Which accounting software do you actually need for MTD?
Making Tax Digital for Income Tax does not require a full accounting package. It requires digital records and quarterly updates sent through software HMRC recognises. Here is what that means for a sole trader or a landlord with a couple of properties, and when paying £15–30 a month is worth it.
What the rules actually say
- Digital records of business income and expenses. A spreadsheet counts, as long as the figures reach HMRC through compatible software.
- Quarterly updates (7 August, 7 November, 7 February, 7 May) and a final declaration by 31 January.
- You are in scope from April 2026 above £50,000 of combined self-employment and property income, April 2027 above £30,000, April 2028 above £20,000. See the full dates.
The three realistic routes
| Route | Typical cost | Good for | Watch out for |
|---|---|---|---|
| Spreadsheet + bridging software | £0 for the spreadsheet, £10–50/year for bridging | One trade or 1–3 properties, few transactions, you file yourself | You still need bridging software recognised by HMRC; no bank feed, so discipline is on you |
| Full accounting software (Xero, QuickBooks, FreeAgent, Sage) | £10–30/month | VAT registered, employees, many invoices, or you want the bank feed and invoicing | Prices rise after the introductory period; features you never use; migrating later is work |
| Accountant with software included (Crunch, TaxScouts, local firm) | £25–150/month | Limited company directors, anyone whose time is worth more than the fee, complicated affairs | Check what is in the fee: year-end accounts, payroll, the actual filings |
How to choose in three questions
- How many transactions a month? Under about 20, a spreadsheet plus bridging is genuinely enough.
- Do you invoice clients? If yes, software that chases invoices pays for itself quickly.
- Who files your return? If an accountant does, ask which software they prefer before you subscribe — it is often cheaper through them.
What we use the calculators for
Whatever you choose, the tax arithmetic is the same: profit, personal allowance, Class 4 NI, and — for directors — corporation tax and dividend rates. Run your numbers first in the sole trader calculator or the dividend calculator, then decide how much software you need to keep those records.
We are not an accountancy firm and this is not advice. Some "next step" links on this site are affiliate links, marked as such; they never change the numbers a calculator shows.