Making Tax Digital (MTD): HMRC-approved software that can make you compliant

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Xero: 90% off MTD-ready software for 6 months

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The deadline for getting Making Tax Digital for Income Tax Self Assessment (MTD ITSA) ready is now fast approaching, with just over two months to go before the deadline. On April 6th 2026, all sole traders and landlords whose turnover exceeds £50,000 (for the tax year 2024/2025) will need to move off the old tax system and be fully MTD for ITSA compliant.

Don’t panic yet, though. The good news is that even though time’s running out, it’s not too late to get prepared. You just need to make sure you’re set up with HMRC-approved software that can keep digital records, and submit quarterly reports regarding your tax. We’ll explain exactly what you need to do, and provide our own suggestions for the top accounting software that is MTD-ready.

The MTD for Income Tax deadline, and what you need to do before then

Make sure you put the date April 6th 2026 in your calendars and diaries, and underline it. It’s as important as your accounting reference date.

This is the date by which you must start keeping records using MTD for Income Tax compliant software if your income was over £50,000 in the 24/25 tax year. No ifs, ands, or buts.

In accordance with HMRC’s regulations, you will need your software to:

1. Create, store, and correct digital records of your self-employment and property income and expenses
2. Send quarterly updates directly to HMRC
3. Submit your tax return by 31 January the following year

A basic spreadsheet won’t cut the mustard any longer. Unless it’s linked digitally to HMRC using ‘bridging software’, but this isn’t ideal (we’ll go into more detail about why later).

We’d recommend using MTD-compliant cloud accounting software. It might take a little longer to get your head around, but it will make your life far easier in the long run.

The below are they key dates you’ll need to know about:

There is a new penalty system specifically for Making Tax Digital.

It’s a points based system, and it works similarly to getting points on a driving license (you will accrue separate points for VAT and Income Tax, so don’t get caught out by this – you don’t want double fines!). If you’re unclear about the difference between income tax, and VAT, you can refer to our guide to VAT and how it affects your small business.

You will be fined when you hit a certain amount of points. If you remain under your specific point threshold for at least 24 months, then your points will expire. You can find out more details in our full guide to Making Tax Digital for 2026.

The best Making Tax Digital software platforms

Our number one recommendation for MTD-compliant software is Zoho Books, because it’s easy to get to grips with and it offers a free plan. We’ve also compiled a list of other top recommendations for MTD-compliant software, as each have standout features (and some weaknesses) that you’ll need to understand to make a final decision.

You can quickly compare costs in the chart below:

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		Rating	Price from	Free trial
FEATURED PROVIDER	BEST OVERALL
Xero	Zoho Books	FreeAgent	QuickBooks	Sage	Clear Books
4.3	4.8	4.5	4.5	4.2	4.0
£7/month (+ VAT) Get 90% off for 6 months	Free	£10/month (+ VAT) £5/month for 6 months (+ VAT)	£10/month (+ VAT) Get 90% off  QuickBooks for a year	£18/month (+ VAT) 90% off the first three months	Free
Try Xero	Compare Deals	Compare Deals	Compare Deals	Try Sage	Compare Deals

Zoho Book: best overall MTD software

Zoho Books

4.8

• Starting price from: Free
• Free trial: 14 days

• Easy-to-use platform that's simple to navigate
• Excellent free plan for solopreneurs and micro-businesses
• Mobile app for real-time financial management

Summary Zoho initially made its name from CRM systems, but has been providing accounting software since 2011. Zoho Books stands out for its clean and modern interface, and seamlessly aligns with the broader Zoho products. While the platform is geared towards small businesses, we would also recommend it to sole traders, as the tools can be used by inexperienced users.

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Zoho Books is MTD compliant, and is by far one of the easiest-to-use accounting software platforms I’ve tested. If this is your first time moving from spreadsheets to dedicated accounting software, you should find it to be a relatively painless transition.

If you do get a little lost, Zoho has a clear, comprehensive help page to assist you as well as an entire free learning library at Zoho Academy so you won’t be left feeling helpless. You can use all the free resources Zoho provides to get confident using the software.

More good news is that you can get started on a completely free plan. Just note though, this only applies if your revenue falls under the threshold of 35k for the financial year. For those whose revenue exceeds 50k this year, you’ll have to use one of the paid plans, but these are still relatively inexpensive.

