To comply with Making Tax Digital (MTD) for VAT, all VAT-registered businesses in the UK must use HMRC-recognised compatible software to keep digital records and submit their VAT returns.
You have two main options for MTD for VAT software:
- Full accounting software: Comprehensive platforms that manage all your business finances, including invoicing, bank reconciliation, expense tracking, and direct MTD submissions to HMRC. Examples of providers include Xero, Sage, and FreeAgent.
- Bridging software: Tools designed to connect existing digital records (such as Excel spreadsheets or non-compatible accounting software) to HMRC's systems via a digital link for submission. This option allows you to continue using your current record-keeping method if you prefer. Examples include Easy MTD, My Digital Bridge, and MTD for VAT.
How to Find Software
HMRC does not provide its own software but maintains a list of approved third-party providers. You can find a comprehensive list of compatible software on the official GOV.UK website.
When choosing software, consider:
- Cost: Options range from paid subscriptions for full accounting packages to low-cost or even free bridging software.
- Functionality: Some solutions offer an all-in-one platform for all business needs, while others focus solely on MTD compliance.
- Compatibility: Ensure the software works with your current systems (e.g., Windows PC, Excel version, specific accounting software).
Key Requirements
- Digital Records: You must keep digital records of all transactions. Manually re-typing or "copy and pasting" figures into the final return is not a compliant digital link.
- Direct Submission: The software must connect directly to HMRC's MTD platform (via an API) to submit your return data.
- Exemptions: Exemptions from MTD are rare and only granted for specific reasons, such as age, disability, remote location, or sincere religious beliefs. You must apply to HMRC for an exemption.
Get MTD Compliant with Easy MTD
If you need bridging software so you can carry on using spreadsheets or software that isn’t MTD compatible, look no further than Easy MTD. This HMRC-recognised Windows application allows you to continue recording your VAT figures figures in a spreadsheet or other file format, meaning there is no requirement to move to expensive and complicated accounting packages.