Wondering whether the accounting software you’re already using will actually cope with Making Tax Digital for Income Tax? You’re not the only one asking. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have had to keep digital records and submit quarterly updates through MTD-compatible software, and that threshold drops to £30,000 from April 2027 and £20,000 from April 2028. So, if you haven’t checked your setup yet, now really is the time.

We already covered general cloud accounting software choice in our guide to the six best cloud accounting software packages for small business. This time, we’re looking specifically through an MTD lens: what ‘MTD-compatible’ actually requires, and how the four packages we work with at Adams Accountancy handle it.

What does mtd-compatible software actually need to do?

According to HMRC’s own guidance, your software needs to create, store and correct digital records of your self-employment and property income and expenses, send quarterly updates to HMRC, and let you submit your final tax return by 31 January the following year. There are two broad types: software that creates your digital records directly (usually by linking to your bank feed or letting you enter figures manually), and ‘bridging software’ that connects to records you already keep in a spreadsheet. You can use more than one product if you need to, but only one product per submission, so check how any software you’re considering fits with your other income sources before you commit.

Four MTD-compatible software packages we work with

HMRC recognises a wide range of MTD-compatible software, and you can use its software finder tool to see the full list. We’ve deliberately narrowed this down to the four packages we actually work with as a practice, so we can offer proper support alongside whichever one you choose, rather than a longer list we couldn’t help you with.

Software	From	Free route	Quarterly & final declaration	Best suited for
Xero	£7/month +VAT (Simple)	No permanent free tier	Both, submitted directly	Sole traders and landlords wanting strong reporting as they grow
QuickBooks	£10/month	No permanent free tier	Quarterly confirmed; confirm final declaration status directly	Sole traders wanting the strongest mobile app
FreeAgent	From £0	Free with NatWest, RBS, Ulster Bank or Mettle	Both, built in	Anyone already banking with a qualifying NatWest Group account
Sage	From £0 (Individual tier)	Free tier for simple sole traders, no property income	Both on paid tiers; confirm Individual tier scope	Simple sole traders, or businesses already using Sage

 

Pricing and exact features change fairly often, and our sources weren’t fully consistent on final declaration support outside Xero and FreeAgent, so treat the table as a starting point rather than gospel. Always confirm current pricing and MTD coverage directly with the provider before deciding.

Software for more complicated companies

A note for landlords with a larger or more complex portfolio: these four are general-purpose accounting packages, and property-specific software exists that may handle multiple properties, joint ownership or foreign property more smoothly. We don’t currently support these specialist tools, but it’s worth knowing they exist if your situation is more complex than a single rental property alongside other income.

It’s also worth knowing that HMRC requires providers to offer a genuinely free product for people with the simplest tax affairs, so it’s not just FreeAgent and Sage worth checking. Free options do typically come with limits, such as a cap on transactions or income sources covered, so check these carefully against your own situation before relying on one.

What to check before you choose

Beyond the headline price, a few practical questions make the real difference:

☐  Does it cover the year-end final declaration as well as quarterly updates, or updates only?

☐  Does it support all your income sources, particularly if you have both self-employment and property income?

☐  If you’re after a free tier, what are the conditions, and do you actually meet them?

☐  Does it work well with the software your accountant already uses, to keep year-end handovers simple?

☐  Does it include HMRC Assist, the feature that flags errors and gives feedback on your submissions using HMRC’s own data?

Getting ready before your next deadline

Quarterly update deadlines fall on 7 August, 7 November, 7 February and 7 May, with your final declaration due by the following 31 January. Our MTD for Income Tax checklist walks through the full run-up in more detail, and our note on the 7 August deadline covers what a first quarterly submission actually involves.

Choosing MTD-compatible software isn’t something to rush, but it also isn’t something to leave until your next deadline is looming. If you’d like a hand working out which package actually fits your business, contact Adams Accountancy on 01322 250001 or get in touch online. No question is too silly when it comes to getting your MTD setup right.

About the author

Michelle Adams is a qualified accountant and director at Adams Accountancy, a friendly and approachable accountancy practice based in Dartford, Kent. With over 15 years of experience helping sole traders and landlords across Kent and beyond, Michelle specialises in cutting through the noise around Making Tax Digital to help clients choose software that actually fits how they work.

Frequently asked questions

Do I need new software if I already keep records on a spreadsheet?

Not necessarily. Bridging software can connect an existing spreadsheet to HMRC’s systems for MTD submissions, so you don’t always need to switch to a full accounting package. It’s worth weighing this against the extra features that dedicated MTD-compatible software usually offers.

Can I use more than one software product for MTD?

Yes, HMRC allows this, for example if you have separate self-employment and property income. However, you can only use one product for each individual submission, so check the products you’re considering can work together.

Is there free MTD-compatible software available?

Yes, several providers offer free tiers, though usually with conditions attached, such as FreeAgent’s free access for certain business bank account holders or Sage’s free tier for simple sole traders. Always check the specific conditions apply to your situation before relying on a free plan.

What’s the difference between a quarterly update and the final declaration?

A quarterly update is a running summary of your income and expenses for that three-month period, sent to HMRC through your software. The final declaration is submitted after the tax year ends, by 31 January, and confirms your full tax position for the year.