When you’re working a VAT-registered enterprise, you’ll already be aware of Making Tax Digital (MTD). Since April 2022, practically all VAT-registered companies have been required to maintain digital data and submit VAT returns utilizing appropriate software program.
Now, MTD for Revenue Tax is being launched in phases, bringing new digital record-keeping and reporting necessities for sole merchants and landlords.
Whether or not you’re making ready for the subsequent deadline or seeking to substitute your present accounting software program, there are many choices to select from. We additionally have a look at 4 suppliers – Sage, Xero, Tide and Countingup – and clarify what they provide, how a lot they value and which companies they’re finest suited to.
What’s Making Tax Digital?
Making Tax Digital is an HMRC initiative designed to make tax reporting extra correct and environment friendly. Fairly than counting on handbook data and coming into figures into HMRC’s on-line types, companies use appropriate software program to maintain digital data and submit data on to HMRC.
There are at the moment two essential components of MTD that companies want to pay attention to.
Making Tax Digital for VAT
All VAT-registered companies should adjust to MTD for VAT until they’re exempt.
This implies conserving VAT data digitally and utilizing appropriate accounting software program to submit returns to HMRC. You need to use a devoted accounting platform, or bridging software program that connects present data, equivalent to spreadsheets, to HMRC’s techniques.
The excellent news is that the majority established cloud accounting suppliers already assist MTD for VAT. When you’re utilizing Sage, Xero or one other recognised platform, you could not want to alter something.
Making Tax Digital for Revenue Tax
MTD for Revenue Tax started on 6 April 2026 and is being launched in accordance with your qualifying earnings.
These thresholds apply to gross earnings from self-employment and property mixed, earlier than bills and tax. They don’t apply to firm turnover.
When you’re affected, you’ll must hold digital data, submit quarterly updates of your earnings and bills to HMRC, and full your annual tax return utilizing appropriate software program.
The quarterly updates don’t substitute your annual Self Evaluation tax return, and also you gained’t must pay tax each quarter merely since you’ve submitted an replace.
What about restricted corporations? MTD for Revenue Tax doesn’t apply to restricted corporations, and the federal government has confirmed it doesn’t intend to introduce MTD for Company Tax. Nevertheless, restricted corporations registered for VAT should nonetheless adjust to MTD for VAT.
Finest accounting software program for Making Tax Digital
There are two issues to contemplate when selecting MTD software program. First, does it assist the precise tax obligations that apply to what you are promoting? Second, can it deal with your wider accounting wants?
You may solely want a primary package deal for conserving digital data and submitting returns. However for those who’re managing staff, inventory, suppliers or worldwide transactions, it’s value what else the software program provides.
Sage
Sage provides a number of accounting merchandise, protecting all the pieces from easy Self Evaluation to VAT, payroll and extra superior monetary administration.
For VAT-registered companies, Sage Accounting permits you to calculate VAT, keep digital data and submit returns on to HMRC. It additionally takes care of on a regular basis duties equivalent to invoicing, financial institution reconciliation and expense monitoring.
There are three essential Sage Accounting plans. Begin covers the necessities, Normal provides options together with money movement forecasting and CIS administration, whereas Plus provides stock administration, budgeting and multi-currency accounting.
It’s also possible to use Sage Copilot, its AI-powered assistant, to assist with bookkeeping and different monetary duties.
Sole merchants who want MTD for Revenue Tax can as an alternative use Sage’s devoted Sole Dealer software program, which features a free plan for non-VAT-registered companies. It helps digital record-keeping and MTD reporting, though the free model limits options equivalent to invoicing and financial institution connections.
MTD compatibility: MTD for VAT by Sage Accounting. MTD for Revenue Tax by supported Sage merchandise, together with Sage Sole Dealer.
Pricing (excluding VAT):
Sage Sole Dealer Free: £0 per thirty days
Sage Sole Dealer: £7 per thirty days
Sage Accounting Begin: £20 per thirty days
Sage Accounting Normal: £43 per thirty days
Sage Accounting Plus: £59 per thirty days
Promotional reductions can be found on chosen paid plans.
Xero
Xero’s Making Tax Digital options help you keep digital data and submit VAT returns on to HMRC. Xero additionally helps MTD for Revenue Tax, together with the brand new quarterly reporting necessities.
Past tax compliance, you may handle payments, ship invoices, reconcile financial institution transactions and generate monetary stories. Payroll is out there too, with completely different allowances relying in your subscription.
Xero can be helpful if a number of individuals want entry to your accounts. There aren’t any per-user licence charges for normal accounting entry, so that you may give your accountant or finance group entry with out paying for extra licences.
Its Easy plan is designed for non-VAT-registered companies, together with sole merchants who want MTD for Revenue Tax. Bigger companies will usually want Ignite or above, notably in the event that they concern greater than 20 invoices a month or need extra refined reporting.
MTD compatibility: MTD for Revenue Tax throughout its UK accounting plans; MTD for VAT on VAT-enabled plans.
Pricing (excluding VAT):
Easy: £7 per thirty days
Ignite: £18 per thirty days
Develop: £39 per thirty days
Complete: £55 per thirty days
Final: £70 per thirty days
Xero at the moment provides 90% off for the primary six months.
