This article explains how to sign your business up for Making Tax Digital (MTD) for VAT and connect your FreeAgent account to HMRC.
Please note that you'll need to use FreeAgent's MTD connection in order to file your VAT returns to HMRC using FreeAgent.
If you're an accountant with a Practice Dashboard, here's how to set up your practice for MTD and how to sign up your clients for MTD.
Before you start
Before you can connect FreeAgent to HMRC, you'll need to enter your 'VAT Registration' details in FreeAgent.
To do this, select ‘Settings’ from the drop-down menu at the top-right of the screen and select ‘VAT Registration’.
Enter the relevant details and select 'Save Changes' at the bottom of the screen to complete the process. For information on how to enter your 'VAT Registration' details, please see this article.
1. Sign up for MTD for VAT with HMRC
Firstly, if you haven’t already done so, head to HMRC’s MTD for VAT sign-up page and sign up your business. Once you’ve completed the process you’ll see the following screen:
- HMRC will perform some checks before sending you a confirmation email. This can take up to 72 hours. Once you receive confirmation, you are ready to connect FreeAgent with HMRC.
- If you make VAT payments through Direct Debit, you cannot sign up in the seven working days leading up to, or the five working days after your VAT return is due.
2. Connect FreeAgent to HMRC
Please note that you'll need to have entered your 'VAT Registration' details in FreeAgent before following the steps below.
After signing up for MTD for VAT with HMRC, log in to your FreeAgent account and select 'Connections' from the drop-down menu at the top right of the screen.
Select ‘Manage HMRC connections’ in the ‘HMRC connections’ section. Please note that only users with full (level 8) access will be able to see the ‘HMRC connections’ section.
Select ‘Connect FreeAgent to HMRC’.
You'll be redirected to the HMRC website to complete the connection process. Select ‘Continue’ and fill in your Government Gateway credentials.
When the connection is completed successfully, you’ll see the following screen:
You will now be able to file your VAT returns via MTD using FreeAgent. HMRC requires you to update your connection every 18 months. You should follow the steps outlined in this article to update your connection when required.
To learn more about the government's Making Tax Digital initiative, check out our MTD guides and resources.
If there is a problem during the connection process, you will see the following error message:
The error could mean one of the following things:
- You haven’t completed the sign-up for MTD. Please try logging in to your HMRC business tax account and check that you can access MTD services. If you can't, you'll need to complete the sign-up for MTD.
- You’ve entered your VAT number incorrectly. Please double-check that the VAT number in your FreeAgent account matches the VAT number in your HMRC business tax account.
- If the VAT numbers in your FreeAgent account and HMRC business tax account do match, please try again using the same credentials you used to sign in to your business tax account.