Just because Making Tax Digital is becoming mandatory, doesn’t mean it has to cut into your budget: these are the best MTD-ready options you can get for free.
Startups.co.uk is reader supported – we may earn a commission from our recommendations, at no extra cost to you and without impacting our editorial impartiality.
Zoho Books is our top choice for free Making Tax Digital-compliant accounting software as it’s easy to use and integrates with various Zoho applications.
With Making Tax Digital for Income Tax now mandatory, it’s essential to use good-quality accounting software, but that doesn’t mean it has to be expensive.
There are plenty of self-employed business owners who were worried that MTD meant having to spend too much on expensive software, but thankfully, that’s not the case. We’ll talk you through the top Making Tax Digital free software options for getting MTD-ready.
- Zoho Books is the best option for a free MTD-ready plan, thanks to its excellent usability.
- FreeAgent is only free if you bank with NatWest, RBS, Ulster Bank, or Mettle (and make one transaction per month).
- HMRC-approved software must be capable of digital record keeping, quarterly updates, and tax return submissions.
- Clear Books offers a free plan for sole traders and landlords with no revenue thresholds or qualifiers required for access.
- ‘Bridging software’ allows you to continue using Excel for MTD, provided the bridge itself is also HMRC-approved.
- Free plans are fine for businesses with only basic needs.
Through our own hands-on testing, we were able to create an unbiased ranking of the best MTD-compatible free accounting software for small businesses.
For this, we tested the platforms based on the following criteria: Core accounting (20%), financial planning & visibility (17.5%), operational efficiency (17.5%), help & support (15%), pricing (15%), and usability (15%).
You can find a more detailed explanation of our full review process at the end of the article.
|
Best for
|
Key benefits
|
||
|---|---|---|---|
|
Best overall
 |
 |
 |
|
|
Best overall free MTD-ready software |
If you bank with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle |
Sole traders and landlords needing a reliable, no-cost software for MTD returns |
|
|
|
|
1. Zoho Books: best overall free MTD-ready software
Zoho Books comes as our number one-rated free accounting software, thanks to how intuitive and easy-to-use it is. For sole traders and landlords who are making the jump from spreadsheets to full software for MTD, Zoho Books is a great starter option if you want to avoid a steep learning curve.
Zoho Books’ free plan comes with:
- Generous transaction caps (1,000 invoices and 1,000 purchases)
- 50 receipt auto-scans per month
- A variety of Zoho apps you can integrate
- Supported income sources (confirmed by HMRC): sole trader and UK property
- An easy-to-use platform with a short learning curve
- It remains completely free until you decide to upgrade
- It allows for one user and one accountant, meaning you can give your bookkeeper or CPA direct access
- Not compatible with non-Zoho software
- All invoices sent via the free plan will carry a "Powered by Zoho Books" watermark
- Crucial business tools like inventory tracking, project/time tracking, and multi-currency support are entirely blocked on the free tier
Zoho Books is also a great choice if you’re already in, or planning to join, the wider Zoho ecosystem. All the Zoho applications connect seamlessly: Zoho CRM or Zoho Mail, for example. So if you want to run your business entirely from the Zoho-ecosystem it will be a convenient workflow.
You’ll also get access to some other helpful features on the free plan, including:
- Email support
- A customer portal
- Customisable reporting
- Mileage expense tracking
2. FreeAgent: best if you qualify for a free plan
FreeAgent is incredible value for money, as long as you qualify for a free plan. FreeAgent costs nothing if you have an eligible business bank account from NatWest, Royal Bank of Scotland, Ulster Bank, or Mettle (and make at least one transaction per month).
