The UK’s Making Tax Digital (MTD) strategy is a government initiative that aims to revolutionize the tax administration system by leveraging digital technology. Launched by HM Revenue and Customs (HMRC) in 2019, MTD now mandates all VAT-registered businesses to maintain digital records and submit tax returns online as of 2022. This move is designed to minimize errors, enhance compliance, and simplify the overall tax process. While the initial focus was on VAT-registered businesses, MTD is gradually expanding to include income tax and corporation tax as well.
Choosing the Right Software for Making Tax Digital
MTD necessitates the use of compatible software to facilitate real-time tax reporting, helping businesses gain insight into their tax obligations and effectively manage cash flow. By digitizing the tax process, HMRC aims to improve accuracy and provide a more user-friendly experience for taxpayers. This shift towards digital taxation aligns with broader trends in financial management and reporting.
With Making Tax Digital now in effect, it is crucial for businesses to transition to online or cloud-based accounting software if they have not already done so.
HMRC does not offer free software for MTD compliance, requiring businesses to invest in suitable software packages tailored to their specific needs.
Top Accounting Software Options for Making Tax Digital
When selecting accounting software for MTD compliance, businesses must consider their individual requirements. For small and medium-sized enterprises (SMEs), several cloud-based platforms are available:
Xero 
Xero offers multiple subscription plans to cater to varying business needs. The pricing mentioned here reflects standard packages at the time of publication, with occasional promotions and optional add-ons:
Ignite: £16 + VAT per month
Grow: £33 + VAT per month
Comprehensive: £47 + VAT per month
Ultimate: £59 + VAT per month
Each plan includes a 30-day free trial.
QuickBooks 
Intuit QuickBooks offers five subscription packages tailored to different business needs:
Self-employed: £10 + VAT per month
Simple Start: £14 + VAT per month
Essentials: £28 + VAT per month
Plus: £38 + VAT per month
Advanced: £90 + VAT per month
Each plan includes a 30-day free trial.
FreeAgent 
FreeAgent offers tailored accounting software packages for different business structures:
Sole trader: £9.50 + VAT per month
Partnership/LLP: £13.50 + VAT per month
Limited company: £16.50 + VAT per month
Each plan includes a 30-day free trial.
Specialized packages are also available for Landlords and Accountants/Bookkeepers.
KashFlow 
IRIS KashFlow offers three subscription packages:
Starter: £11.50 + VAT per month
Business: £23.50 + VAT per month
Business and Payroll: £31.50 + VAT per month
The software integrates with various payment processors.
Sage Business Cloud Accounting 
Sage offers three packages tailored to different business sizes:
Sage Accounting: £15 + VAT per month
Sage 50 Accounts: £92 + VAT per month
Sage Intacct: Custom pricing for larger companies
Zoho Books 
Zoho Books provides six pricing tiers to accommodate various business needs:
Free
Standard: £10 per month + VAT
Professional: £20 per month + VAT
Premium: £25 per month + VAT
Elite: £85 per month + VAT
Ultimate: £85 per month + VAT
Each plan includes a free trial and allows for additional user accounts at an extra cost.
Exploring Free Software for Making Tax Digital
For businesses seeking cost-effective solutions, several free software options are available for MTD compliance:
QuickFile 
QuickFile offers free small and medium-sized accounts, with additional features available for a nominal fee for larger businesses.
adminsoft 
adminsoft provides a comprehensive accounting system for free, catering to various business needs with additional modules available for specific industries.
While these software options offer cost-effective solutions, businesses should assess their requirements and choose a software package that best aligns with their needs for Making Tax Digital compliance.
Mariah Tompkins is the founder of WKM Accountancy.
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