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Making Tax Digital with Xero: Your Comprehensive Guide by JacRox Accountants

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Tax Made Simple With Xero

Introduction: What is Making Tax Digital (MTD)?

Welcome to JacRox, a brand division of Jack Ross Chartered Accountants in Manchester. We are dedicated to offering expert Xero services to a wide variety of clients, from sole traders to large corporations. If you are in need of state-of-the-art cloud accounting software, use the contact form on the right and one of our JacRox team will be in touch to discuss next steps.

Making Tax Digital (MTD) is a government initiative that aims to modernise the UK tax system by moving it online. The move to MTD is mandatory for VAT-registered businesses, and the scope of MTD is expected to extend in the coming years. If you are a business owner looking to comply with MTD, Xero offers an HMRC-recognised MTD software solution that can simplify the process for you.

The Importance of MTD for VAT

For VAT-registered businesses, MTD means you must keep digital records and submit your VAT returns using HMRC-recognised MTD software. This shift aims to make tax returns more accurate and easier to manage. Here, we will explore how Xero can help you comply with MTD for VAT.

MTD and Xero: A Perfect Partnership

Xero’s Making Tax Digital Software

Xero’s MTD software is designed to help small businesses and accountants and bookkeepers manage VAT returns efficiently. It is an HMRC-recognised MTD software solution that integrates seamlessly with HMRC systems.

How to Use Xero for MTD

Connecting Xero to HMRC is straightforward. Once you have signed up for MTD, you can use Xero to submit your VAT returns online. Xero’s interface is user-friendly, and it provides all the digital tools you need for digital record-keeping.

Benefits of Making Tax Digital with Xero

  • Accuracy: Digital records reduce the risk of errors in VAT returns.
  • Efficiency: File VAT returns directly from Xero, saving time.
  • Real-time Information: Keep track of your VAT obligations in real-time.

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Very good service from the Jack Ross Team. They gave us good advice and completed a very efficient audit. They have a friendly and competent team. I would surely recommend them.

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Dan Gazzard 25/02/2022
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Been using Jack Ross for a number of years. Good clear advice and nice people to do business with.

Jack Ross is based in Manchester and provides tax planning and Xero accounts. They are a long-standing and well-regarded firm with an excellent reputation. They provide their clients with exceptional service and a wealth of advice. I have no hesitation in using their professional services.

aj shelton 22/12/2021
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Jack Ross has been my accountants since I set up my business in 2016. From the outset I was helped with advice, support and encouragement. I cannot commend them highly enough. Always on hand to answer any question and responsive to any changes in the economy which might concern their clients. I don’t have to worry about the financial side of my business as all of that is taken care of and dealt with by Umar and the brilliant team. If you are looking for a top class accountancy firm which maintains the personal touch they are for you!

I would recommend this account, knowledgable and helpful

syra bano 16/11/2019
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I can confidently recommend Jack Ross Accountants. They are continually improving their service, greatly benefiting our company as well as me personally. The team at Jack Ross have helped suggest and set up innovative accounting software, adding training and support. This alone has been a massive step towards having more control and understanding of our company finances.

J 13/08/2018
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We have enjoyed a solid and constructive relationship with JackRoss and Can highly recommend them for accountancy services.

We have been working with Jack Ross for over two years and the service has been fantastic. They have a great and knowledgable team who have taken good care of us and our accounts.

Meeting to review annual accounts and discuss future plans. Very productive as they definitely talk my language - on reflection probably the best such meeting in recent years. Many thanks Umar and Jamie

Jack Ross has serviced my Personal Tax requirements for the last 5 years. During some complicated challenges their advice was excellent and the customer service second to none and left me with no doubt all was in hand.

Following a recommendation, I have used Jack Ross for all my accounting needs (including payroll) since the inception of my business over 12 years ago. The relationship has been completely hassle free and I greatly value their service, which goes well beyond preparation of accounts. Their tax planning advice has been really helpful and I have always felt that they have ‘got my back’. Can’t recommend them enough.

We have finally found the Accountancy firm that we have been looking for! We switched over to Jack Ross towards the end of last year and from the very first contact to the recent submission of our end of year accounts the service provided has been fantastic and has easily exceeded our expectations. Thank you!

oliver kirk 22/03/2018
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Excellent service; very helpful people and work done much quicker than I expected.

