouse for MTD compliance, especially for small businesses and self-employed filers:
Key Benefits: Automates VAT and ITSA reporting, integrates with bank feeds, and offers mobile access.
MTD-Ready: Connects directly to HMRC for digital tax submissions, ensuring compliance.
User Base: Popular among accountants managing multiple clients—see [Specific Audiences].
Customisation: Tailored dashboards for tracking income and expenses.
Worried about costs? Check [Challenges and Considerations]. Explore Xero’s features at Xero’s MTD page.
QuickBooks and MTD
QuickBooks is a go-to for MTD-compliant software, offering simplicity and power:
Below Threshold: If your business or property income is under £50,000 (until April 2027, then £30,000), you’re exempt but can join voluntarily.
Special Circumstances: Exemptions apply for those unable to use digital tools due to disability, religion, or location. Learn about unique cases in [Specific Scenarios].
Application Process: Request an exemption from HMRC if eligible, but note alternative reporting requirements may apply.
Staying Informed: Even exempt individuals should understand MTD compliance to avoid surprises. See [Challenges and Considerations] for penalty details.
For unique setups like joint properties, see [Specific Scenarios]. Visit QuickBooks’ MTD guide.
Sage for MTD
Sage is a top choice for MTD-compliant software, trusted by businesses and accountants alike. Here’s why it shines:
Features: Handles VAT returns, ITSA quarterly updates, and Corporation Tax filings with real-time tax calculations.
User-Friendly: Designed for small businesses, self-employed, and landlords, with cloud-based access.
MTD Compliance: Fully approved by HMRC for seamless submissions via the Government Gateway.
Scalability: Offers plans for solo traders to larger firms—perfect for partnerships too (see [Specific Audiences]).
For setup tips, visit [Registration and Setup]. Learn more at Sage’s MTD hub.
Software for Landlords
Landlords need MTD-compliant software tailored for rental income under MTD for ITSA:
Quarterly Updates: Report rental income and allowable expenses quarterly via MTD-compliant software.
Software Choices: Tools like Sage or specialist landlord software simplify tracking. Check [Compliant Software] for landlord-specific options.
Joint Properties: If you co-own properties, MTD for ITSA has specific rules—learn more in [Specific Scenarios].
Tax Planning: Digital tools give you a clear view of your tax obligations, making budgeting easier.
Revisit [MTD for Income Tax (ITSA)] for landlord-specific rules. HMRC’s landlord software guide lists options.
Software for Self Employed
For self-employed individuals, the right software makes MTD for ITSA manageable:
Tailored Solutions: Tools like FreeAgent or QuickBooks Self Employed focus on freelance and sole trader needs.
Quarterly Updates: Automates digital record-keeping and ITSA submissions for incomes over £50,000 (from April 2026).
Ease and Affordability: Budget-friendly options for solo workers—see [Specific Audiences].
Tax Insights: Real-time data helps avoid surprises at tax time.
For penalty risks, check [Challenges and Considerations]. HMRC’s self-employed software list has recommendations.
Remember we are here to enhance your work life balance. We have two ways to get you ready for ‘Making Tax Digital’.
Choosing Your MTD-Compliant Software
Picking the right MTD-compliant software ties together your Making Tax Digital journey, whether you’re handling VAT, ITSA, or Corporation Tax. From Sage to bridging software, there’s a tool for every self-employed individual, landlord, accountant, or small business. Need setup help? Visit [Registration and Setup]. Curious about exemptions or niche cases? See [Specific Scenarios]. For cost concerns, explore [Challenges and Considerations].
At PJL Accounts, we’re here to guide you to the perfect software for MTD compliance. Contact us or dive into our Making Tax Digital guides to stay compliant with ease!