Making Tax Digital software
Using Making Tax Digital compatible software is essential for MTD for VAT and MTD for Income Tax. Xero’s HMRC-recognised MTD software makes keeping digital records and submitting VAT and Income Tax returns simple and fast.
Why Xero MTD software is your ticket to simple compliance
Save time on admin and simplify tax tasks, with MTD compliant software that makes keeping digital records and submitting returns easy.
Easily submit returns online
Send compliant MTD for VAT and MTD for Income Tax returns. Autofill returns with records already in Xero.
Automate VAT calculations
Xero software for MTD calculates VAT and Income Tax amounts quickly and accurately, so you can plan for your tax bill.
Maintain HMRC-compliant digital records
Xero keeps your digital records safe and secure, ensuring easy access with MTD compliant cloud-based storage.
95% of customers agree Xero payroll helps them stay compliant
*Source: survey conducted by Xero of 254 small businesses in the UK using Xero, May 2024
Why you need Making Tax Digital software
Since April 2022, all VAT registered businesses have been required to use MTD software for recordkeeping and returns. From April 2026, sole traders and landlords earning above £50,000 will need to join the MTD for IT system. MTD software has benefits beyond compliance:
- See key financial metrics in a simple dashboard with Xero MTD software
- Save time on admin with tax returns auto-filled for you, using records already in Xero
- Get reminders when returns are due so you never miss a deadline or catch a penalty
Choosing HMRC-recognised MTD software
When it comes to choosing Income Tax and VAT software, HMRC-recognised providers offer features that ensure compliance. Xero’s MTD for Income Tax and VAT compatible software is HMRC-recognised and easy to use.
- Complete compliant returns yourself or share access to Xero with your trusted advisor
- Connect your bank account so that transactions flow through to Xero automatically, ready for reconciliation
- Keep an eye on cash flow, outstanding invoices, and bills due with a beautiful dashboard
Benefits of Making Tax Digital software
Using MTD software means saying goodbye to manual data entry and complex calculations. Xero’s HMRC-recognised software has all the tools you need to create MTD compliant returns for VAT and Income Tax. Plus:
- Admin is automated – no more copying records for draft returns.
- Xero’s live testing checks MTD submissions with HMRC, making it easy to get it right the first time.
- Automatic updates mean Xero software remains compliant with evolving regulation.
MTD bridging software
Making Tax Digital bridging software is designed as a stop-gap solution for businesses that want to carry on using spreadsheets instead of full MTD software. Bridging software connects to HMRC so you can submit returns, but you don’t get access to cloud-based software tools.
Submitting MTD returns is a walk in the park
Xero MTD software makes preparing compliant returns for VAT and Income Tax fast and easy. You don’t need to do any tricky calculations or copy data from one tool to another. For VAT, you can use accrual, flat-rate, or cash VAT schemes. For Income Tax, you get a tax estimate after every submission.
Submit VAT online with Xero
How Xero MTD software makes compliance effortless
All the tools you need to submit MTD compliant returns are in Xero. Plus, extra features that help you run a healthy business. View Xero’s accounting software.
Direct connection HMRC
Draft, test, and submit MTD compliant returns directly to HMRC from Xero – no extra tools required
Time-saving automation
Xero speeds up reconciliation by recommending matches, so you can move onto your tax return faster
Confidence in your numbers
Get financial clarity with Xero’s easy-to-read dashboard and reporting features that use live data
FAQs about Making Tax Digital software
MTD for Income Tax software will be required from April 2026, for sole traders and landlords earning above £50,000 annually. Those earning above £30,000 will follow in 2027. Discover more about Making Tax Digital for Income Tax and see how Xero can support your business with the transition.
Learn more about MTD for Income Tax softwareMTD for Income Tax software will be required from April 2026, for sole traders and landlords earning above £50,000 annually. Those earning above £30,000 will follow in 2027. Discover more about Making Tax Digital for Income Tax and see how Xero can support your business with the transition.
Learn more about MTD for Income Tax softwareYes, you’ll need MTD software for Corporation Tax in the future, though the deadline is yet to be confirmed. Businesses will need to keep digital records and submit updates using Making Tax Digital compatible software.
Learn more about MTD for Corporation TaxYes, you’ll need MTD software for Corporation Tax in the future, though the deadline is yet to be confirmed. Businesses will need to keep digital records and submit updates using Making Tax Digital compatible software.
Learn more about MTD for Corporation TaxA digital link is an electronic or digital transfer or exchange of data between software programmes. Businesses are required to have digital links between software programmes for data that forms part of their MTD VAT return.
Digital links for MTDA digital link is an electronic or digital transfer or exchange of data between software programmes. Businesses are required to have digital links between software programmes for data that forms part of their MTD VAT return.
Digital links for MTDAll VAT-registered businesses have a legal obligation to keep and maintain records. Making Tax Digital means that some of these records must be kept digitally using HMRC-recognised MTD software.
See HMRC Making Tax Digital for VAT guidanceAll VAT-registered businesses have a legal obligation to keep and maintain records. Making Tax Digital means that some of these records must be kept digitally using HMRC-recognised MTD software.
See HMRC Making Tax Digital for VAT guidanceThere are some exemptions from Making Tax Digital. For example, If you or your business are subject to an insolvency procedure, factors such as age, disability, or location. You need to apply to HMRC if you believe you should be exempt from MTD.
Find out more about MTD exemptionsThere are some exemptions from Making Tax Digital. For example, If you or your business are subject to an insolvency procedure, factors such as age, disability, or location. You need to apply to HMRC if you believe you should be exempt from MTD.
Find out more about MTD exemptionsFunctional and compatible software is required to comply with MTD rules. This could be software or applications that can maintain digital records, and provide and receive information from HMRC via an API connection. Essentially, this means the software lets you submit returns directly to HMRC. The best software for Making Tax Digital for VAT doesn’t just help with compliance – it makes managing your finances easier, too.
Learn more about functional compatible MTD softwareFunctional and compatible software is required to comply with MTD rules. This could be software or applications that can maintain digital records, and provide and receive information from HMRC via an API connection. Essentially, this means the software lets you submit returns directly to HMRC. The best software for Making Tax Digital for VAT doesn’t just help with compliance – it makes managing your finances easier, too.
Learn more about functional compatible MTD software
For anyone thinking of moving to Xero, I‘d say do it. It’s probably the best decision that your business is ever going to make.
Hitesh, the founder of construction company IKPE Ltd
Plans to suit your business
All pricing plans cover the accounting essentials, with room to grow.
Simple
A new plan with features designed for sole traders and landlords, supporting MTD for Income Tax
Simple
Usually £7
Now £0.70
GBP per month
Save £37.80 over 6 months
- Send quotes and 10 invoices†
- MTD for Income Tax Ready
- Reconcile bank transactions
- Capture bills and receipts with Hubdoc
- Short-term cash flow and business snapshot
- Automate CIS calculations and reports
Start using Xero for free
Access Xero features for 30 days, then decide which plan best suits your business.
