MTD Software That Makes VAT Return Filing a Breeze

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 (with an MTD Software Portal) that lets you submit your MTD VAT Returns to the HMRC and review past submissions, VAT liabilities, and VAT payment history. Making tax digital for VAT-registered businesses is simple with FreshBooks MTD software (Making Tax Digital software).

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.

Making Tax Digital software programs are HMRC-recognised software programs that ensure your business’ digital records are compliant with the HMRC. This means when you submit VAT returns through your MTD-compatible software (FreshBooks), your VAT submission and tax returns meet the standards and expectations of HMRC.

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

Get all the details about how MTD works in FreshBooks in this helpful step-by-step guide.

Simply put, bridging software is a light and more complex solution than FreshBooks for your Making Tax Digital needs. It 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.

PSD2 stands for Payments Services Directive 2 and is a new EU regulation on authenticating online payments. 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.

BACS Direct Debit (also known as Bankers’ Automated Clearing System (BACS)) is available through the FreshBooks integration with Stripe. It allows businesses to receive online payments from Clients through bank-to-bank transfers in GBP currency.

Looking for MTD software (Making Tax Digital software) that’s right for your business means trying out your options. So give FreshBooks a free try. It’s on us. As a small business owner, you get unlimited access to FreshBooks accounting software through our 30-day free trial, with no contracts and no credit card required. You even get free phone and email support if you have questions about setting up your account.

That’s right, the free trial period gives you access to all of our unlimited invoicing features, expense features, project management tools, the FreshBooks mobile app, business financial reports, accounting reports, everything you need for income tax, and as many billable clients as you need. Basically, all the features growing businesses need to keep growing are available to try out.

Need more answers? Check out this great article on the FreshBooks blog: How to Make the Most of Your Free 30-Day FreshBooks Trial

Sales Tax is imposed on the price of some items and services and is charged as a percentage of the selling price and is collected at the time of the sale. The amount of Sales Tax to charge depends on the State, City, and Country your business may operate in, and multiple or different taxes can be charged at the same time. MTD software (Making Tax Digital software), like FreshBooks, needs to have an accurate way to track sales tax.

The business charges Sales Tax on the government’s behalf, which means Sales Tax is not a part of your business’ income. Sales Tax must be paid back to the government (also known as tax remittance) at specific intervals depending on your government’s requirements.

MTD software (Making Tax Digital software), like FreshBooks, needs to be able to track other income so you can properly report your income tax. As a business owner, you may be receiving income or revenue through other means that don’t require an invoice (like non-invoice income). While tracking it might be different, this other income still needs to be reported on income tax self-assessment returns.

Other income can be from selling through online stores (like Shopify and Etsy), at fairs, selling ads, or renting space, for example. This can be tracked in FreshBooks by recording the details of the income, along with the payment (which is optional).

Recording Other Income allows you to provide accurate information for your accountant, so you can get a complete picture of the health of your business.