Best MTD Software of 2023
What is MTD Software and how does it work?
MTD software, also known as Making tax Digital, is a form of accounting software that is used to manage your tax documents. It is designed to help businesses keep track of their tax liability and make sure that they are compliant with tax laws. MTD software can be used to prepare and file tax returns and track and manage tax payments.
Currently Making Tax Digital is all about VAT submissions but over the coming months and years this will include Corporation Tax and Income Tax.
MTD software is typically used by small businesses and self employed and is designed to be easy to use. MTD software includes a chart of accounts that businesses can use to track their income and expenses. The software may also include features such as invoicing, tracking inventory and managing payroll.
How does MTD software help businesses save money?
MTD software helps businesses save money by automating tasks that would otherwise be done manually. This includes tasks like invoicing, tracking inventory and managing customer data. By automating these tasks businesses can save time and money that would otherwise be spent on manual labor. Additionally, MTD software can help businesses save money by providing tools for streamlining operations and improving efficiency.
What is the best MTD Software?
There is no one-size-fits-all answer to this question as the best MTD software for your business will depend on a number of factors, including the size and complexity of your business, your industry, and your specific needs and requirements.
Below is a quick guide to help you make more of an informed decision to decide which software programs best suits you and your business.
Quickbooks is probably the most used accounting software and is commonly used by sole traders and small businesses. The Quickbooks MTD software is recognised by HMRC in the UK so can easlity help you get ready for MTD.
Reasons to buy:
Quickbooks is a solid and versatile accounting software. It is mainly tailored to suit small businesses and self-employed whilst being almost suitable for accountants and bookkeepers. I personally have tried all of the software in this post and found quickbooks to be the most suitable to meet my requirements.
In addition to this meeting my needs, its pricing is extremely competitive and it is keen to win your business too. It regularly runs pricing offers on its services whilst offering incentives and discounts. It really is a great piece of software to handle your invoices, for VAT and any you need to handle.
It is incredibly important for businesses to get their tax correct, Quickbooks is a strong contender.
2) Xero Software
Xero accounting software has been around for a while now and is giving Quickbooks a run for its money. Xero is a very versatile tool and whilst it supports Making Tax Digital, xero offers additional tools like VAT returns, bill payments and expenses to name a few.
Reasons to buy:
Xero is a great piece of accounting software and answers your tax affair needs with HMRC however what frustrates me is the pricing model and the additional add on costs for extras.
Having said that, the software does exactly what you expect from it. Xero is an all-in-one platform that simplifies your business accounting tasks. You can track cash flow, raise invoices and file digital tax returns.
The digital era that we are now in, security is key and even more so when it comes to your financial affairs. Xero does pride itself on being a safe and secure platform so maybe the extra cost may be worth it.
Freshbooks is a no nonsense accounting software and is a strong contender. Freshbooks are HMRC approved and is fully ‘Making Tax Digital’ compliant. They cover the usual invoicing, expenses and accounting requirements. Not only is suitable for Self Employed and Small businesses, but it is also tailored for businesses who need to track time with employed contractors.
Reasons to buy:
Freshbooks comes with simplicity which is handy when handling your finances and taxes. There are a number of different software packages to suit your business requirements. Whether you are Self Employed or run a Small to Medium sized business Freshbooks have you covered. Their are budgets to suit what you need. As your business grows your financial requirements will grow with this, you can upgrade as and when you are ready.
Freshbooks offer solid support should you get into any trouble using their platform. One thing I am not a fan off is the limitations on billable clients…you maybe a small business selling lots of small items to hundreds of clients but do not require all bells and whistles offered at the Premium level. For me this is a stumbling block.
Parking the price structure though, Freshbooks is a strong offering and one for consideration for sure.
4) Zoho Books
Zoho Books is a cloud-based bookkeeping software that helps businesses manage their finances, generate reports, and work collaboratively with their team. With Zoho Books, you can give your accountant access to your books at no additional cost.
Zoho Books uses the cloud to manage your bookkeeping from anywhere, making it simple to maintain digital records of income and expenses as required for Making Tax Digital.
Reasons to buy:
Zoho Books is a small part of the Zoho company software portfolio that is good for anyone who needs to do any type of task. The UK edition is now fully MTD compliant. It is a cheap option for business users, from the self-employed sole trader to larger limited companies. The package is good because it can be used with other Zoho software products which means this allows you to have of a more seamless workflow as you jump from task to task.
Used alone Zoho Books is still a powerful software with lots of features to help with tasks such as filing VAT returns. Another good thing about this software is that it is cloud-based, so you can store documents remotely and access them from anywhere. Zoho Books comes in several different variants with a price point to suit everyone.
What to look for in the best MTD software?
When looking for the best MTD software, one of the key things to look for is HMRC approval. HMRC approval means that the tax people have agreed that the package you’re interested in has been vetted by HMRC officials, which should mean it’ll be good to go when you want to start filing your tax returns.
Before that you’ll want to have a software package that can help you with accounts and bookkeeping duties throughout the year. Having all your data in one software bundle makes it much easier to do your taxes. Being able to use data from your HMRC-approved MTD package should help a lot.
Be mindful of the various features and functions offered. You don’t want to overspend on MTD software that has features you’ll never use. A good rule of thumb is to select a package based on the features you’ll actually utilize. For instance, if you’re a freelancer or sole trader with relatively simple tax affairs then a basic package should suffice.
Do you have to be MTD compliant?
If your business is already free from filing a VAT return online then it is exempt from MTD.
There are certain exceptions where you may only be partially exempt from VAT. If you purchase goods or services that are not for business purposes you will not be able to reclaim the VAT you paid. However, if you buy them for both business and personal use, you will be able to use the partial exemption method.
How to register for MTD
If you wish to register for MTD (making tax digital), you will need to do this on the HMRC website. It may take up to 72 hours for the HMRC to process your application and respond. You won’t be able to submit your VAT return until the sign up is completed so make sure you don’t leave it until the last minute.
What about Making Tax Digital for Income Tax?
Self-employed businesses and landlords with annual business or property income of over £10,000 will be required to follow the rules for Making Tax Digital for income tax from their next accounting period starting on or after 6 April 2023.
Many businesses, self-employed individuals, and landlords are choosing to keep digital records as a precautionary measure. This will allow them to submit income tax updates to HM Revenue and Customs (HMRC) in place of filing the annual Self Assessment tax return.
Making Tax Digital Bridging Software
Bridging software is software that is designed to help businesses transition to Making Tax Digital (MTD) by allowing them to continue using their existing software to keep track of their tax affairs while also complying with the requirements of MTD. Bridging software provides a “bridge” between the business’s existing software and the HMRC (Her Majesty’s Revenue and Customs) systems, enabling the business to submit tax returns and other information electronically in a format that is compatible with MTD. Bridging software may also include features like the ability to extract data from the business’s existing software and convert it into a format that can be submitted to HMRC via MTD, as well as tools to help businesses manage the transition to MTD and ensure compliance with the new requirements.