Zoho Books offers a range of good features to make sure you’re MTD for Income Tax ready:

• Connect the software to HMRC and manage your income tax obligations
• Generate and finalise your quarterly updates, and submit them directly to HMRC
• Create, send, and track invoices
• Record your expenses

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	Plan	Cost
Free	Standard	Professional	Premium
Free	Paid monthly: £12/month (+ VAT) Paid yearly: £10/month (+ VAT)	Paid monthly: £24/month (+ VAT) Paid yearly: £20/month (+ VAT)	Paid monthly: £30/month (+VAT) Paid yearly: £25/month (+ VAT)

Provided you’re over the 35k threshold for the free plan, Zoho Books starts from a pretty reasonable £12 per month, plus VAT (£10 if you opt to pay yearly). While the range of plans Zoho offers provide scalability for businesses looking to grow, we’d just flag the transaction limits as one of Zoho’s few weak spots.

The 1,000 sales invoice and 1,000 purchase caps won’t be an issue for more modest businesses, but if you have ambitious scaling plans this might become a frustration down the line (Xero will be a better solution for scaling).

Does it have a free version?

As I’ve mentioned above, Zoho Books does have a completely free plan, but only if your revenue doesn’t exceed 35k per financial year. This will remove those above 50k per year who will be mandated to begin MTD for ITSA this year, but for those who will begin the scheme next year and the year after, the free plan will be a perfect way to get accustomed to the software ahead of time.

What type of software is it?

Zoho is a fully MTD-compliant software that creates digital records. It supports sole trader and UK property income sources.

FreeAgent: comprehensive MTD software, if you qualify for a free account

FreeAgent

4.5

• Starting price from: £10/month
• Free trial: 30 days

• The only software we tested that gives you built-in tax forecasting and planning tools at no extra cost
• Helpful cash flow alerts about potential surpluses and shortfalls
• Free plan available with certain qualifying banks

Summary Originally launched in 2007, FreeAgent is based in Edinburgh and now helps over 200,000 small businesses. It was acquired by NatWest Group in 2018. Our recommendation is that FreeAgent is best suited to freelancers, sole traders and novice accountants. It’s a good middle ground for those who need a feature-filled system that’s not overly complex.

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FreeAgent is HMRC-recognised software that provides a comprehensive, end-to-end solution for MTD for Income Tax, and you can get it completely free…just as long as you bank with the following:

• NatWest
• Royal Bank of Scotland
• Ulster Bank
• Mettle (and make at least one transaction per month)

As you can imagine, you can use the accounting software to submit quarterly updates and file your tax declarations directly to HMRC, but another benefit of FreeAgent is that they offer a free consultation about MTD. There’s also a ‘Practice Portal’ that users can log into and access a host of MTD-related learning resources, including:

• Webinars
• Email templates
• Client guides

FreeAgent is adept at balancing simplicity with functionality, and when we tested it, we found that tasks like setting up reminders and managing our expenses was reassuringly simple. The user-friendly templates for invoices and estimates were a highlight, and we particularly liked FreeAgent’s ‘traffic-light system’ for bank transactions.

How much does FreeAgent cost?

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	Plan	Cost
Landlord	Sole Trader	Partnership/LLP	Limited Company
Paid monthly: £10/month (+ VAT), currently 50% off for your first six months Paid yearly: £100/year (+ VAT), currently 50% off for your first year	Paid monthly: £19/month (+ VAT), currently 50% off for your first six months Paid yearly: £190/year (+ VAT), currently 50% off for your first year	Paid monthly: £27/month (+ VAT), currently 50% off for your first six months Paid yearly: £270/year (+ VAT), currently 50% off for your first year	Paid monthly: £33/month (+ VAT), currently 50% off for your first six months Paid yearly: £330/year (+ VAT), currently 50% off for your first year

How much does FreeAgent cost?

As we mentioned, FreeAgent can be accessed completely free, just so long as you have a business current account with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle. If you do qualify for a free plan, FreeAgent really is pretty amazing value for money.

