Top Making Tax Digital solutions for UK accountants

As part of the UK’s digital transformation, all British businesses registered for VAT must comply with a government initiative called Making Tax Digital (MTD). This involves using specific tax and accounting software that is MTD-compliant. 

But what exactly is Making Tax Digital? What features should you look for in MTD-compliant software? And how will using that software benefit your business or accounting firm? In this article, we’ll answer all these questions and more. 

What is Making Tax Digital?

Making Tax Digital is a government initiative designed to digitise VAT tax filing and reduce errors. It was introduced in 2019 as part of the UK government’s Tax Administration Strategy. 

Initially, MTD applied only to businesses with a turnover of £85,000 or higher. Since 2022, however, it has been mandatory for all VAT-registered businesses to comply with MTD requirements, regardless of their turnover. 

Under the MTD initiative, VAT-paying businesses in the UK must: 

• Maintain digital tax records for VAT
• Submit VAT updates every quarter
• Use software that is compatible with MTD requirements

At this point, you might be wondering what makes software MTD-compatible. To be compliant, your accounting or tax system must be able to: 

• Record and store digital records
• Provide HMRC with information and VAT returns using those records
• Receive information directly from HMRC

Since its launch, MTD has had a tangible impact on the tax filing process. According to an independent study, 68% of registered businesses have experienced at least one benefit from the change, while 67% believe it has reduced the risk of error in the tax filing process.

Benefits of using MTD-compliant software 

So what are the advantages of using MTD-compliant software? Besides adhering to government requirements, accounting firms and businesses stand to benefit from making the switch in several ways, including:

• Reduced risk of fines. Adhering to the government’s MTD requirements will help you steer clear of penalties for non-compliance. 
• Improved accuracy. Digital record-keeping and automated tax calculations reduce the risk of manual errors. 
• More efficient workflows. Digital tax filing speeds up the process by eliminating paperwork and streamlining VAT submissions.
• Superior client service. With real-time financial insights and digital processes, you can provide a better service and keep clients happy. 
• Better record-keeping. By securely storing tax records in digital format, it’s easier to track and retrieve information. Digital record-keeping also makes audits simpler. 
• Seamless integrations. The best MTD solutions integrate with other software, including tools for bookkeeping, invoicing, task management, and reporting. The result is a joined-up software ecosystem and more effective data sharing.

Key features to look for in MTD-compatible software

If you’re using legacy spreadsheet tools like Excel or Google Sheets, it is possible to use bridging software to connect those records to HMRC digitally. That said, bridging software doesn’t enable you to fulfill the MTD requirements for digital record keeping. For this reason, we recommend investing in MTD-compliant software.

There are plenty of MTD-compatible platforms on the market. When choosing one, you need to consider your firm’s size, budget, and preferences. That said, there are several key features that all good Making Tax Digital software has. These include: 

Automated VAT reporting and filing

The more you can automate the tax reporting and filing process, the more time you’ll save — and the fewer errors you’ll make. Look for MTD software that automates processes such as VAT calculations, report generation, and submissions to HMRC. 

Some MTD software offers automated reminders to ensure you’re on track with key tax-related tasks. Real-time VAT tracking is another handy feature, providing up-to-date insights into your tax situation.

Integration with other tools

Seamless integration with other tools is crucial. By connecting to practice management software, task management systems, time and billing tools, and so on, you can ensure smooth data transfer and minimise manual data entry. 

In addition, the software must integrate with HMRC. This allows you to file returns and send updates to HMRC — and receive information and updates — directly in the software. 

Data security 

Data security is crucial when handling sensitive tax-related information. Choose MTD software that offers: 

• Secure cloud storage, enabling you to back up and access tax records from anywhere
• Encryption to protect sensitive financial data from cyber threats
• Multi-factor authentication to prevent unauthorised access
• Digital audit trails to streamline compliance and audit processes

An intuitive user interface

To maximise the advantages that MTD VAT software offers, it needs to be easy to use. That means a clear and intuitive user interface, easy navigation between different features, and automation capabilities that are simple to set up. 

