Making Tax Digital for Income Tax (MTD for ITSA) is coming, and one of the first practical questions people ask is: what software do I actually need to use?
This is a fair question. MTD introduces new obligations around digital record-keeping and quarterly reporting that simply cannot be met using a spreadsheet or a paper records system alone. The right software choice makes the transition straightforward. The wrong one creates extra work.
This guide explains what the software needs to do, what your options are, and how to choose the right one for your situation.
Quick Answer
From April 2026, self-employed people and landlords with income over £50,000 must use HMRC-recognised software to keep digital records and submit quarterly updates. The software needs to connect directly to HMRC’s systems. Options range from dedicated accounting packages like QuickBooks, Xero and FreeAgent to simpler MTD-specific apps and bridging software. Free options exist but check they are fully MTD for ITSA compatible before relying on them.
Who Needs MTD Software and When?
Making Tax Digital for Income Tax applies in stages:
- April 2026: Self-employed individuals and landlords with combined income over £50,000
- April 2027: Those with combined income over £30,000
- April 2028: Those with combined income over £20,000 (subject to confirmation)
Income means your total gross income from self-employment and property combined, before expenses. It is not the same as your profit.
If you are below the threshold now but close to it, it is worth being aware of the timeline. The government has indicated the threshold will continue to fall.
What Does MTD-Compatible Software Need to Do?
Not all accounting software is automatically MTD for ITSA compatible. The software must be able to:
- Keep digital records of your income and expenses in a format HMRC accepts
- Submit quarterly updates to HMRC four times a year (within one month of each quarter end)
- Submit an end-of-period statement at the end of the tax year, confirming your figures
- File a final declaration (the equivalent of the current Self Assessment return) to confirm all income sources and claim reliefs
If the software cannot connect directly to HMRC’s APIs and perform these submissions, it is not suitable for MTD.
Your Software Options
Full Accounting Packages
These are the most comprehensive option and suit businesses with more complex affairs:
- QuickBooks Self-Employed / QuickBooks Simple Start – widely used, cloud-based, links to bank accounts
- Xero – popular with small businesses and landlords, strong reporting features
- FreeAgent – built for freelancers and sole traders, includes invoicing
- Sage Accounting – well-established, broad feature set
These products are typically subscription-based and cost between £10 and £40 per month depending on the tier. They offer bank feed connections, expense tracking, and in many cases, direct HMRC submission.
Simpler MTD-Specific Apps
Some providers have built lightweight apps aimed specifically at sole traders and landlords who want to meet the MTD requirements without the overhead of a full accounting package:
- Coconut – aimed at sole traders, integrates with bank accounts
- Hammock – designed specifically for landlords
- TaxScouts* / *GoSimpleTax – simpler interfaces, suited to straightforward affairs
These tend to be cheaper and easier to use but may have limitations for more complex situations.
Bridging Software
Bridging software sits between your existing records (such as a spreadsheet) and HMRC’s systems. It reads your data and submits it in the required format.
This is useful if you are comfortable with spreadsheets and do not want to change your records system. However, it requires discipline: your underlying records still need to be complete and accurate, and you still need to submit manually each quarter.
Bridging software is a recognised and legitimate approach under MTD, but it is not a way to avoid keeping proper digital records.
What About Spreadsheets?
Plain spreadsheets are not MTD-compatible on their own because they cannot connect to HMRC’s systems. However, a spreadsheet combined with bridging software can be compliant.
For most people who are not already using accounting software, moving to a dedicated app is more reliable and often simpler in practice than maintaining a spreadsheet and using bridging software alongside it.
What to Look for When Choosing
Before committing to any software, check:
- It appears on HMRC’s list of recognised MTD for ITSA software
- It supports all four quarterly updates and the final declaration
- It handles your specific income type (self-employment, property, or both)
- The pricing is clear and includes all MTD features (some products charge more for MTD submission)
- It has a mobile app if you want to record expenses on the go
HMRC publishes an updated list of compatible software on its website. The list changes as providers gain recognition, so check it is current before making a decision.
Do I Need an Accountant as Well as Software?
Software handles the mechanics of record-keeping and submission. It does not advise you on what to include, what to claim, or how to reduce your tax bill.
Many people in the MTD threshold range benefit from working with a tax specialist alongside their software, particularly in the first year of MTD when new processes need to be set up correctly. A qualified accountant can also review your quarterly figures before submission to catch errors before they become problems.
Getting Ready Before the Deadline
The April 2026 deadline sounds distant, but there are practical steps to take well in advance:
1. Confirm whether you are in scope based on your gross income 2. Choose your software and set it up before April 2026, not on the day 3. Link your bank account if the software supports it 4. Understand the four quarterly deadlines: 5 August, 5 November, 5 February, 5 May (for a standard April to March tax year) 5. Consider whether you want professional help for the transition
Starting early means you can iron out any issues before the mandatory period begins.
Frequently Asked Questions
Can I use free software for MTD for ITSA? Some free or low-cost tools are MTD-compatible, but check carefully. Not all free accounting apps support MTD for ITSA submission specifically, as opposed to MTD for VAT (a different scheme). Confirm the product covers the full workflow: quarterly updates, end-of-period statements, and final declaration.
Do I need different software for property income and self-employment? Some software handles both. Others are better suited to one or the other. If you have both types of income, look for a product that separates them correctly and submits the right returns for each.
What happens if I do not use compatible software from April 2026? Failure to comply with MTD requirements can result in penalties under HMRC’s new points-based penalty system. Each missed quarterly update earns a point, and accumulating points leads to a financial penalty.
Will my accountant sort the software for me? Some accounting practices provide software as part of their service. Others will advise you on what to use but leave setup to you. It is worth asking your accountant directly what is included.
I am a landlord with one buy-to-let. Do I really need accounting software? If your rental income exceeds £50,000, yes. Even for simpler affairs, a dedicated landlord app like Hammock can be a low-cost and straightforward solution that meets the MTD requirements without over-engineering things.
Need Help Preparing for Making Tax Digital?
Sat Bhatti is an ACCA and ATT qualified tax specialist and HMRC Registered Agent with over 25 years’ personal tax experience. If you are approaching the MTD threshold and want to get set up correctly from the start, Kent Tax Specialists can advise on the right approach for your situation.
We work with self-employed individuals, landlords and contractors across Gravesend, Dartford, Medway, Maidstone, Sevenoaks, Tonbridge, Tunbridge Wells and the wider Kent area. Get in touch today for practical advice and a fixed-fee quote.
Also see: Making Tax Digital in Gravesend | Making Tax Digital Services | Making Tax Digital for Income Tax: What You Need to Do Before April 2026