However, if you don’t have a qualifying business account, then it’s definitely on the costlier side of things for sole traders, starting from £19 (plus VAT) per month. It’s slightly cheaper if you’re a landlord though, as you’ll only pay £10 (plus VAT) per month. Both of these tiers include:

• The ability to generate MTD-compatible VAT returns and submit them directly to HMRC
• Real-time view of how much you owe HMRC
• Real-time view of your tax calculations and what is due when

Does it have a free version?

FreeAgent lives up to its name and provides free MTD-compliant software, but you need to have a business current account with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle (and make one transaction per month).

If you don’t qualify for a free plan (and are set on using free MTD software) you should look to Zoho Books, Sage, or Clear Books instead.

What type of software is it?

FreeAgent is a fully MTD-compliant software that creates digital records. It supports sole trader and UK property income sources.

QuickBooks: excellent mobile app for staying MTD-compliant

QuickBooks

4.5

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• Starting price from: £10 (self-assessment only)
• Free trial: 30 days

• Great bank reconciliation feature
• Predicts your transaction categorisation
• Custom reports and templates tailored to your business’ needs

Summary Part of the American multinational company Intuit Inc., QuickBooks is accounting software specifically designed for SMEs. It currently has 6.5 million subscribers worldwide. We think its intuitive layout combined with detailed features makes it suitable for more advanced business operations. It’s more suited to those working in accountancy rather than small business owners themselves, due to the complexity of the software and steep learning curve.

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QuickBooks is MTD for VAT and ITSA ready, and it has the best mobile app for managing your tax on the go – a big boon for the self-employed, who often find themselves having to do their bookkeeping on the move. In particular, the receipt-capture tool on the app is extremely helpful.

For less-experienced users, QuickBooks’ standout bank ‘reconciliation’ function will give you reassurance that your figures are adding up. Automatic links to your bank can be known to fail, so this feature will give you peace of mind.

We will say that the learning curve felt quite steep with QuickBooks (find out more in our QuickBooks review), but once you’ve gotten to grips with everything, it offers a lot of  power. However, it might not be the first choice for landlords and sole traders who just want the cheapest, most basic software to stay on the right side of MTD (you should check out Zoho Books instead).

How much does QuickBooks cost?

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	Plan	Cost
Sole Trader	Simple Start	Essentials	Plus	Advanced
Paid monthly: £10/month (+ VAT) You can currently get 90% off for the first six months	Paid monthly: £16/month (+ VAT) You can currently get 90% off for the first six months	Paid monthly: £38/month (+ VAT) You can currently get 90% off for the first six months	Paid monthly: £56/month (+ VAT) You can currently get 90% off for the first six months	Paid monthly: £123/month (+ VAT) You can currently get 90% off for the first six months

How much does QuickBooks cost?

While QuickBooks doesn’t offer a free plan, you can get started on the Sole Trader plan for just £10 per month (plus VAT), and currently you can get 90% off your first six months, so you’ll only pay £1 per month over this period.

Just be aware, you’ll need to upgrade to the Simple Start plan (£16 per month) in order to access Intuit Assist, the AI-powered financial assistant. Intuit Assist will give you access to AI-powered bank feeds: this means that your transactions will be quickly and automatically organised for faster approval. You can learn more in our full breakdown of QuickBooks costs.

Does it have a free version?

There is currently no free version of QuickBooks. However, you can start a commitment-free, free trial of QuickBooks for 30 days (you can cancel at any time). Just one thing to note before starting the trial, strangely if you opt for the free trial you will miss out on the 90% discount.

What type of software is it?

Quickbooks is a fully MTD-compliant software that creates digital records. It supports sole trader and UK property income sources.

Xero: strong MTD-compliant software if you’re a growing business

Xero

4.3

• Starting price from: £16/month
• Free trial: 30 days

• Easiest interface for quickly dealing with your bank transactions
• Well-thought out plans and growth path
• Connect with over 1,000 possible integrations

Summary Based in New Zealand, Xero was founded in 2006 and now boasts 4.2 million subscribers. Xero is tailored mostly towards experienced professionals and accountants, predominantly positioning itself towards high-turnover businesses with long-term client bases. We wouldn’t recommend it to new users.

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Every Xero plan is MTD-ready, and though your sole concern at the moment may be getting ready for MTD for ITSA, Xero provides some of the best scaling plan options for ambitious businesses. Xero has a clear and well-balanced upgrade path, so you won’t need to switch platforms as your business grows.

