MTD-compatible software is accounting software that is able to integrate with HMRC systems to send regular updates directly to HMRC.

While HMRC will not be offering their own software, they are providing the Application Programming Interfaces (APIs) to commercial software developers such as FreeAgent. These accounting software providers are currently using HMRC’s APIs to develop a range of applications that will enable businesses to easily maintain their records digitally and integrate this with HMRC systems.

At this stage, MTD-compatible software products are still being tested, and HMRC is working closely with accounting software providers to produce a variety of suitable products at different pricing levels.


MTD for VAT compatible software

 For an accounting software to be operative for Making Tax Digital it must be able to:

  • Keep records in a digital form.
  • Preserve records in a digital form.
  • Create a VAT return from the digital records.
  • Provide HMRC with VAT returns and voluntary information by using the API platform.
  • Receive information from HMRC using the API platform. This will include messages and reminders about requirements to file and confirmation of successful filing.


Choosing the right MTD-compatible software

A business or organisations choice of MTD-compatible software depends on their business model and level of experience with technology.

Those with extensive knowledge and understanding of IT, who perhaps already have an accounting software integrated into their business model, will have to ensure that their provider is going to deliver a version of their software that is MTD-compatible.

Businesses, who do not use technology very much, have the option to consider a spreadsheet bridging software. This is an application that will be able to extract the contents of a spreadsheet and upload it to HMRC.

However, with technology becoming more and more prevalent in every industry, it is worth becoming more comfortable with IT sooner rather than later. The reality is that businesses will only become more reliant on technology and so for the long-term future of a business or organisation, it is worth becoming more accustomed and comfortable with the integration of technology such as MTD-compatible accounting software.


Cloud accounting software

While a cloud accounting software is not essential to being MTD-compatible, with the number of legislative changes that have occurred in the UK from pension auto-enrolment and open-banking to GDPR and now MTD, businesses may find it a lot simpler and more cost-effective to choose a software provider that is on the cloud (hosted on the internet). As a cloud accounting software will be able to make connections with other digital services and as a result provide increased functionality and flexibility.



K&B Accountancy Group is proud to be premium partners with FreeAgent, a cloud accounting software crafted with small businesses and the self-employed in mind. Simplifying financial administration and helping to keep small businesses on the right track. What’s more, HMRC has included FreeAgent on their list of suppliers equipped to supply software MTD-compatible software in time for Making Tax Digital for VAT in April 2019. Our monthly accounting packages all have FreeAgent incorporated into the cost, so no matter what package you choose, we’ll make sure your business is MTD-compliant.


Click below to learn more about Making Tax Digital: 

Making Tax Digital: what you need to know so far

Making Tax Digital for VAT

Making Tax Digital for Income Tax


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