Last updated: July 2026
What is the best Making Tax Digital software?
The best Making Tax Digital software is the one that fits your business, your budget and how much of the bookkeeping you want to do yourself. The most compatible UK options in 2026 are AccountsOS, Xero, QuickBooks, FreeAgent and Sage, and all file MTD for VAT directly to HMRC. AccountsOS is £20 a month flat with everything included and an AI accountant, Finn, that does the categorising and reconciling for you. Xero and QuickBooks are the established names but usually cost £30 to £55 a month once intro discounts end, and FreeAgent is free if you bank with NatWest, Royal Bank or Mettle.
Making Tax Digital (MTD) is HMRC's programme to move UK tax onto digital record-keeping and software-based filing. If it applies to you, you can no longer type figures into the old HMRC online portal. You need MTD-compatible software that keeps your records digitally and submits to HMRC on your behalf. That turns "which software should I use?" from a nice-to-have into a decision you actually have to make.
The honest truth is that most of the well-known tools clear the compliance bar. They all keep digital records and file MTD for VAT. So the real question is not which one is "MTD-compliant" (they nearly all are) but which one saves you the most time and money for the way you run your business. Below is a straight comparison of the five options UK founders and sole traders shortlist most often, with real prices and what each is genuinely good at.
Not sure whether MTD even applies to you yet? Use the free MTD checker first. It tells you which parts of Making Tax Digital apply to you and from when, so you buy the right software for the right deadline.
MTD software compared
Prices as of July 2026. Xero and QuickBooks intro discounts expire, so budget for the standard rate.
| Software | From | MTD for VAT | MTD for Income Tax | Best for |
|---|---|---|---|---|
| AccountsOS | £20/mo flat14-day free trial, everything included | Yes, HMRC-recognised | On the roadmap | Founders who want the software to do the bookkeeping for them |
| Xero | £16 to £55/motypically £30 to £55/mo once intro discounts end | Yes | Yes | Established small businesses working with an accountant |
| QuickBooks | From ~£28/molist price, heavy intro discounts common | Yes | Yes | Sole traders wanting the widest accountant support |
| FreeAgent | Free or ~£19 to £33/mofree with a NatWest, Royal Bank or Mettle business account | Yes | Yes | NatWest, Royal Bank or Mettle banking customers |
| Sage | From ~£15/moAccounting Start tier, rises with features | Yes | Yes | Businesses already committed to the Sage ecosystem |
AccountsOS quarterly MTD for Income Tax filing is on the roadmap ahead of the 2026 and 2027 waves. Competitor Income Tax coverage reflects each provider's own published MTD for Income Tax support.
AccountsOS: the software does the work
AccountsOS is an AI accountant built for founders and sole traders who would rather not think about bookkeeping at all. It is £20 a month flat, with a 14-day free trial and no feature tiers, so MTD, VAT filing, invoicing, expenses and reporting are all included at one price. It is HMRC-recognised software for MTD for VAT and files VAT returns directly to HMRC.
The difference is Finn, the AI accountant inside it. You forward a receipt, upload a bank statement or connect your bank, and Finn categorises everything, reconciles it and prepares your VAT return, then flags only the handful of things that need you. You can ask "how much did I spend on software this quarter?" or "when is my next VAT deadline?" in plain English and get a straight answer. Quarterly MTD for Income Tax filing is on the roadmap ahead of the 2026 and 2027 waves, and you can keep your digital records in AccountsOS today so you are ready when your mandate begins.
Xero: the established all-rounder
Xero is the market-leading small-business platform and almost every UK accountant knows it. It handles MTD for VAT and MTD for Income Tax, has a large app marketplace, and is a safe choice if you already work closely with an accountant who lives in Xero. The catch is price. Advertised plans start around £16 a month, but that is usually a time-limited intro rate. Once it ends, most businesses pay £30 to £55 a month depending on the plan, and features such as expenses or multi-currency sit on higher tiers.
QuickBooks: broad support, discount-driven pricing
QuickBooks is the other big incumbent, strong on sole trader and Self Assessment features and widely supported by accountants. It covers MTD for VAT and MTD for Income Tax. Like Xero, the headline price is often a deep intro discount that expires. Budget for the list price, which starts around £28 a month and rises with the plan. QuickBooks suits people who want the widest possible pool of accountants who can pick up their file.
FreeAgent: free if you bank in the right place
FreeAgent is a genuinely good tool that is free if you hold a NatWest, Royal Bank of Scotland or Mettle business bank account, which makes it unbeatable on price for those customers. Outside that banking relationship it costs roughly £19 to £33 a month. It handles MTD for VAT and MTD for Income Tax and is popular with contractors and freelancers. The main consideration is that the free pricing is tied to your bank, so if you switch banks you may start paying.
