Using Xero for Making Tax Digital

Xero helps you follow and meet HMRC’s rules and requirements for Making Tax Digital (MTD) for VAT.

Done before the coffee gets cold.

A tablet showing that a return has been submitted to the tax office.

Making Tax Digital for VAT explained

MTD is an HMRC service that requires businesses to keep digital records and file VAT returns using compatible software.

A tablet showing that a return was submitted to the tax office.

Based on taxable turnover

MTD is mandatory over £85k, optional under £85k.

MTD software needed

The software must connect with HMRC’s system.

Maintain digital records

Businesses must keep digital records of VAT data.

How Making Tax Digital works

Set up for MTD with Xero

Most Xero plans allow you to keep digital records and submit VAT online through HMRC’s MTD system.

  • Log in to HMRC and sign up for MTD
  • Connect Xero to HMRC once you get a confirmation email
  • Use the MTD VAT return instead of the standard VAT return

Use Xero for filing MTD VAT returns

Generate, review and submit VAT returns in Xero once you’ve signed up for MTD.

  • View VAT return due dates, details, notes and history
  • Check and make adjustments to returns before filing
  • Submit VAT returns to HMRC direct from Xero
An office worker submits a tax return

More about Making Tax Digital

Xero’s Making Tax Digital (MTD) software works for both VAT and non-MTD VAT returns. But once you sign up for MTD, you can only submit MTD VAT returns. You won't be able to return to the old VAT return to view or publish.

See how to set up MTD for VAT in Xero

If the domestic reverse VAT charge applies to you, you need to use the standard (not flat) rate MTD VAT return in Xero. Xero has specific tax rates set up for use on invoices and bills in order to report the right amounts on the VAT return.

See how to apply the domestic reverse charge in Xero

If you use spreadsheets for VAT, you can still connect to HMRC’s MTD system via Xero. Xero provides a tool that lets you upload VAT amounts, then send MTD VAT standard rate returns from Xero.

See how to get VAT data into Xero from spreadsheets

Use Xero for MTD

Access all Xero features free for 30 days, then decide which plan best suits your business.