We recommend looking at online reviews and ratings when researching different software. This will give you a feeling for the best and worst aspects of different tools. Pay careful attention to the overall user experience — and avoid those that seem overly complex or outdated. 

Great customer Support

Great customer support can make all the difference. If you have an issue with the system, you want someone to help you fix it ASAP. Likewise, having hands-on support during implementation, configuration, and training sets you up for success. Look for software that offers:

• 24/7 customer support via chat, phone, or email
• Personalised support during implementation
• Comprehensive guides and tutorials

Top MTD software for VAT in 2025

There are plenty of MTD-compliant software solutions to choose from. In this section, we’ll help you narrow down the field to five standout platforms that make MTD-compliant tax filing simple. 

1. Xero

Xero is a popular cloud accounting and bookkeeping platform designed for small and medium-sized businesses. It’s also recognised by HMRC as MTD compliant. In other words, Xero allows you to record and store your tax records digitally and submit VAT returns directly to HMRC. 

In addition to Making Tax Digital compliance, Xero offers a broad range of accounting features, including: 

• Live bank feeds for real-time financial data
• Simple bank reconciliations
• Payroll processing
• Invoicing, auto-reminders, and secure payments
• Expense management 

Xero is known for being relatively cost-effective and easy to use. It also offers a range of integrations via the Xero App Store. There, you’ll find native integrations for everything from CRMs to invoicing, billing, and HR tools.

Xero offers four different pricing plans, all of which enable you to submit VAT returns to HMRC digitally. At the time of writing, the cheapest plan — Ignite — is a remarkable £1.60 per month, making it an incredibly cost-effective option. More expensive plans unlock advanced accounting and bookkeeping capabilities.

2. QuickBooks Online

QuickBooks Online (QBO) is the market-leading accounting platform from Intuit. In recent years, it has become synonymous with small-bussiness accounting, with more than five million users worldwide. For UK-based businesses and accountants, it’s also one of the most popular MTD-compliant platforms and offers the following: 

• Secure digital record-keeping
• HMRC integration and digital filing
• Real-time VAT calculations
• A handy error checker that scans your data and identifies mistakes

In addition to MTD-related features, QBO offers an extensive range of accounting and bookkeeping features — much like its direct competitor Xero. It’s regarded as a highly intuitive and user-friendly platform that’s suitable for accountants and business owners alike. Also, QBO integrates with a huge range of third-party tools.

Price-wise, QuickBooks Online offers different plans for different business sizes. For simple VAT returns, sole traders and small businesses can opt for the Simple Start plan, which costs £17.20 per year for the first year, rising to $172 for the following years. There are additional plans for larger businesses or those with broader accounting needs.

3. Sage Accounting

Sage Accounting is another popular HMRC-recognised, MTD-compliant accounting software platform. Like Xero and QBO, it allows you to store VAT records and file VAT returns digitally. In addition, it offers a range of accounting features that enable you to: 

• Automate repetitive bookkeeping tasks and data entry to save time and improve accuracy
• Improve data security through data encryption and two-factor authentication
• Boost collaboration between accountants and clients through secure information sharing
• Connect your bank account to automatically pull in transactions and financial data
• Generate customisable reports to understand and improve business performance

Sage Accounting offers three pricing plans. Accounting Start is a single-user plan with limited functionality and costs £15 per month. Then there’s Accounting Standard for £30 per user per month and Accounting Plus for £39 per user per month, both for unlimited users.  

4. Zoho Books

Zoho Books is a cost-effective accounting and bookkeeping platform for solopreneurs and small businesses. It’s part of the wider Zoho suite of products, which includes a range of tools that span sales, marketing, customer service, HR, and more. 

As HMRC-recognised and MTD-compliant software, Zoho Books simplifies digital record-keeping. It also allows you to file VAT returns directly to HMRC in a matter of seconds based on sales and purchase transactions. 