Xero provides MTD-ready features like:

• Bookkeeping transactions are automatically mapped to the correct tax categories (this helps minimise errors for your MTD reporting)
• Real-time insights with tax estimates and submission statuses from HMRC
• Make your MTD for Income Tax process more streamlined using Xero’s built-in receipt capture tool Hubdoc

Xero has gone through some face-lifts over the past couple of years, and has now become a slick software that’s easy to navigate, with an upgraded tool bar. It can take a little time to get to used to though, and Zoho Books might be a better option if you just need to hit the ground running.

One thing to note for some business owners: the multicurrency functionality is paywalled behind the premium Comprehensive plan. This isn’t the case with all accounting software, so if you’re working in multiple currencies, you might find a more cost-effective option elsewhere.

How much does Xero cost?

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	Plan	Cost
Simple	Ignite	Grow	Comprehensive	Ultimate
Paid monthly: £7/month (+ VAT) Buy by 30 January 2026 to get 90% off for the first six months	Paid monthly: £16/month (+ VAT) Buy by 30 January 2026 to get 90% off for the first six months	Paid monthly: £37/month (+ VAT) Buy by 30 January 2026 to get 90% off for the first six months	Paid monthly: £50/month (+ VAT) Buy by 30 January 2026 to get 90% off for the first six months	Paid monthly: £65/month (+ VAT) Buy by 30 January 2026 to get 90% off for the first six months

As of April 2025, Xero has launched it’s lowest priced plan, ‘Simple’, specifically with MTD for Income Tax in mind. The ‘Simple’ plan has been built for sole traders and landlords who need to be MTD-ready, and costs just £7 per month (plus VAT). If you buy any Xero plan before the end of January then you can get 90% off for the first six months. This means you’ll pay 70p per month for the Simple plan (for six months).

If you’re feeling ambitious (you might be a landlord now, but what’s to stop you starting your own business in the future?) Xero has a comprehensive and well-balanced range of plans so you’ll be future-proofing your bookkeeping needs.

Does it have a free version?

Unfortunately, there’s no free plan offered by Xero, but you can try it for free for 30 days. There’s no credit card required, and you can cancel any time, so it’s a great way to test the software out for yourself to see if you think it’s worth the money.

What type of software is it?

Xero is a fully MTD-compliant software that creates digital records. It supports sole trader, UK property, and foreign property income sources.

Sage: a trusted brand name that’s MTD-ready

Sage

4.2

• Starting price from: £18/month or £0 for Sage Individual Free
• Free trial: First month free

• A quick, no-nonsense experience
• Customisable themes and logos to establish a strong brand identity
• Reassurance of a long-standing accounting brand

Summary Based in Newcastle upon Tyne, as of 2017 Sage is the UK’s second largest technology company, the largest supplier to small businesses and has 6.1 million worldwide customers. Its accounting software is best suited for service-based businesses, like builders, contractors and handymen. While it’s good for managing quotes and invoicing, it may lack the functionality needed by more established businesses.

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Sage is one of the biggest brand names in accounting software, and its MTD-ready plans provide a traditional approach for those who prefer a less complicated means to getting HMRC paid on time. Sage is fast, dependable, and you have the reassurance of a trusted brand name in the accounting software space.

Each of the standard Sage Accounting paid plans include access to Sage Copilot, the AI-powered productivity assistant. This can make getting your tasks done more efficient and give you confidence that you’re remaining compliant.

As well as its paid plans, Sage also provides sole traders with its free software: Sage Individual Free. Just be aware that you’re limited to only five invoices per month on Sage Individual Free, so it’s really only suitable for landlords or sole traders with very basic needs.

How much does Sage cost?

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	Plan	Cost	Features
Accounting Start	Accounting Standard	Accounting Plus
£18/month (+ VAT) 90% off for three months	£39/month (+ VAT) 90% off for three months	£59/month (+ VAT) 90% off for three months
Create and send unlimited sales invoices Submit VAT returns 24/7 support	Advanced reporting capabilities Unlimited users Cash flow statements	Support for multiple currencies Inventory management

Compare Sage plans and see what's best for you Visit Sage

Business owners who’re registered for VAT will need to pay for one of the main Sage Accounting plans, which start from £18 (plus VAT) per month. This is on the slightly more expensive end of the spectrum for a starter level plan, but you do get access to both Sage Copilot and payroll on any plan level. Right now, you can also get 90% off your first six months.