If you can get a FreeAgent account through one of the above banks, then you’ll have access to:
- Built-in tax forecasting and planning tools
- Cash flow alerts
- Smart receipt capture
- Supported income sources (confirmed by HMRC) for sole trader and UK property
- There are no limits on the number of invoices, clients, or expenses you can track
- Includes fully RTI-compliant payroll, letting you file PAYE and National Insurance directly to HMRC
- Allows Self Assessment tax returns and MTD VAT returns directly to HMRC
- Doesn’t provide autofill when manually entering a bill (though it will for receipt capture, or clearing down your bank account)
- It can use some unclear terminology, which can make some sections hard to locate
- A complex onboarding experience, while Zoho Books had a shorter learning curve
FreeAgent’s design choices make your bookkeeping simpler, such as the user-friendly templates and clear timeline for invoicing. But the ‘traffic-light’ system for bank transactions stood out as especially helpful: transactions are categorised as “Explained”, “Unexplained”, “Manually added” or “Marked for approval”.
3. Clear Books: best free MTD plan for sole traders with simple needs
Clear Books is best for sole traders with simple needs, thanks to its easy quote customisation, and the well-designed search functionality makes it quick to find whatever you need. The free plan is free forever, and allows you to submit one-click quarterly updates to HMRC. Users can also benefit from:
- “Pop-up” project creator
- Built-in AI-powered smart coding tools
- No caveats on the free plan
- It doesn't limit how many sales invoices you can send or how many expenses you can log
- Your accountant can log in and review your books or handle your tax submissions on your behalf
- Unlike FreeAgent, you do not need to switch your business bank account to qualify for the free plan
- The free plan doesn't include email, phone, or user community support
- A steep learning curve compared to Zoho Books and FreeAgent
- Advanced forecasting, cash flow alerts, and budget comparisons are completely hidden on the free tier
While there’s a bit of a learning curve initially, Clear Books is still useful for bookkeeping convenience. Touches like the easy “pop up” project creation and AI-powered smart coding can help you build an efficient accounting workflow and make getting your quarterly updates out to HMRC much easier.
What other Making Tax Digital free software is available?
Our top three recommendations for free MTD-ready accounting software have been tested and reviewed by us at Startups, but there are other options out there to consider, such as Sage Sole Trader Free.
Other free platforms include the following:
Sage Sole Trader Free
Sage Sole Trader Free is a free accounting tier designed explicitly for non-VAT-registered freelancers and microbusinesses. You can sign up to Sage Sole Trader Free to access an HMRC-approved software that will allow you to manage your income and expenses as well as send off your quarterly updates and tax summary to HMRC.
!Coconut Free
!Coconut Free is basic, and has been designed predominantly for mobile use, tailored to users who need something free and simple. HMRC confirms that !Coconut Free supports sole trader, UK property, and foreign property income sources.
TaxNav
TaxNav is a browser-based software that doesn’t require you to install anything on your computer. Its focus is on simplicity; however, it doesn’t have a mobile app, which can limit its suitability for some users. As confirmed by HMRC, TaxNav supports sole trader, UK property and foreign property income sources.
Monzo
If you use Monzo for your business bank account, it’s worth knowing that you already get built-in MTD-ready software for your account. As confirmed by HMRC, Monzo supports sole trader income sources.
Can I use Excel for Making Tax Digital for Income Tax?
Excel on its own is not approved by HMRC for Making Tax Digital for Income Tax because it’s not capable of submitting updates directly to HMRC, making it non-compliant. However, you can technically keep on using it if you combine it with ‘bridging software’.
‘Bridging software’ connects your spreadsheets to HMRC (this acts as the bridge between your non-compliant record-keeping software and HMRC). Just keep in mind, the bridging software you choose to use needs to also be HMRC-approved, so bear this in mind, or you could face penalties.
Still, just because you can continue to use Excel in this way, doesn’t mean that you should. In our opinion, using bridging software isn’t the best long term solution. Using full cloud accounting software will overall make your bookkeeping more efficient, allow you deeper insights into your finances, and give you an end-to-end MTD-ready platform at your fingertips.
You’ll be able to find HMRC-approved, free MTD bridging software through the finder tool at gov.uk.
Understanding the digital links rule
The digital links rule is important for staying MTD compliant, so it’s crucial to understand it: from the moment you record a transaction in your software, any further transfer or amendment of that data must be done digitally.
