Software Is Not Optional Under MTD
Under Making Tax Digital for Income Tax, you cannot submit quarterly updates to HMRC using a spreadsheet or paper records alone. You must use HMRC-recognised MTD-compatible software. Choosing the right software — one that fits your situation, your technical comfort level, and your budget — is one of the most important practical decisions you'll make in preparing for MTD.
What MTD-Compatible Software Must Do
At a minimum, your software must be able to keep digital records of your income and expenses, generate quarterly updates in the format HMRC requires, and submit those updates directly to HMRC via the MTD API. It must also support the end-of-year final declaration process.
The Main Options for Sole Traders
QuickBooks Self-Employed — designed specifically for sole traders, with automatic mileage tracking, receipt capture, and direct HMRC submission. Simple to use, limited in scope.
FreeAgent — popular with freelancers and contractors, strong invoicing features, MTD-ready, good mobile app.
Xero — more powerful and more expensive, better suited to sole traders with more complex finances or who plan to grow.
Sage Accounting — well-established, MTD-ready, good for those who prefer a traditional accounting software feel.
The Main Options for Landlords
Hammock — built specifically for landlords, with bank feed integration, automatic categorisation of rental income and expenses, and MTD submission.
Landlord Vision — property management and accounting combined, good for landlords with multiple properties.
QuickBooks or Xero — both support property income and are MTD-ready, though they require more manual setup for landlords than dedicated property software.
What to Look For
Choose software that connects directly to your bank account via open banking (to reduce manual data entry), has a mobile app for capturing receipts on the go, is explicitly listed on HMRC's MTD-compatible software list, and has a pricing model that makes sense for your volume of transactions.
Start Before You Have To
The worst time to set up new accounting software is the week before your first quarterly deadline. Set it up now, import your historical data, and use the period before MTD becomes mandatory to get comfortable with the workflow.
Read next: Making Tax Digital Is Now Live — What Sole Traders and Landlords Need to Know
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This article is for educational and informational purposes only and does not constitute legal, financial, or professional advice. Always verify current requirements and consult a qualified professional for your specific situation.