Software for MTD
HMRC doesn't sell software or recommend a product. Here's what your software actually needs to do, and how to find something that fits the way you work.
What "MTD-compatible" actually means
HMRC doesn't provide its own software, and it doesn't recommend any particular product. What it does set is a standard, and that standard applies to your overall setup, not to any single product you buy. Between whatever software you use, you need to be able to:
- Create and store digital records of your self-employment and property income and expenses
- Send your quarterly updates to HMRC
- Submit your MTD tax return at the end of the year, adding any other income, allowances and adjustments before filing
Plenty of products do all three on their own. Others are built to do one job well, for example a tool that only handles the year-end tax return, and rely on you pairing them with something else for the rest. You can mix and match like this if it suits you, with one condition: each individual submission to HMRC has to go through one product, not be patched together from several. If you have a sole trade and a rental property and want to use a property-specific tool for one and a general one for the other, that's fine. Sending the same submission through two different products is not.
The two ways MTD software can work
Software for MTD falls into two broad types, based on where your records actually live.
Software that creates your digital records for you. You enter income and expenses directly into the software, or it pulls them in automatically through a bank feed or receipt scanning. This covers the full range from simple sole-trader apps through to full cloud accounting packages like Xero, QuickBooks, Sage and FreeAgent. Check the specific product and plan, not just the brand name - features and income source coverage vary significantly between tiers.
Software that connects to records you already keep elsewhere. If you already track your income and expenses in a spreadsheet, you don't have to abandon it. Spreadsheets stay usable too, paired with bridging software that connects them to HMRC, and we've covered that on its own page.
If spreadsheets are how you work and you want the detail on bridging software, including what counts as a compliant digital link, see Bridging software for spreadsheet users.
How to actually choose
Most of the guidance out there tells you what categories of software exist and leaves you to work out which one fits. Here's a more direct way to think about it.
Start with your transaction volume, not your income. A landlord with one property and twelve rent payments a year has very different software needs from a sole trader invoicing fifty clients a month, even if their qualifying income is similar. Volume drives the admin, not the headline figure.
Be honest about whether you'll actually use the extra features. Full cloud accounting can justify its monthly cost where bank feeds, automatic categorisation and real-time figures genuinely save time or improve control. If you're not going to look at those figures between quarters, you're paying for automation you won't benefit from.
Decide whether you want your accountant working inside your software, or just receiving your figures. If you want us reviewing things in real time rather than only at submission points, that points toward cloud accounting. If you're happy keeping your own spreadsheet and having us file from it, bridging software does the job without the extra cost.
Check it covers the income you actually have, now and soon. Some products handle self-employment but not property income, or vice versa. If you're about to add a second income source, check the product handles that too before you commit.
Want a direct answer rather than a framework? See our recommended MTD software for what we actually tell clients to use, by situation. If you want to see the full feature and price comparison behind those recommendations, that's on our MTD software compared page. Either way, HMRC's software finder tool is worth a final check before you commit, since which providers offer what changes often enough that no fixed list, including ours, stays perfectly current for long.
Do you need full accounting software?
Not necessarily, and this is worth being honest about. The right answer depends on what your affairs actually look like, not on what's most widely used.
If you have one income source and a modest number of transactions a year, a simpler product, or your existing spreadsheet with bridging software, may cover everything you need. Paying for invoicing, bank feeds and stock tracking you'll never touch doesn't make you more compliant.
If you have multiple income sources, higher transaction volume, or VAT to manage as well, full cloud accounting may be more practical than relying on spreadsheets and bridging software alone.
We support whichever of these genuinely fits your situation. Some of our clients run full cloud accounting, and some run a spreadsheet with bridging software, and we work with both.
Two things to check before you commit
- Transaction limits on free products. Free and low-cost software is real, but it's often capped: a maximum number of transactions per year, or a single income source. Check the limit actually fits your situation before you build a quarter of records into something you might outgrow.
- Quarterly updates and the year-end tax return aren't always covered by the same tool. Some products handle one but not the other. Confirm whichever software you choose, or combination of software, covers both before you rely on it.
Common questions
No. What you need depends on how complex your affairs are. Straightforward cases are often well served by a simpler product, or a spreadsheet paired with bridging software. If you have multiple income sources, higher transaction volume, or VAT to manage as well, full cloud accounting may be more practical than relying on spreadsheets and bridging software alone.
Yes, provided it's connected to HMRC through bridging software with a proper digital link. A spreadsheet you retype figures from by hand into another system doesn't count. See our bridging software page for the detail on what does and doesn't qualify.
Some free and freemium products exist, but they often come with limits, for example a cap on the number of transactions or income sources covered. Check the limit fits your situation before committing.
Possibly. HMRC's software finder tool lets you check your existing product against MTD's requirements directly, since this changes as providers update their software.
Both need to be covered somewhere, but not necessarily by the same product. Some software only handles quarterly updates. Check before you commit that whatever you choose, or whatever combination you use, covers the year-end tax return as well.
This page is general guidance, not advice for your own circumstances. It was correct as at the date shown at the top, and tax rules and rates change over time. Please take advice on your own position before acting on anything here.
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