Making Tax Digital deadlines
Making Tax Digital for VAT, the initiative's first phase, began on April 1st, 2019. This included all VAT-registered companies with taxable turnovers above the £85,000 VAT threshold. If you are VAT-registered, you will be required to comply with Making Tax Digital for VAT beginning in April 2022. The final stage will begin in April 2023, when Self-Assessment taxpayers will be required to comply with Making Tax Digital for Income Tax as well.
How to register for digital tax
Now, only VAT-registered companies must comply with the latest initiative; however, it will soon be extended to all businesses. How you register for digital tax depends entirely on which phase you are part of.
According to the available consulting documentation, HMRC's website has a guide for locating compatible software, this forces most companies to purchase software that is appropriate for business use.
So, what is the best accounting software to choose for MTD for VAT?
Which accounting software to choose can be confusing and daunting! It’s critical to find a solution that is suitable for you and your business; it must include the functions that you need right now and be able to help you in the future, as your business expands and when the tax self-assessment laws change.
Sage One (Start-up friendly)
Sage is a large commercial software provider, but its cloud accounting software offering for small companies is Sage Company Cloud Accounting. It aims at Entrepreneurs, start-ups and small businesses. Its features include free 24/7 telephone and email support 365 days a year; users can choose to take Payroll without an Accounting subscription. Sage Business Cloud Accounting supports Automated Bank Feeds, from a third party and Direct Bank Feeds with RBS, Nat West, Barclays, Halifax, Santander, Nationwide, Cashplus, and hundreds of other financial institutions. The Sage Expenses and Invoices apps are available for free download on iOS and Android.
FreeAgent (Freelancers, contractors' companions)
Since FreeAgent is aimed at freelancers, contractors, and micro-businesses, it focuses on day-to-day administrative activities such as VAT filing; RTI-compliant payroll; overview screen bringing together invoices, expenses, bank accounts, and cash flow tracking; Tax Timeline enabling users to see upcoming dates for self-assessment, VAT, corporation tax return, and payroll; powerful double-entry accounting engine; self-assessment filing for sole traders and limited company directors; free UK-based telephone and email support. It is a cloud accounting software package.
Quickbooks (Small businesses, self-employed are covered)
QuickBooks is a cloud-based accounting software developed by Intuit, one of the very first developers of accounting software. Freelancers can consider signing up for the basic Self-Assessment, which allows them to monitor their self-employed revenue, and small firms can use it for VAT and payroll. Quickbooks tracks income and manages self-assessment for sole traders; receipts; downloads bank transactions; invoicing; payroll; manages CIS deductions; bills and payments. Through the QuickBooks App Store, you can connect your account with over 700 third-party applications, allowing you to save time on data entry, payroll processing, backup capture, and inventory tracking.
Xero (Colleagues' choice)
Xero aims at small business owners and their accountants, and contractors. Its features include direct bank feeds; easy invoicing, expenses, CIS, stock control, and bill paying; you can submit VAT and payroll to HMRC online directly; payroll; mobile apps for invoicing, expenses, and bank transactions; easy use of the dashboard to see how your business is doing, updates and new features released every three to six weeks; unlimited user access. It can also upload your banking, credit card, and PayPal details, and there is an app for both iPhone and Android.
Accounting software Comparison
| Accounting Software | Free Agent | Sage | Quickbooks | Xero |
| Free Trial | Yes (30 days) | Yes (30 days) | Yes (30 days) | |
| MTD VAT capabilities | Yes. Throughout all price policies, Xero calculates your VAT and allows you to directly file your VAT returns online. | |||
| Works with multiple currencies | Premium plan only | |||
| Any limit on the number of users | Single users can use Sage Accounting Start; unlimited multi-users can use Sage Accounting & Sage accounting plus. | Depending on the package, 3 to 5. However, Quickbooks desktop can do so much more. | ||
| Costs | Monthly at a 50% discount for the first six months, then the normal price applies. | Sage Accounting costs £24; Sage Accounting Plus costs £30; Sage Payroll costs £7 for up to twenty five employees. (Higher prices apply for additional employees). | £12 per month – Simple Start month; From £20 per month for essentials. | The Starter package is £5 a month, the Standard plan is £12 a month, and the Premium plan is £15 per month for the first three months. Within six months, the charges increase to £10pm/£24pm/£30. |
Making Tax Digital for VAT means you need to keep digital records and use compatible Making Tax Digital software that lets you submit VAT returns. HMRC has no intention to include its own free software. HMRC eventually plans to implement Making Tax Digital for all VAT-registered companies, as well as Income Tax and Corporation Tax. Hence, we would recommend you do your own research accordingly before choosing the appropriate accounting software.
