× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our UK site. Select your regional site here:

Help

Call Sales: +44 (800) 047 8164

A Beginner’s Guide to Making Tax Digital (MTD) 

Not sure where to get started with Making Tax Digital? Let us help. FreshBooks has everything you need to check if you’re MTD-compliant and easily file your Value-Added Tax (VAT) returns.

What Exactly Is Making Tax Digital (MTD)?

MTD is an initiative designed to move the UK tax system online by HM Revenue & Customs. And FreshBooks can help you submit returns, and review past submissions. 

What Is the VAT Return Report?

A report that lists VAT-eligible transactions – and calculates the amount of VAT you should pay or reclaim. They can easily be run and submitted directly to HMRC on FreshBooks.

So, What Do I Do as a Business Owner?

Use an MTD-compatible software like FreshBooks to keep proper digital records and accurately file a VAT return report (it’s super easy).

Still Not Sure if You Need to Be MTD-Compliant?

Below you’ll find a series of quick questions to help you understand if you’re ready for MTD. Don’t worry – it’s super straightforward!

MTD Compliance Checker

Is your business VAT-Registered?

|

MTD Compliance Checker

That means you’re not affected by MTD for VAT. But, MTD for Income Tax Self Assessment is coming in 2026. Start prepping for it now by using FreshBooks to keep digital records.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

Have you registered for Making Tax Digital for VAT?

|

MTD Compliance Checker

No worries! HMRC will automatically register you in MTD for VAT. You’ll just need to use an MTD-compatible software like FreshBooks to keep digital records and file your VAT Returns.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

How do you currently prepare your VAT Returns?

|

MTD Compliance Checker

Use FreshBooks to keep digital records, generate VAT reports, and stay MTD-complaint – and share everything with your accountant when needed.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

As of April 2022, it’s best to use MTD-compliant software to keep digital records and file your returns. FreshBooks keeps everything organized, accurate, and allows you to file directly to HMRC.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

As of April 2022, you need to use MTD-compliant software to keep digital records and file your returns. FreshBooks keeps everything organized, accurate, and allows you to file directly to HMRC.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

Which software do you use?

|

MTD Compliance Checker

No problem! Just check that your software is MTD-compatible.

And if you’re looking for something easier, FreshBooks keeps everything organized, MTD-compliant, and allows you to file directly to HMRC.

Try It Free

Ready to Join? Buy Now & Save 90%

Need More Help?

|

MTD Compliance Checker

Awesome! You’re already using a platform that keeps everything organized, MTD-compliant, and allows you to file directly to HMRC.

But if you want an accountant’s help to simplify VAT filing even more, let’s talk.

|

Easy-to-Use Accounting & Bookkeeping Features

Professional Invoicing

Impress clients with professional Invoices that clearly show the work you’ve done and what it costs…then, just click send. Oh, and use automated payment reminders to nudge clients for payment.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Invoicing-uk
Close video

Keep an Eye on the Big Picture

FreshBooks’ easy-to-use Double-Entry Accounting tools and reports show profitability, cash flow health, and details your spending. Plus, easily file VAT returns online.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Accounting-gb
Close video

Never Miss an Expense

Snap receipt photos, forward email receipts to your account, and import expenses from your bank – then assign them to clients and stay ready for taxes.  Bank Connections are powered by Plaid, through FreshBooks as their agent.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

expenses-ocr-en-uk
Close video

Fast & Easy, for You and Your Clients

FreshBooks’ automated online payment options (like automated recurring billing) let your clients pay their preferred way, and get you paid 2x faster.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Payments-uk
Close video

Track Time to the Minute

You (and your team) work on lots of projects at once, and missing billable time can be costly. Time Tracking in FreshBooks makes it easy for teams to log time and automatically add it to invoices, so all time is accounted for.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-TimeTracking-uk Carousel-TimeTracking-mobile-uk
Close video

Keep Everyone on the Same Page

With a business to run and projects to manage, it’s tough to keep everyone synced up and on schedule. Projects in FreshBooks make it easy for your clients, team, and contractors to collaborate, and share files and updates…all in one place.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Projects-uk Carousel-Projects-uk
Close video

Know Your Business Better

Easily track every dollar in and out of your business then run reports to see how your business is doing. And at tax time, do it yourself or just give your accountant access to quickly find what they need.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Reports-uk Carousel-Reports-mobile-uk
Close video

Take FreshBooks Anywhere

Stay connected to your clients and team, even on the go. Send invoices, track expenses, and check on projects all with the FreshBooks mobile app. Oh, and if you drive a lot for your business, check out the Mileage Tracker.
Try It Free

Try it free for 30 days. No credit card required. Cancel anytime.

Carousel-Mobile-uk freshbooks-product-family-uk
Close video

Why 30+ Million People Have Used FreshBooks

4.4 Excellent  

“This software fits well with small businesses as they can easily do invoices with tax and VAT things, expenses and even payroll. Thumbs up!”

4.4 Excellent  

“It’s great on the customer side of things… creating invoices and for doing some other tasks such as estimates, petty cash and simple VAT return.”

4.4 Excellent  

“FreshBooks is one of the best accounting software for accurate invoicing, expense tracking and reporting. The ease of use is exceptional.”

