Glossary definition

What is MTD compatible, MTD approved or MTD ready software?

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MTD-compatible software is accounting or record-keeping software that can connect directly with HMRC systems and help businesses meet the requirements of Making Tax Digital (MTD).

If you’re registered for VAT or fall within the scope of MTD for Income Tax, you must use software that supports digital record keeping and submission to HMRC.

The terms MTD compatible, MTD approved, and MTD ready are often used interchangeably to describe software that works with HMRC’s Making Tax Digital system.

However, HMRC does not officially approve or endorse accounting software.

Instead, HMRC operates a software recognition process that checks whether a product can meet the technical requirements needed to work with MTD.

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What does MTD-compatible software do?

MTD-compatible software helps businesses:

• Keep digital tax records.
• Connect securely with HMRC systems.
• Submit required tax information electronically.
• Meet Making Tax Digital record-keeping and reporting requirements.

The exact features available will vary between software providers.

Is MTD-approved software the same as MTD-compatible software?

In practice, yes.

Many software providers use terms such as “MTD approved” or “MTD ready” in their marketing.

HMRC’s official position is that recognised software has been checked to confirm it can work with Making Tax Digital requirements, but HMRC does not recommend or endorse one product over another.

What software is recognised by HMRC for MTD?

HMRC maintains a list of recognised software products that meet its Making Tax Digital requirements.

Sage Accounting is recognised by HMRC for both MTD for VAT and MTD for Income Tax.

Browse more topics from this term

• Making Tax Digital for businesses
• Making Tax Digital for Income Tax
• Making Tax Digital for VAT