Paul Clark 29/09/2017
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I have used Jack Ross as my accountants for a number of years. Their service is professional and accurate. They deal with queries promptly and I can always get hold of the person I need to speak to. Their digital product has made a big difference to the efficiency of my business. I would not hesitate to recommend them.

Benjamin 22/02/2017
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Jack Ross have been my family and business accountants and financial advisors for over 50 years. The delivery of services is second to none and i would recommend them to anyone. We have also built up great friendships over the years, above and beyond that of a normal business relationship which i value greatly.

Rob Cowan 22/02/2017
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We have been looked after by jack Ross for a number of years. They have given us fantastic tax advise and helped our company grow from strength to strength. A & f

Fee Munshi 16/02/2017
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Excellent advice and an understandable explanation of a very complex area of tax and corporate law which other (so called) advisors managed to totally confuse me. Thank you.

I have had a relationship with Jack Ross for several years and continue to be impressed by the proactive support and diligent advice received across the breadth of the firm. Excellent at signposting.

Holly Jones 14/02/2017
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Jack Ross have acted for our law company for over 5 years and have been professional, prompt, and knowledgable in all aspects of our dealing with them.

MTD Rules and How Xero Complies

Digital Links and Digital Records

One of the key MTD rules is to maintain digital links between all parts of your accounting. Xero’s MTD software complies with HMRC’s requirements for digital links and digital record-keeping.

MTD for ITSA and Future Expansions

While MTD for Income Tax Self Assessment (ITSA) is not yet mandatory, it is on the horizon. Xero is well-positioned to help businesses and landlords comply with MTD for ITSA when the time comes.

Who Needs to Comply with MTD?

VAT-Registered Businesses

If your business is VAT-registered and you have a taxable turnover above the VAT threshold, you must use HMRC-recognised MTD software like Xero to keep digital records and submit VAT returns.

Sole Traders and Landlords

From April 2026, MTD for ITSA rules will apply to sole traders and landlords earning income above a certain threshold. Xero is developing solutions for these groups as well.


Getting Started with Xero for Making Tax Digital

Sign Up for MTD with HMRC

Before you can use any MTD software, you must first sign up for MTD with HMRC. This process ensures that you are on the HMRC system and ready to start submitting digital VAT returns.

Connect Xero to HMRC

Once you have signed up for MTD, you can connect Xero to HMRC using Xero’s dedicated function for this. It is a straightforward process that involves entering your HMRC credentials into Xero to establish a secure connection.

MTD Bridging Software

If you are using spreadsheets to keep your financial records, Xero offers MTD bridging software that can connect your spreadsheets to HMRC, making it easier to submit your VAT returns online.

Explore Our MTD Solutions

At JacRox Accountants, we offer tailored solutions for Making Tax Digital. Whether you need to comply with MTD for VAT or are preparing for future MTD for ITSA rules, our expertise with Xero’s Making Tax Digital software ensures you will find the right fit for your business needs.

Final Thoughts: Making Tax Digital Means Modernising Your Business

As the UK tax system modernises, businesses need to keep up. Making Tax Digital is more than just a government initiative; it is a signal for businesses to modernise their tax returns and record-keeping practices. Xero and MTD are leading the way in this transformation.

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Yes, Xero’s Making Tax Digital software is recognised by HMRC. This means it meets the requirements set by HMRC for digital record-keeping and the online submission of VAT returns. This ensures that you can confidently use Xero for your business’s MTD compliance needs.

Once you’ve signed up for Making Tax Digital (MTD) with HMRC, you can easily connect your Xero account to HMRC. This is typically done within Xero’s dashboard, where you’ll enter your HMRC credentials to establish a secure connection. This allows you to file your VAT returns directly through Xero, ensuring seamless compliance with MTD requirements.

Absolutely, Xero offers MTD bridging software that allows you to link your spreadsheets to the HMRC system. This enables you to continue using your spreadsheets for financial record-keeping while still complying with Making Tax Digital’s requirements for digital VAT returns. The bridging software serves as an intermediary between your spreadsheets and HMRC, making the transition to digital tax filing easier.

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Take advantage of harnessing the full potential of Xero for your business. Whether you're a start-up, a thriving SME, or a larger enterprise, our Xero-certified accountants are ready to guide you through every step. Please fill out the form below, and let's begin your financial transformation.

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