Making Tax Digital Software

Making Tax Digital (MTD) software that’s HMRC-compliant must be used by businesses to manage their tax affairs online.

Hands typing on laptop running Making Tax Digital software in office setting

Why you need Making Tax Digital software

From April 2022 all VAT-registered businesses will need to keep digital records and submit VAT returns using HMRC-recognised MTD software, like Xero.

File your return to HMRC screen shown in Xero’s Making Tax Digital software with thumbs up illustration

Choosing HMRC-recognised MTD software

It’s important to choose Making Tax Digital software that’s 100% HMRC compliant. Xero’s digital VAT software is MTD compliant, HMRC-recognised, and easy to use.

Person using Making Tax Digital software on laptop in sunny home office setting

Benefits of Making Tax Digital software

Using MTD software means saying goodbye to manual entry and complicated calculations. Xero, for example, automatically records VAT collected and paid, so you can spend less time on your VAT return.

Laptop showing VAT return submitted success message from Xero’s Making Tax Digital software

MTD bridging software explained

MTD bridging software must have a connection with HMRC and allow you to submit VAT online. It’s designed for businesses who want to continue using spreadsheets instead of moving to full MTD software.

Two people happily interacting with devices using Making Tax Digital software, one on mobile, another on tablet

More about Making Tax Digital

MTD software will be needed for Income Tax Self Assessment returns from April 2024. Learn more about MTD for ITSA and discover how Xero can support your business with the transition.

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MTD software will be required for Corporation Tax in the future. This means companies will have to keep digital records for all transactions under assigned categories.

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Businesses will be required to have digital links between software programs for data that forms part of their MTD VAT return. A digital link is an electronic or digital transfer, or exchanging of data, between software programs.

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All VAT-registered businesses have a legal obligation to keep and maintain records. Making Tax Digital means that some of these must be kept digitally using HMRC-recognised MTD software.

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There are some exemptions from Making Tax Digital, such as if you or your business are subject to an insolvency procedure or factors such as age, disability or location. You can find out more via the link below.

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Functional and compatible software must be used by businesses to comply with MTD. This could be a software, product, or application that can preserve and hold digital records along with providing and receiving information from HMRC through an API.

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