Sage: familiar if you are already there
Sage Accounting starts around £15 a month for its entry tier and scales up as you add features. It covers MTD for VAT and MTD for Income Tax. Sage makes most sense if your business is already embedded in the Sage ecosystem or your accountant prefers it. For a brand-new micro-business choosing from scratch, the entry tier can feel thin and the interface dated next to newer tools.
Not sure which parts of MTD apply to you?
Answer three quick questions and the free MTD checker tells you exactly what applies, and from when.
How to choose the best MTD software for you
Since compliance is more or less a given, choose on the things that actually vary. Work through these five questions:
- What is the true monthly cost after any intro discount ends? Compare the standard rate, not the teaser price.
- Who do you bank with? If it is NatWest, Royal Bank or Mettle, FreeAgent is free and hard to beat on price alone.
- Do you work with an accountant, and which tool do they use? Matching their software can reduce friction.
- How much of the bookkeeping do you want to do yourself? If the answer is 'as little as possible', prioritise software that categorises and reconciles for you rather than just filing.
- Are you heading into MTD for Income Tax? Make sure your choice handles the full quarterly cycle, not just a one-off return.
Where AccountsOS is different
Ask it anything
Chat with your books in plain English. Ask about spend, VAT deadlines or what a figure means and get a straight answer.
Dump and forget
Forward receipts and statements. Finn categorises, reconciles and prepares your return, then flags only what needs you.
One flat price
£20 a month, everything included, no tiers gating MTD or VAT behind a higher plan. Free for 14 days.
Best MTD software: frequently asked questions
What is the best MTD software for a small business?
There is no single best MTD software for everyone. The most compatible options for UK small businesses in 2026 are AccountsOS, Xero, QuickBooks, FreeAgent and Sage, and all of them keep digital records and file MTD for VAT directly to HMRC. The right one depends on your budget, whether you bank with NatWest, Royal Bank or Mettle, whether you already work with an accountant, and how much of the bookkeeping you want the software to do for you.
What is the cheapest MTD software?
FreeAgent is effectively free if you hold a NatWest, Royal Bank of Scotland or Mettle business account, which makes it the cheapest option for those customers. Beyond that, Sage Accounting Start begins around £15 a month for a limited feature set, and AccountsOS is £20 a month flat with everything included and no feature tiers. Xero and QuickBooks often look cheaper on their advertised intro price but rise to £30 to £55 a month once the discount period ends.
Is AccountsOS MTD compatible?
Yes. AccountsOS is HMRC-recognised software for MTD for VAT and connects directly to HMRC to file VAT returns. It keeps your records digitally so you meet the digital record-keeping requirement. Quarterly MTD for Income Tax filing is on the roadmap ahead of the 2026 and 2027 waves.
Do I have to use software for Making Tax Digital?
Yes. If MTD applies to you, HMRC requires you to keep digital records and submit through MTD-compatible software rather than typing figures into the online portal. For MTD for VAT this has been mandatory for all VAT-registered businesses since April 2022. For MTD for Income Tax it becomes mandatory in stages from April 2026.
What should MTD software actually do?
At a minimum it must keep your records digitally, maintain an unbroken digital link through to the figures you file, and submit to HMRC through the MTD service. Good software also categorises transactions for you, calculates the VAT return, tracks your deadlines, and explains what the numbers mean in plain English so you are not guessing.
Can I switch MTD software part way through the year?
Yes. You can move to different MTD software at any point, including mid-year, as long as your new software keeps the digital records HMRC requires and you carry over your opening balances correctly. Most people switch at the start of a VAT quarter or a tax year to keep things tidy. AccountsOS imports data from Xero, QuickBooks and other tools so you do not start from a blank slate.
Is free MTD software good enough?
Free MTD tools, including bridging software that connects a spreadsheet to HMRC, can be enough if your records are simple and you are comfortable doing the bookkeeping yourself. The trade-off is that they usually do the bare minimum: they file, but they do not categorise transactions, chase your deadlines or answer questions. Paid software earns its keep by removing the ongoing admin, not just the filing.
Does the best MTD software change for Income Tax versus VAT?
The core requirements are the same, but MTD for Income Tax adds quarterly updates and a Final Declaration, so you want software that handles that whole cycle rather than a one-off return. If you are a sole trader or landlord heading into the 2026 or 2027 waves, check our companion guide on what software you need for MTD for Income Tax, and run the free MTD checker to confirm exactly when you are mandated.
Try the MTD software that does the work
AccountsOS is HMRC-recognised for MTD for VAT, files directly to HMRC, and Finn keeps your books up to date in the background. Free for 14 days, then £20 a month with everything included.
Get started freeNo credit card required · Free for 14 days