For Your Business

Cloud Accounting & Making Tax Digital

For most businesses and sole traders, the shift to cloud accounting is now a compliance requirement rather than a lifestyle choice. Making Tax Digital for VAT has been mandatory since 2019. Making Tax Digital for Income Tax came in from April 2026. HMRC’s own desktop filing tools are being retired. The direction of travel is clear: if your records aren’t in digital software, they need to be.

We help businesses make the switch – and stay compliant once they have. That means getting you onto the right software, setting it up correctly from the start, and handling the ongoing compliance so the quarterly obligation feels like a routine rather than a deadline.

In a nutshell: we’ll get you onto Xero, FreeAgent, or Dext depending on what suits your business, handle the setup and migration, and manage the Making Tax Digital obligations as they apply to you. Fixed fee. Plain English. No nasty surprises when the new rules land.

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s programme to move tax record-keeping and submissions to digital software. The timeline so far:

MTD for VAT – mandatory for all VAT-registered businesses since November 2022. Records must be kept digitally; returns must be filed through MTD-compatible software. HMRC’s manual VAT submission route is no longer available.
MTD for Income Tax (MTD for ITSA) applies to self-employed people and landlords with qualifying income above £50,000 from 6 April 2026, dropping to £30,000 from April 2027 and to £20,000 from April 2028. Under MTD for ITSA, affected taxpayers file quarterly digital updates to HMRC throughout the year instead of a single annual Self Assessment.

Which Software is Right for You?

We work across three platforms. The choice depends on the size of the business, how you work, and what you want from the system.

FreeAgent is particularly good for sole traders, freelancers, and limited companies that want simplicity and want everything in one place – invoicing, expense tracking, bank feeds, tax estimates, and VAT. Strong MTD for ITSA compliance is built in. Worth noting: FreeAgent is free for NatWest, Royal Bank of Scotland, and Mettle business banking customers.

Xero is our recommendation for more complex limited companies or businesses with 3rd party add-ons. It has excellent bank feed connectivity, strong reporting, good VAT and payroll integrations, and a large ecosystem of add-ons. It’s well-suited to businesses with staff, multiple income streams, and multi-currency businesses.

Dext works alongside Xero or FreeAgent to capture supplier invoices and receipts. Point your phone camera at a receipt, forward an invoice to a dedicated email inbox, or connect supplier portals directly – Dext accurately reads the document and pushes the data through to your accounting software, removing the manual input bottleneck.

If you’re not sure, tell us about your business, and we’ll recommend what’s best for you. We do the setup and, if needed, the migration from wherever you are now. We can also give you training that is tailored to you.

MTD for VAT – What You Need to Do

If you’re VAT-registered and not yet filing through MTD-compatible software, you have a problem. HMRC requires both digital record-keeping and electronic submission – manual processes aren’t compliant even if you file on time. Getting compliant involves:

Getting your records into Xero, FreeAgent, or another MTD-compatible platform
Making sure bank feeds are connected, and VAT records are correctly coded.
Filing through the software’s MTD submission route going forward

We handle all of this as part of the ongoing bookkeeping and VAT service. See VAT and Bookkeeping for the details.

MTD for Income Tax – What’s Changing

Under MTD for ITSA, the annual Self Assessment is replaced for affected taxpayers by:

Four quarterly updates – a digital summary of business income and expenses, submitted to HMRC through compatible software
A final declaration – replacing the current Self Assessment return - this reconciles the previous four quarters and deals with normal accounting and tax year end adjustments.

The quarterly updates aren’t the same as tax returns. You’re not paying tax quarterly (the payment dates don’t change). You’re submitting a record of what happened in the period, so HMRC has an up-to-date picture throughout the year. But if your records aren’t up to date at quarter-end, the submission becomes stressful. Clean bookkeeping through the quarter is the foundation. We get clients MTD-ready ahead of the threshold dates so the change smoother. If your current turnover is more than £30,000, we should chat now before you are mandated in April 2027.

Software Training

If you’d rather run the software yourself, with us available for questions, we can set that up. See Software Training for hands-on training on Xero and FreeAgent.

How We Work

For clients new to cloud accounting:

We agree on the right software. A short conversation about your business, how you work, and what you need from the system.

We set it up. Opening balances imported, chart of accounts configured to your business, bank feeds connected, VAT settings checked, users added.

We handle the ongoing compliance. Bookkeeping is maintained throughout the year, VAT returns are filed quarterly (and MTD for ITSA submissions is filed quarterly once you’re in scope), and year-end accounts and tax are prepared from the same records.

For clients already on Xero or FreeAgent who need a health check or a handover from another accountant, we do a systems review, fix any problems with the existing setup, and take over from there.

Fixed Fees, No Surprises

Software setup and ongoing MTD compliance fees depend on the platform, the size of the business, and whether we’re handling the bookkeeping. The right number for your situation comes from a short conversation.

Ask for a fixed fee quote

A couple of minutes on our online form, and we’ll come back to you with a number.

Frequently Asked Questions

I’m already on Xero but not sure if my MTD for VAT is set up correctly. Can you check?

Yes. We do an Xero health review for new clients – we’ll look at the VAT settings, the bank feed connections, the chart of accounts, and whether the MTD submission route is live and working. Most problems are quick to fix; we tell you exactly what we find.

What happens if I miss an MTD for ITSA quarterly filing?

HMRC will issue penalties for late MTD submissions under the points-based penalty system. Late submissions accumulate penalty points; once you reach the threshold, a financial penalty follows. Getting set up properly before the obligation starts means this isn’t a risk you need to worry about.

Do I need MTD-compatible software for my Self Assessment if I’m below the threshold?

If your qualifying income is below £50,000 (or £30,000 from April 2027, or £20,000 from April 2028), MTD for ITSA doesn’t apply to you yet. But cloud accounting software is still worth using – it gives you a better understanding of your finances, keeps your records in order, and means you’re already compliant when the threshold eventually covers your income.

Can I keep a spreadsheet?

For MTD for VAT, spreadsheets are only acceptable with HMRC-approved bridging software that reads the spreadsheet and submits the figures digitally. It’s a workaround rather than a solution. For MTD for ITSA, spreadsheets alone won’t be compliant. We’d rather get you onto proper software and make the whole thing simpler.

Ready to get MTD-ready?

Three ways to start. Whichever’s easiest.

Call us Ask for a fixed fee quote Email us