How to Choose the Right MTD VAT Software

Choosing the right MTD-compatible software for VAT is essential because Making Tax Digital has changed how UK businesses manage their VAT. Now, most VAT-registered businesses must keep digital records and submit VAT returns using approved software.
To make the right choice, start by making sure the software is officially recognised by HMRC for Making Tax Digital compliance. Next, think about your business needs. Do you only need VAT submission, or do you want a full accounting solution with features like invoicing, payroll, or expense tracking? The right software helps you follow the rules easily, saves time, and reduces errors.
What are the software requirements for MTD?
To comply with Making Tax Digital for VAT, businesses must use software that meets specific requirements set by HMRC. Below are the important software requirements for MTD compliance.
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- Digital Record Keeping: The software must allow you to keep and maintain digital records of your VAT-related transactions.
- Preparing VAT Returns from Digital Records: MTD-compatible software must be able to prepare VAT returns automatically using the digital records stored within the system.
- Digital Submission to HMRC: The software must be able to communicate directly with HMRC’s systems.
- Digital Links Between Software: If you use multiple software packages or spreadsheets, the connections between them must be digitally linked.
Factors to Consider When Choosing MTD Compatible Software
Choosing the right MTD-compatible software for VAT is an important decision that goes beyond simply meeting HMRC’s digital submission requirements. Here are the factors to keep in mind when selecting MTD-compatible software for your business:
HMRC Recognition and Compliance
First and foremost, ensure the software is officially recognised by HMRC as MTD for VAT compliant. Using software that meets HMRC’s technical standards guarantees your VAT returns will be accepted without issues.
Suitability for Your Business Type
Different businesses have different needs. For example, limited companies with employees might benefit from software that includes payroll features or integrates with third-party payroll systems.
Sole traders or small businesses might prefer simpler, more affordable options. Choose software that fits your current business structure and can grow with you.
Ease of Use and Accessibility
The software should be user-friendly, especially if you or your team are not accounting experts. Good software will have a clear interface, helpful guides, and responsive customer support. Some providers offer free trials or demos, which allow you to test usability before committing.
Cost and Value for Money
There are both free and paid MTD-compatible software options. While free software might suit very small businesses or sole traders, paid solutions often provide a wider range of features and better support. Consider the long-term value and how the software can support your business growth.
Support for Future MTD Requirements
MTD is expanding beyond VAT. For example, MTD for Income Tax will become mandatory for sole traders from 2026. Choosing software that plans to support these future requirements can save you from switching providers later.
By considering these factors, you can select MTD-compatible software that not only meets your VAT submission responsibilities but also supports your business operations efficiently and effectively.
Steps to Select the Right MTD Compatible Software
Here are practical steps to guide you through the selection process:
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- Start by assessing your business size, complexity, and accounting requirements.
- Ensure the software is officially recognised by HMRC as MTD-compatible.
- Choose software with a user-friendly interface, especially if you or your team have limited accounting or technical experience.
- Look for features that match your needs, such as bank feeds, automated VAT calculations, real-time financial insights, and cash flow management tools.
- MTD is expanding beyond VAT to include Income Tax Self-Assessment and other taxes. Choose software that can adapt to these upcoming changes to avoid switching systems later.
Following these steps will help you select MTD-compatible software that ensures compliance, reduces errors, saves time, and supports your business growth effectively.
Choosing the right MTD-compatible software for VAT is an important decision for any business required to comply with Making Tax Digital. Remember, the right MTD-compatible software is an investment in your business’s future, enabling you to meet regulatory requirements while gaining valuable operational benefits.
If you’re an accountant or business owner looking for reliable MTD-compatible VAT software, Nomi is the best choice. This software simplifies bookkeeping and VAT compliance. Nomi offers a user-friendly platform that helps you stay fully compliant with HMRC’s Making Tax Digital requirements.
Note: This information covers general features and considerations for MTD-compatible software. For detailed guidance or specific questions about a particular software solution, please contact the software provider directly.
Frequently Asked Questions
What MTD software is compatible with VAT?
MTD-compatible VAT software includes approved solutions like Nomi, Xero, QuickBooks, FreshBooks, FreeAgent, all officially recognised by HMRC for digital VAT record keeping and submissions.
How to be MTD compliant?
To be MTD compliant, keep digital VAT records using HMRC-recognised software, submit VAT returns digitally and maintain digital links between your accounting records.
Can I submit a VAT return without MTD?
No, if you meet the VAT threshold, you must submit VAT returns using MTD-compatible software; manual submissions or HMRC’s old portal are no longer accepted.
Can I reclaim VAT on software?
You can reclaim VAT on software purchases if the software is used for business purposes and you are VAT registered, subject to normal VAT rules.
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