That includes making any corrections, submitting the quarterly updates, or filing your tax return. HMRC must be able to see a clear, digital audit trail for any movement of data since it first entered the system.
This means actions like cut and paste, or copy and paste, are not allowed under HMRC’s regulations. However, HMRC does consider the following to be acceptable digital links:
- Linked cells in a spreadsheet
- Using a flash drive or memory stick, which is then handed to another person to upload to HMRC-approved software
- XML, CSV import and export, and downloading or uploading files
- API transfer
You can find out more detailed information about the rules and regulations of MTD in our full guide to Making Tax Digital.
Is free MTD software right for my business?
Free software is perfectly fine for your business if you only have simple and basic needs. If you were already comfortable doing your accounts on spreadsheets, then free software will most likely do the trick.
However, free plans can become restrictive quickly. You might find that the transaction caps, limited support, and lack of extra features like advanced cash flow reporting will hold your business back. Remember also that free plans won’t include payroll, so they won’t suit you if you have other employees, and most won’t support more complex tax needs.
- You have low transaction volumes
- You're on a very tight budget
- You're a sole trader who just needs to be MTD-compliant for a basic business
- You need deep insights into your finances
- You need to manage employees
- You have complex tax requirements (for example the Construction Industry Scheme)
Pros and cons of free MTD software
The main pro of free MTD software might be obvious (you don’t have to pay anything), but there are a number of limitations to these plans that you might not have considered. For example, limited customer support or missing out on helpful features like AI-powered receipt capture.
While it’s always tempting to go for a free option to save on overheads, have a look at our list of pros and cons below to see what the trade-offs to free plans can be:
- Save on costs
- You can try out accounting software before upgrading
- Reassurance of HMRC compliance
- Most platforms are beginner-friendly and easy to use
- Restrictive transaction caps
- Limited support compared to paid plans
- Often only free under specific circumstances
- Limited tools and features (no receipt capture for example)
Free plans are really only suitable for very basic needs. Before choosing a free plan, consider the extra features of a premium plan that can help make your bookkeeping more efficient like AI-powered automations or unlimited document capture tools that can automatically upload receipts for you.
Our methodology: how we chose the best free MTD software
Our dedicated, in-house research team carried out 37 user tests, which amounted to a total of 57 hours of actual testing, in order to determine the best accounting software options.
We split this testing across these six crucial categories:
- Core accounting (20%): essential capabilities, including invoicing and quotes, bank account syncing, bank reconciliation, and payment processing.
- Financial planning & visibility (17.5%): reporting features and whether the software helps track bills, expenses, and overall business finances.
- Operational efficiency (17.5%): integrations with third-party apps, automation, and customisation options that streamline bookkeeping.
- Help & support (15%): the support available on each provider’s free plan, including channels and accessibility.
- Pricing (15%): the pricing of paid plans, value for money, and any additional or hidden fees.
- Usability (15%): the software’s interface and how easy each platform is for sole traders to learn and use.
Next steps: how to choose the best MTD software
It’s vital to keep in mind that the ‘best’ MTD software will depend on your specific scenario and needs. For the majority of sole traders, Zoho Books will be the top option, but if you’re banking with NatWest, then FreeAgent will be the most logical choice.
Remember that free accounting software options can be a great option for the self-employed who need to be MTD-ready quickly. They can also be a good learning experience if you’re new to cloud accounting software. However, they do have several limitations you might find restrictive as your business grows.
If you’re feeling confident about your software, but still concerned about the upcoming MTD for ITSA deadlines, don’t panic. Take a look at our Startups MTD readiness checklist, and you can be fully MTD compliant.
Jump back into any of our reviews:
Startups.co.uk is reader-supported. If you make a purchase through the links on our site, we may earn a commission from the retailers of the products we have reviewed. This helps Startups.co.uk to provide free reviews for our readers. It has no additional cost to you, and never affects the editorial independence of our reviews.
