Key takeaways
- Software must be on HMRC's list of products compatible with MTD for VAT or MTD for Income Tax, which are separate lists.
- For Income Tax, the software must create digital records, send quarterly updates and submit the tax return, either alone or with linked products.
- Spreadsheets are allowed if combined with bridging software that keeps digital links to HMRC.
- Free software exists for simple businesses, but check its limits on income types, number of businesses and support.
- Check that the product handles your situation: property and self-employment together, joint lets, VAT schemes or cash basis.
HMRC does not provide its own software for Making Tax Digital (MTD). Instead it publishes lists of commercial products that have been tested against its systems. Choosing the right one is the first practical step for anyone joining MTD, and the choice is wider than many people expect.
The basic requirement
Your software, alone or with other products linked to it, must be able to:
| MTD for VAT | MTD for Income Tax |
|---|---|
| Keep digital VAT records | Keep digital records of self-employment and property income and expenses |
| Submit VAT returns to HMRC through the MTD API | Send quarterly updates for each business |
| Receive information from HMRC, such as obligations | Make year-end adjustments and submit the tax return |
| Show your tax estimate and obligations |
HMRC keeps separate lists for VAT and Income Tax. A product that is compatible for VAT is not necessarily compatible for Income Tax, so check the right list.
Types of software
All-in-one accounting software
Cloud accounting packages keep the records, connect to your bank and submit to HMRC. They suit most businesses that want bookkeeping, invoicing and tax in one place. See our accounting software reviews and comparisons.
Apps for sole traders and landlords
Mobile-first apps aimed at the self-employed and landlords often handle receipts, categorisation and quarterly updates simply, at lower cost. They may not cover more complex needs, such as VAT schemes or partnership income.
Bridging software
If you keep records in spreadsheets, bridging software reads the totals from your spreadsheet through a digital link and submits them to HMRC. It is the cheapest way to comply for spreadsheet users, but the spreadsheet must be well organised. See MTD bridging software.
Software used by your accountant
If an accountant manages your tax, they may use professional software that submits on your behalf, with your records reaching them through digital links. You authorise them as your agent in your HMRC account.
Features to check before you choose
- Your income types: self-employment, UK property, overseas property, or a combination
- Multiple businesses: some products cover only one self-employment
- Joint property: support for reporting your share, and for income-only quarterly updates on joint lets
- Accounting basis: cash basis and accruals, and accounting periods to 31 March or 5 April (calendar or standard update periods)
- Year-end features: capital allowances, private use adjustments, losses, and whether you can add other income such as employment, savings or dividends to file the full tax return
- VAT: if you are also VAT-registered, whether it handles VAT returns and your VAT schemes
- Bank feeds and receipt capture, if you want automation
- Support and price: what is included, and whether prices rise after an introductory period
Free software
HMRC’s lists flag products available free of charge, often with limits such as a single business, a cap on transactions or limited support. Some banks also provide free accounting software with business accounts. Free software can work well for a simple sole trader or landlord; check what happens if your needs grow.
Setting up
- Choose a product from the right HMRC list.
- Sign up for MTD through GOV.UK, or ask your accountant to sign you up.
- Authorise the software to connect to your HMRC account, using your Government Gateway or One Login details.
- Set up your income sources and categories, and your update period type.
- Start creating digital records from the first day of your first MTD year.
Frequently asked questions
Does HMRC provide free MTD software?
No. HMRC publishes lists of compatible commercial products, some of which are free for simple needs.
Can I use the same software for VAT and Income Tax?
Often yes, but check that the product appears on both HMRC lists and handles both obligations.
Can I use spreadsheets for MTD for Income Tax?
Yes, with bridging software that links the spreadsheet to HMRC digitally.
What happens if my software stops supporting MTD?
You would need to move to another compatible product. Choose established products and keep exports of your records.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.