Does it have a free version?

Yes, Sage provides Sage Individual Free. This is the no-cost version of its software that’s been specifically made for non-VAT registered sole traders who have really minimal needs, but still need to be MTD ready. Just note that this is a separate product to the main line of Sage Accounting plans, which are the versions we tested here at Startups (you can find out more in our full Sage pricing guide).

You can also upgrade to a monthly subscription of Sage Individual (which costs just £7 plus VAT per month) which will unlock AI-powered expense categorisation, and crucially, will give you unlimited invoice creation (as opposed to the five cap on the free version). However, we would flag that receipt capture is only included at the Standard and Plus plan levels (Xero provides this at all plan levels).

What type of software is it?

Sage is a fully MTD-compliant software that creates digital records. It supports sole trader income sources.

Clear Books: a solid free MTD-ready plan

Clear Books

4.0

• Starting price from: Free
• Free trial: 30 days

• Well-designed search function enables easy access to important information
• Efficient and easy customisation, such as quote creation
• Easily create new projects with helpful pop-up feature

Summary Started in 2008, ClearBooks is a UK based accounting software firm specifically designed with small businesses in mind. Freelancers, as well as small businesses, could benefit from ClearBooks, mainly thanks to its easy-to-use project creation.

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As of 2025, Clear Books introduced a new plan that provides completely free MTD for Income Tax software (provided you’re a sole trader with only very basic needs). The plan supports sending quarterly updates to HMRC with one click, as well as filing your Year End tax return.

Outside of the free plan, Clear Books doesn’t necessarily have a standout feature like Sage Copilot or QuickBooks’s mobile app, but it’s a solid piece of software that we found had some nice touches. The search function, for example, felt really intuitive to use. However, we did find there was a slightly steeper learning than with other software.

Clear Books might be on the more basic side of things, but the ‘Free’ plan does exactly what it says: provides HMRC-approved completely free software for submitting MTD quarterly updates. It also comes with some bonuses, too, like AI-powered smart coding for better business insights.

How much does Clear Books cost?

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	Plan	Cost
MTD Income Tax	Small	Medium	Large
Free	Paid monthly: £15/month (+ VAT), currently £7.50/month (+ VAT) for the first three months Paid yearly: 10% off Paid every two years: 20% off	Paid monthly: £31/month (+ VAT), currently £15.50/month (+ VAT) for the first three months Paid yearly: 10% off Paid every two years: 20% off	Paid monthly: £41/month (+ VAT), currently £20.50/month (+ VAT) for the first three months Paid yearly: 10% off Paid every two years: 20% off

While both landlords and sole traders can start with a Clear Books free plan, there are some missing features you might find a little restrictive. For example, you’ll need to upgrade to the £5 per month (plus VAT) sole trader plan in order to snap and scan bills and receipts.

This paid plan also includes the ability to prepare and send quotes, as well as customise invoices. If you’re registered for VAT, then you’ll need to pay for, at minimum, the £15 per month (plus VAT) plan.

Does it have a free version?

Yes, as we discussed above, Clear Books does a have a completely free MTD-ready plan for landlords and sole traders not registered for VAT. It’s understandably quite limited in terms of features, but from what I could see, it doesn’t have the same 35k per year cap on it that Zoho Books’ free plan does. This means anyone, regardless of their income, can use it without paying a penny.

What type of software is it?

Clear Books is a fully MTD-compliant software that creates digital records. It supports sole trader, UK property, and foreign property income sources.

Types of Making Tax Digital software

Generally, there are two main types of Making Tax Digital software: software that ‘creates digital records’, and ‘bridging software’.

1. Software that creates digital records

This type of software includes full cloud accounting software, and it allows you to create self-employment and property digital records through different methods:

1. Manually enter your income and expenses into the software
2. Automatically import your transactions by linking the software to your business bank account
3. Scanning your receipts or invoices through an app and uploading them

Our recommendations for the best MTD software all fall under this category. They’re particularly helpful as most will likely tick all the boxes you need: you can submit quarterly updates and submit your tax returns to HMRC.

