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).
or Try it Free
Everything You Need to Make Taxes Digital
Professional Invoicing
Try it free for 30 days. No credit card required. Cancel anytime.
Keep Tabs on Your Business Health
Try it free for 30 days. No credit card required. Cancel anytime.
Never Miss an Expense
Try it free for 30 days. No credit card required. Cancel anytime.
Fast & Easy, for You and Your Clients
Try it free for 30 days. No credit card required. Cancel anytime.
Know Your Business Better
Try it free for 30 days. No credit card required. Cancel anytime.
Track Time to the Minute
Try it free for 30 days. No credit card required. Cancel anytime.
Keep Everyone on the Same Page
Try it free for 30 days. No credit card required. Cancel anytime.
Take FreshBooks Anywhere
Try it free for 30 days. No credit card required. Cancel anytime.
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.”
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
Or check out the Making Tax Digital resource hub
Frequently Asked Questions
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.
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!
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.
FreshBooks is MTD-compliant, HMRC-approved 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.
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.
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.
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.
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.