Find Out More About MTD on FreshBooks

How to Enjoy a Stress-Free UK Tax Season With FreshBooks

5 Benefits of Switching Your UK Business to Cloud Accounting

Everything You Need to Know About Making Tax Digital Software


Or check out the Making Tax Digital resource hub


Frequently Asked Questions

What is Making Tax Digital (MTD), and Making Tax Digital software?

Making Tax Digital is an HM Revenue & Customs (HMRC) initiative designed to ensure the UK tax system is effective, efficient and more straightforward for VAT-registered businesses. FreshBooks is an MTD software that lets you submit your MTD VAT Returns to the HMRC and review past submissions, VAT liabilities, and VAT payment history.

For VAT-registered businesses, once a VAT Profile is configured and signed in with the Government Gateway, it’s easy to submit returns directly to the HMRC using FreshBooks.

At the same time, FreshBooks also ensures you have the information you need for your income tax self assessment. It’s easy when all business finances are in one place.

Learn more about how FreshBooks makes tax time easy in this article: How to Enjoy a Stress-Free UK Tax Season With FreshBooks

Or see how FreshBooks can help you with Making Tax Digital every step of the way on this page.

Is Making Tax Digital required for my business?

Making Tax Digital for VAT is currently a requirement for all VAT-registered businesses with a taxable turnover of over £85,000. And easy way to check if you fall into this is by using our compliance checker.

If you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you must keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software like FreshBooks!

What is MTD bridging software for Making Tax Digital?

Simply put, bridging software extracts and collects information from the spreadsheets you’ve been maintaining all year and consolidates it. Then, it links it to HMRC’s portal and submits it electronically. It’s a solution for Making Tax Digital that allows you to keep using spreadsheets to keep digital records. But a bridging software, as the name suggests, will now act as a ‘bridge’ between you and HMRC’s tax return portal.

The HMRC wants businesses like yours to use bridging software for Making Tax Digital reflects as part of the HMRC’s Application Programme Interface (API) first strategy—making tax collection and VAT return filing digital, making it more efficient, less time-consuming, and overall easier to manage.

Alternatively, using Making Tax Digital software programs like FreshBooks ensures you can efficiently run your business in a way you can’t while using spreadsheets, and you get MTD-compliant digital record-keeping software that makes it easy to file your VAT return.

How can FreshBooks help with Making Tax Digital?

FreshBooks is MTD-compliant, HMRC Recognised accounting software that keeps accurate digital records of all your invoices, payments, and expenses. This makes it easy to file a self assessment tax return.

FreshBooks also automatically generates VAT Return Reports, connects to the HMRC for filing, and lets you to export files for your accountant – allowing you to make tax digital for an income tax self assessment.

How can FreshBooks help me with my Income Tax Self Assessment?

HMRC announced that Making Tax Digital for Income Tax Self Assessment will now be introduced in April 2026 – with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first. Those with income over £30,000 will be mandated from April 2027.

Which means, now is as good a time as ever to start prepping for it by using MTD Compliant software like FreshBooks to keep digital records.

Is FreshBooks PSD2 compliant?

Yes! FreshBooks is PSD2 compliant as of September 14, 2019, when PSD2 went into effect. This affects all European Business Owners who bill Clients based in Europe only. In addition to PSD2, the UK has implemented the Open Banking Standard for users in the UK who use third-party apps to connect to their bank accounts.

Is FreshBooks just an accounting solution, or can it help me file my income tax and VAT return?

The short answer is YES, it will help you file your income tax and VAT returns!

Here’s the long answer:

You probably already know that FreshBooks is Making Tax Digital software that’s compliant with HMRC’s MTD initiative to help you file VAT returns for your VAT-registered business. It allows you to easily file your income tax self assessment using digital records (of everything from invoices, to expenses, to payments – allowing you to account for things like property income and track the difference between VAT and corporation tax in your business)

FreshBooks also supports Cash Accounting, Accrual Accounting, and Flat Rate accounting schemes commonly used to file VAT Returns.

So if you’re wondering whether you need to worry about MTD, use our compliance checker to see if you meet the necessary threshold. 

Can FreshBooks replace QuickBooks Online or Xero?

Yes, absolutely. We could write an eBook detailing why FreshBooks is the best accounting software for your business, and a better solution than Quickbooks Online, Xero, MYOB, Zoho, Wave, or any other accounting software. But the best way to decide for yourself is to start a 30-day free trial. You get to use all the user-friendly features and don’t need a credit card to sign up.

FreshBooks is the perfect solution for everyone, from very small businesses all the way up to established tech companies with big teams. Kind of like this one: Erik’s Health-Tech Startup Relies on FreshBooks to Keep Cash Flow Strong

Want more information about which of the FreshBooks plans is right for you? Check out this blog article: Wondering Which FreshBooks Plan Is Right For You?

Before starting a trial, if you want a thorough breakdown of the main reasons FreshBooks is a better accounting software, then check out the links below.

FreshBooks vs QuickBooks

FreshBooks vs Xero

WHY BUSINESSES LOVE FRESHBOOKS

40 hrs

SAVE 40 HRS FILING TAXES EACH
TAX SEASON BY USING FRESHBOOKS

28 %

FILING TAXES UP TO 28% FASTER BY
USING FRESHBOOKS

160+

PEOPLE IN OVER 160 COUNTRIES
HAVE USED FRESHBOOKS

Free for 30 days. No credit card required. Cancel anytime.