They are comprehensive, coming equipped with multiple tools and features to make your bookkeeping all around more efficient. This type of software is the “all-in-one” solution.

2. Bridging software

This type of software connects to your existing records, rather than being able to create new digital copies. Usually, this existing software is older, like spreadsheets, and given that these outdated methods aren’t HMRC-approved, there needs to be a ‘bridge’ to connect it with the new system. Bridging software fills this role, helping older accounting tools submit information to HMRC through compliant channels.

However, we would say this isn’t the most ideal solution. For one thing, you’ll need to make sure your spreadsheets are fully updated and formatted correctly yourself. This can be very time-consuming and lead to errors. You’ll also be missing out on all the other features of full accounting software, like invoicing and reporting.

You could technically use multiple different softwares together (one for creating and storing records, and one for submitting them to HMRC), but the simplest solution is to go the “all-in-one” route.

These are two main types of MTD software, but you do get niche variations within those categories, such as examples like:

• !Coconut: this is ‘full-software’, but is predominantly designed to be used on mobile
• Hammock: this is MTD software which has been built to be used by landlords specifically
• Monzo: you can get MTD software built directly into your Monzo business bank account

Read next: tax expenses for the self-employed

Does HMRC have its own official software?

No, HMRC does not provide its own Making Tax Digital software. HMRC is the API (Application Programming Interface), and you use your chosen software platform to connect to it. So think of HMRC as the “gate”, and your selected platform as the messenger.

While there isn’t HMRC Making Tax Digital software, HMRC can help you find the right third-party MTD-ready software. You can use HMRC’s finder tool to hunt down the best software for your needs, and double-check it is HMRC approved.

Are there any free Making Tax Digital software options available?

Yes, there are a number of free Making Tax Digital software options available in the UK, including Zoho Books (our top choice for the overall best free accounting software), Sage, and Clear Books. You can find a full list of all the free software by using the HMRC finder tool in the section above. When using the tool, you can adjust the filter menu on the left to further refine your results so that only free software solutions are displayed.

However, a word of caution – even the best free HMRC-approved Making Tax Digital software can be highly limited compared to paid plans. This might be fine if you’re only a sole trader (or landlord) with extremely limited needs, but if you’re planning on expanding in the future, you will need a software platform that will support you and help you manage your cash flow effectively.

Even if you just want to start on free software for now, you should look for platforms that will support future growth, so you don’t need to waste time learning a whole new software platform when the time comes.

How to choose the right software for your business

One of the positives about choosing accounting software is that all the top options have relatively similar offerings, so you can’t go too far wrong. That being said, it’s important to double-check that your chosen platform ticks a few specific boxes before making your choice. Plus, it’s also worth paying attention to the USPs of each software because they all vary and one might better fit your particular situation over another.

The key points to look out for when choosing your software are:

• HMRC-recognised: this one should go without saying, but it’s always worth triple-checking that your chosen software has been approved by HMRC. You can go to HMRC directly to confirm this. If your chosen software isn’t HMRC-recognised you could face fines and penalties.
• Supports all your income sources: you might be receiving income from multiple sources, such as from self-employment, UK property, or from foreign property. Make sure your chosen software is able to support all the income sources relevant to you.
• Supports multiple agents: you may be engaging the services of multiple different agents to assist you with MTD. You should make sure your software can support more than one agent.
• Offers receipt/document capture: this specific feature can be a massive time-saver for the self-employed. Some software will allow you to ‘snap and scan’ your receipts for automatic upload, so keep an eye out for this.
• User-friendly: there’s a good chance you’ll be spending a lot of time using this software throughout the tax year, so make sure it’s one you’ll find easy to get to grips with.
• Syncs up with your bank account: you’ll need to ensure your chosen software can sync up with your business bank account, so you can seamlessly import transactions.

A final point: if you’re running your own business, don’t just think of your software as a way to submit updates to HMRC. You should take advantage of all the features to make your bookkeeping easier. You’ll find that this will be particularly helpful when it comes time to do your small business accounts.

Read next: what is the VAT threshold, and when do you need to register for VAT?