What software is compatible with Making Tax Digital?
MTD-compatible software must be on HMRC's approved list. Free options include QuickFile, My Tax Digital, FreeAgent (via NatWest/Mettle), and AccountsOS. Paid options include Xero, QuickBooks, and Sage.
Detailed Explanation
To comply with Making Tax Digital, you must use software that can connect directly to HMRC's systems to keep digital records and submit quarterly updates. HMRC maintains an official list of approved software.
Free MTD-compatible software: - QuickFile — free cloud accounting with MTD VAT and ITSA support - My Tax Digital — free MTD bridging and submission tool - FreeAgent — free if you have a NatWest, Mettle, or Lloyds business bank account - AccountsOS — free during Early Access, AI-native with chat interface
Paid MTD-compatible software: - Xero — from £15/month, popular with accountants - QuickBooks — from £12/month, strong invoicing features - Sage — from £14/month, established UK accounting software - FreeAgent — £14.50/month if not via a partnered bank
Bridging software is also available if you prefer to keep records in spreadsheets. Bridging tools read your spreadsheet data and submit it to HMRC in the required format.
Always check the [HMRC approved software list](https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax) before choosing, as the list is updated regularly.
Source: HMRC MTD Compatible Software List
Real-World Examples
Sole Trader Choosing Free Software
You are a self-employed plumber earning £55,000 and need MTD software from April 2026. You already bank with NatWest, so FreeAgent is free for you. Alternatively, QuickFile offers a fully free option.
Spreadsheet User Needing Bridging
You have tracked expenses in Excel for years and do not want to switch. You can use bridging software like My Tax Digital to pull data from your spreadsheet and submit quarterly updates to HMRC.
Landlord Wanting AI Assistance
You manage three rental properties and want to ask questions about your finances in plain English. AccountsOS provides AI-native bookkeeping with MTD compatibility during its free Early Access period.
Common Mistakes to Avoid
- Assuming any accounting software is MTD-compatible — it must be on HMRC's official approved list.
- Not checking whether your bank offers free access to accounting software like FreeAgent.
- Waiting until the last minute to choose software — getting familiar with digital record-keeping takes time.
- Forgetting that bridging software exists if you want to continue using spreadsheets.
Frequently Asked Questions
Can I use a spreadsheet for MTD?
Not directly. You must use MTD-compatible software to submit to HMRC. However, you can use bridging software that reads data from your spreadsheet and submits it in the required format.
How do I check if my software is approved?
Visit the HMRC website and search for "find software that's compatible with Making Tax Digital". The list is updated regularly and shows which software supports MTD for VAT, MTD for ITSA, or both.
Can I switch MTD software mid-year?
Yes. You can switch software at any point. Your new software will need to pick up from where you left off, so export your data from the old tool before switching.
Does my accountant's software count?
If your accountant uses MTD-compatible software to submit on your behalf, that satisfies the requirement. However, you still need to keep your own digital records throughout the year.
Practical Tips
- If you bank with NatWest, Mettle, or Lloyds, check if you qualify for free FreeAgent access before paying for software.
- Trial two or three options before committing — most offer free trials or free tiers.
- Ensure your chosen software supports both MTD for VAT (if applicable) and MTD for ITSA to avoid needing two tools.
- Ask your accountant which software they prefer to work with — compatibility with your accountant's workflow saves time.
Related Questions
What is Making Tax Digital (MTD)?
Making Tax Digital is HMRC's initiative requiring businesses to keep digital records and submit returns using compatible software. VAT is already under MTD; Income Tax follows in April 2026.
Do I need accounting software for Making Tax Digital?
Yes, if you're VAT-registered you must already use MTD-compatible software. From April 2026, self-employed and landlords earning over £50,000 must also use MTD-compatible software for Income Tax.
Is there free MTD software available in the UK?
Yes. Free MTD-compatible options include QuickFile, My Tax Digital, FreeAgent (free via NatWest, Mettle, or Lloyds business accounts), Clear Books (free tier), and AccountsOS (free during Early Access).
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