Tide
Fairly than providing accounting software program as a totally separate service, Tide’s bookkeeping and tax instruments are constructed into its enterprise banking platform.
When you’re a sole dealer, you may entry free MTD for Revenue Tax instruments by your Tide account. You may categorise transactions, seize receipts, calculate tax estimates and submit quarterly updates to HMRC. Tide additionally provides the choice to automate these quarterly submissions.
When you’re VAT registered, Tide’s paid Accounting service lets you put together and submit VAT returns. It provides monetary reporting, profitability insights and money movement forecasting, providing you with a greater image of how what you are promoting is performing. It’s also possible to join exterior financial institution accounts, though you’ll want a Tide account to make use of its accounting instruments.
One limitation to pay attention to is that Tide Accounting doesn’t assist VAT submitting underneath the Flat Fee Scheme. Its Self Evaluation instruments even have eligibility restrictions, together with for sole merchants utilizing CIS.
MTD compatibility: Free MTD for Revenue Tax instruments for eligible sole merchants; MTD for VAT by paid Tide Accounting plans.
Pricing (excluding VAT the place relevant):
Free MTD instruments: £0 for eligible sole merchants
Bill Assistant: £5.99 per thirty days
Tide Accounting: £13.99 per thirty days for sole merchants or £19.99 for restricted corporations
Admin Additional: £17.99 per thirty days for sole merchants or £24.99 for restricted corporations
Separate banking fees could apply.
Countingup
With Countingup, you may handle what you are promoting banking and accounting by a single app. It robotically categorises transactions, tracks earnings and bills, and calculates how a lot tax you may owe.
It’s also possible to create invoices, seize receipts and share monetary data along with your accountant. As a result of transactions are recorded immediately by what you are promoting account, there’s much less must switch data between completely different techniques.
Countingup helps Making Tax Digital for VAT, permitting you to arrange and submit VAT returns on to HMRC from the app.
Its different tax options are helpful for day-to-day monetary planning. For instance, you may robotically put cash apart for future tax payments and earn 1.2% AER (variable) curiosity in your tax financial savings. The app additionally offers tax estimates and submitting reminders.
Not like Sage or Xero, Countingup doesn’t cost completely different quantities for various units of accounting options. All subscriptions embody its banking, bookkeeping and tax instruments, with pricing decided by how a lot cash is deposited into your account every month.
MTD compatibility: MTD for VAT. Countingup’s revealed product data doesn’t at the moment verify direct MTD for Revenue Tax quarterly and annual submissions, so verify with the supplier earlier than selecting it for that goal.
Pricing:
Countingup provides a three-month free trial, adopted by:
£5 per thirty days: Month-to-month deposits as much as £750
£12 per thirty days: Month-to-month deposits between £750.01 and £7,500
£20 per thirty days: Month-to-month deposits above £7,500
Further transaction fees can apply.
How to decide on Making Tax Digital software program for what you are promoting
It’s value wanting past the essential potential to file a tax return. Most MTD-compatible accounting software program can carry out that operate, however the extra options and prices differ significantly.
Examine which taxes it helps. MTD for VAT and MTD for Revenue Tax have completely different necessities. When you’re a sole dealer who wants each, verify that your chosen software program can deal with each sorts of submission. You must also verify it helps all of the earnings sources it’s good to report.
Take into consideration the way you’ll use it as what you are promoting grows. Primary bookkeeping software program could also be adequate right now, however will you ultimately want payroll, stock administration, multi-currency accounting or extra detailed monetary stories? Altering suppliers later might imply migrating years of accounting data.
Think about your present techniques. When you already use a CRM, ecommerce platform or fee supplier, search for accounting software program that integrates with it. This could scale back handbook information entry and aid you hold monetary data correct.
Examine the complete value. Introductory reductions could make a package deal look significantly cheaper than it’s. Evaluate the common month-to-month subscription, extra consumer charges, transaction fees and any extras you’ll want.
Lastly, converse to your accountant earlier than making a choice. They might already use a selected platform and might advise on whether or not it can meet your reporting necessities.
HMRC additionally offers separate software program finders for MTD for VAT and MTD for Revenue Tax, permitting you to verify whether or not a product is recognised for the tax it’s good to report.
Are you able to get Making Tax Digital software program at no cost?
Sure. You don’t essentially should pay a month-to-month subscription to adjust to Making Tax Digital.
For instance, Sage provides a free MTD for Revenue Tax plan for non-VAT-registered sole merchants, whereas Tide offers free MTD instruments to eligible sole merchants with a Tide enterprise account.
There are additionally free and low-cost alternate options from different suppliers, in addition to bridging software program if you wish to proceed utilizing spreadsheets.
Nevertheless, free plans usually include restrictions on invoicing, financial institution connections or different accounting options. Earlier than signing up, verify that the software program covers all of your tax obligations and lets you full the required submissions to HMRC.
For a rising enterprise, paying for a extra complete package deal could also be worthwhile if it saves time on bookkeeping, reduces errors or offers you higher visibility over your funds.