In addition to hassle-free VAT returns, Zoho Books offers everything you need to manage the books of a small business. For example, you can: 

• Manage receivables and cash flow
• Create professional invoices and accept online payments
• Sync with your bank for automatic data imports and simple reconciliation
• Manage your inventory and stock
• Offer a great customer experience with a self-service portal
• Automate high-volume manual tasks

Where Zoho really stands out, however, is its pricing. For solo users, there’s a completely free plan that includes MTD-compliant VAT returns. For larger teams, paid plans range from £10 to £25 per month depending on the features you need. 

5. FreeAgent

FreeAgent is MTD-compatible accounting software designed for freelancers, contractors, and small businesses. Unlike the other platforms on this list, FreeAgent is specifically aimed at the UK market. In terms of MTD compliance, it allows you to: 

• Auto-generate VAT returns from your bookkeeping data
• File your VAT returns directly with HMRC in just a few clicks
• See how much VAT you owe in real time and keep track of deadlines 

In addition to hassle-free VAT returns, FreeAgent provides you with basic accounting and bookkeeping tools. You can invoice customers, manage expenses and cash flow, and run payroll. You can also boost collaboration with simple project management capabilities. All this is delivered via a simple and intuitive user interface on both desktop and mobile. 

What’s more, FreeAgent offers a completely free version for customers with certain bank accounts, including NatWest and the Royal Bank of Scotland. This free version offers VAT returns and basic bookkeeping features. There’s also a paid version with broader capabilities, which costs £16.50 per month. 

Whatever MTD software you choose, you need to make sure your firm is running as smoothly as possible from an operational point of view. This is where TaxDome comes in. As a complete practice management platform, TaxDome automates your workflows, improves collaboration, and transforms your client experience. And by integrating with your accounting software, you can create a cohesive tech stack.

FAQs about MTD software

Who does Making Tax Digital apply to?

Making Tax Digital applies to all VAT-registered businesses in the UK, regardless of turnover. From April 2026, self-employed individuals and landlords who earn over £50,000 per year will also be required to meet Making Tax Digital requirements.

What are the requirements for Making Tax Digital for VAT?

To comply with Making Tax Digital for VAT, you must:

• Maintain digital records of VAT transactions
• Use MTD-compatible software to record and file VAT returns
• Submit VAT returns directly to HMRC through your MTD software

What records do I need to keep digitally for MTD?

If you’re a VAT-registered business, you should record and store the following records digitally:

• VAT transactions (sales and purchases) and related invoices
• The VAT rate applied to each transaction
• VAT return calculations

What is MTD-compatible software?

MTD-compatible software is accounting or tax software that meets HMRC’s requirements for digital record-keeping and VAT tax returns. It integrates directly with HMRC’s systems, allowing you to submit VAT returns digitally. 

Can I use my existing accounting software for MTD?

Yes — if your current accounting software is MTD-compatible and integrates with HMRC. If not, you’ll need to upgrade to an HMRC-recognised MTD VAT software. You can find a full list of MTD-compliant software in this government guide. 

Can I still use spreadsheets for VAT submissions under MTD?

Yes, but spreadsheets alone are not MTD-compliant. If you use them, you’ll need to use something called bridging software. Thos connects tools like Excel and Google Sheets to HMRC, enabling you to submit returns digitally.

How do I sign up for Making Tax Digital?

You no longer need to sign yourself up for MTD. When a new business registers for VAT, HMRC signs them up to MTD automatically — unless they are exempt. 

What happens if I don’t comply with Making Tax Digital requirements?

Non-compliance with MTD requirements can result in penalties from HMRC. For example, you may receive a fine if you fail to keep digital tax records, or if you submit your VAT returns through software that isn’t MTD compliant. 

The bottom line

If you’re a business that’s registered for VAT in the UK — or an accounting firm that serves those businesses — you are required to comply with Making Tax Digital requirements. Choosing the right software plays a central part in this process. 

With MTD-compliant software, you can store tax records digitally and file VAT returns directly with HMRC. While no two solutions are the same, the five we’ve listed in this guide are all excellent options. 

Of course, compliant tax filing is just one aspect of running a successful accounting firm. In addition to great accounting software, you need something that can simplify and automate your day-to-day operations. This is where a comprehensive practice management platform like TaxDome comes in.