Making Tax Digital (MTD) is the UK government’s initiative to make tax fully digital. If your business is VAT-registered and turnover is above £85,000, you are legally required to file your VAT returns digitally using compliant software. Even if you are below that threshold or not VAT-registered yet, moving to digital now saves you time and prepares you for future rules. Not all tools meet the standard — here are the fully approved, trusted options you can use right now.
What Makes Software Approved?
To be HMRC recognised, the software must be able to connect directly to HMRC systems, submit your data in the correct format, and keep digital records of all your transactions. You cannot use simple spreadsheets alone; you need software that has been tested and authorised. All our recommendations below are officially listed and fully compliant.
Top Approved Choices
- Xero
Xero was one of the first platforms to support Making Tax Digital and is still the most widely used by UK accountants. Every plan, including the entry-level Starter, is fully compliant. You can record all sales and purchases, keep digital copies of receipts, and submit your VAT return directly from the dashboard in a few clicks. It automatically stores all your records securely so you never lose them. Perfect for all business types, from sole traders to limited companies.
- QuickBooks
QuickBooks is fully MTD approved across every version, including Self-Employed, Essentials, and Plus. It guides you step-by-step through the process, calculates your VAT automatically, and submits directly to HMRC. It also lets you view past returns and check what you owe at any time. It is very user-friendly and great if you want clear warnings and reminders before deadlines. Ideal for sole traders and growing companies alike.
- FreshBooks
FreshBooks is fully compliant and approved for Making Tax Digital for VAT. While it is known for being great at invoicing and client management, it also handles all the record-keeping and submission requirements perfectly. It is simpler than the other two, so if you are a service-based business, freelancer, or agency, it is the easiest way to stay legal without unnecessary complexity.
Which One Should You Pick?
- Choose Xero if you want the industry standard, unlimited users, and strong accountant support.
- Choose QuickBooks if you want great value, clear guidance, and excellent cash flow tools.
- Choose FreshBooks if you are service-based and want simple, beautiful software that just works.
Important Note
If you are only self-employed or a sole trader below the VAT threshold, MTD for Income Tax is being rolled out gradually, but using approved software now makes the transition effortless later. Staying compliant is not optional — using these tools ensures you avoid fines and keep your business running smoothly.
Links:
https://www.xero.com/uk/
https://quickbooks.intuit.com/uk/
https://www.freshbooks.com/uk