Making Tax Digital for VAT
Using HMRC-recognised software is essential for Making Tax Digital (MTD) for VAT compliance. Xero’s MTD for VAT compatible software makes keeping digital records and submitting returns simple. Save time, ensure accuracy, and maintain compliance with Xero Making Tax Digital for VAT software.
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 Xero is your ticket to simple MTD compliance
Spend less time on admin and more time on your business, with software that makes keeping digital records and submitting VAT returns easy.
Easily submit VAT returns online
Send VAT returns directly to HMRC with Xero’s MTD software. Auto-fill MTD returns with records already in Xero.
Save time with automated VAT calculations
Xero software for MTD calculates VAT amounts quickly and accurately, helping you plan for your tax bill.
Maintain HMRC-compliant digital records
Xero stores your digital records safely and securely, ensuring easy access and compliance with MTD rules.
Why you need Making Tax Digital software
Since April 2022, all VAT-registered businesses have been required to keep digital records and submit MTD returns using HMRC-recognised software, like Xero. But, software for MTD can benefit you beyond compliance:
- See key financial metrics in a simple dashboard with Xero MTD software
- Save time on admin with tax returns auto-populated 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 selecting VAT software, HMRC-recognised providers offer features that ensure compliance. Xero’s MTD for VAT and MTD for Income Tax-ready 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 automatically records VAT collected and paid, so you can spend less time on your VAT return. Plus:
- Admin is automated. No more copying records for draft returns.
- Xero's live testing checks MTD VAT 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 explained
MTD bridging software is designed as a stop-gap solution for businesses that want to carry on using spreadsheets instead of full MTD software. It must connect to HMRC so you can submit VAT returns online, but bridging software won’t help you save time on admin like cloud-based accounting software.
Submitting MTD VAT returns is a walk in the park
Xero MTD software makes preparing compliant VAT returns fast and simple. VAT is calculated for you, so you don’t need to do any complex calculations. You can use accrual, flat-rate, or cash VAT schemes in Xero, and it’s easy to see what needs doing, what’s done, and how much VAT is due.
Submit VAT online with Xero
How Xero makes MTD compliance effortless
All the tools you need to submit MTD VAT-compliant returns are in Xero. Plus, extra features that help you run a healthy business. View Xero’s accounting software.
Direct connection to HMRC
Draft, test, and submit returns directly to HMRC from the Xero platform – no extra tools required
Time-saving automation
Xero speeds up reconciliation by recommending matches, so you can move onto your VAT 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
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
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