MAKING TAX DIGITAL SORTWARE
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Making tax digital software
Choosing Approved Software for Making Tax Digital
From April 2026, if you are required to join Making Tax Digital (MTD) for Income Tax, you must use MTD-compatible software to keep digital records and submit your updates. The traditional Self Assessment process will no longer apply to those mandated into MTD, so using approved software becomes essential for tax compliance.
What Is MTD-Compatible Software?
MTD-compatible software is digital accounting software that can:
Keep the required digital income and expense records
Store bookkeeping data securely
Submit quarterly updates digitally to HMRC
Submit the Final Declaration at the end of the year
You cannot manually type figures into an online form each quarter. All submissions must be sent through HMRC-approved compatible software.
Who Needs MTD Software?
If your 2024/25 qualifying income (turnover) exceeds £50,000, you must use MTD-compatible software from April 2026. This applies to:
Sole traders
Landlords
Anyone with both business and rental income
The requirement is based purely on your income threshold — not on the size or complexity of your business.
Check the Official Approved Software List
Before choosing any provider, always check the official list of software recognised for Making Tax Digital on the HMRC website. Make sure the software is approved specifically for MTD for Income Tax, not just for VAT.
Types of MTD-Compatible Software
There are three main options available:
Full accounting software (such as Xero)
Simpler bookkeeping systems
Bridging software (for those who prefer to use spreadsheets)
Spreadsheets on their own do not meet HMRC’s submission requirements. If you want to continue using spreadsheets, you must also use compatible bridging software to send your quarterly updates and Final Declaration.
Choosing the Right MTD Software
Software providers differ in cost, features, ease of use, and suitability for sole traders or landlords. The cheapest option is not always the best choice for long-term tax compliance.
When deciding, consider:
How you currently record your income
Whether you deal with cash, invoices, or online sales
Your level of confidence with bookkeeping
Choosing software without first understanding how Making Tax Digital works can lead to unnecessary confusion and extra cost later.
Take time to understand the full MTD process before you commit to any software.