Effective April 6, 2023, the new UK tax system will require all citizens and companies to keep a digital record of their transactions. The HM Revenue and Customs (HMRC) will use the data to calculate any income or value-added tax due.
As an e-commerce seller, your business must be VAT-registered, and you must submit VAT returns in addition to your quarterly income tax returns. This is made possible by using Making Tax Digital (MTD) software applications - fully MTD-compliant software can help immensely with your tax return submission.
This article will help you select the right MTD software to submit income tax updates. All these tools comply with the latest tax digital rules and offer a proper tax digital service to self-employed businesses, sole traders, and enterprise-level businesses.
Tax Return Submissions are made by filling in forms with data from the sales transaction records held by e-commerce sellers.
MTD software is accounting software compatible with making tax digital that helps you record transactions and calculates the tax due.
It allows you to manage your VAT and income taxes easily and submit your returns online. So, in a nutshell, it's a user-friendly integrated taxation solution that automatically calculates the tax due based on your sales records.
The MTD-compatible software can be incorporated with HMRC systems to send routine updates directly to HMRC.
HMRC isn’t selling any software, but it’ll make the Application Programming Interfaces (APIs) available so that other companies may use them to create their own.
This software must be capable of the following:
The HMRC portal closed for VAT submissions on November 1st , making MTD-compatible VAT software mandatory to file your VAT return. Look at the available options and compare features to determine which works best for your business.
If you ask us which MTD software is our favourite, we’d say Xero and QuickBook. These two are the best available options with tons of features.
The cloud-based solution connects with other accounting software, offering a low-cost solution for accounting. It can be used to keep track of your stock and sales.
Potential consumers may select from various packages with competitive costs and many features.
With the QuickBooks MTD software, company owners can access their financial data anywhere. It allows e-commerce accountants and bookkeepers to log in from any browser. This software is best for service-based businesses.
Besides Xero and QuickBooks, there are a few more excellent tools that make your VAT submission and other tax related tasks easier. They are:
This software is straightforward and highly suitable for e-commerce sellers. You can track, record, and file your VAT returns online in real-time.
They offer Excel/spreadsheet integration. Their software is integrated with the HMRC filing portal, so you can file your VAT returns directly and save time.
FreeAgent is explicitly designed for service-based businesses like freelancers, agencies, and consultants to help invoice their customers on the spot from any mobile device or desktop PC.
This software is 100% functional, and MTD-compatible with all of the tools needed for quick and efficient tax and account processing. It has better features than other software tools and works with most platforms.
It is a free MTD-compatible software option for Making Tax Digital and filing VAT returns. You can automatically import all your receivables, suppliers, and clients into Anna Money.
After this, the accounting software can easily track your cash flow, organise your assets and inventory, track payments, and much more.
Zoho Books is an MTD-compatible software tool that suits the requirements of almost all types of users. It is the best software option for beginners.
Because of the features, the tool is cost-effective with high usability. Users agree that the pricing is quite affordable for a highly functional application for taxes and accounting.
Making Tax Digital compatible software allows you to meet your new obligations by submitting records digitally. Here are some benefits:
You can create your spreadsheet to get an overview of your sales. The spreadsheet will show your income and the total amount of VAT and other taxes you owe.
Using such a tool will save time and money on your accounting bills. A report will help you understand your financial situation and help prepare your VAT return.
It’s easy to bill your customers and give them the proper tax invoice. These invoices are produced at the click of a few buttons. There is no need to create any manual invoices anymore.
All financial information, including tax reports and invoices, is stored centrally in the software and can be viewed on any device.
The software allows you to automatically create and submit your payroll with your monthly VAT report.
You should be careful when choosing the best Making Tax Digital compatible software. Since the law requires tax return submissions, you must choose a solid option capable of doing all the work.
In addition, it is cost effective and time saving to have reliable and MTD-compatible tax return software in your arsenal to file your returns correctly.