September 21, 2026

HMRC Making Tax Digital changes how businesses and individuals keep records and report information to HM Revenue and Customs (HMRC). As the rules expand, choosing the right Making Tax Digital software has become an important consideration for landlords, sole traders, and VAT-registered businesses. The software you need depends on which part of Making Tax Digital (MTD) applies to you. For instance, MTD for Income Tax requires eligible sole traders and landlords to keep digital records and send quarterly updates to HMRC. However, MTD for VAT requires VAT-registered businesses to keep digital VAT records and submit VAT Returns using compatible software. This guide explains MTD software for Income Tax and VAT. It also discusses the benefits of Making Tax Digital for sole traders, landlords, and other small businesses in the UK. What Is Making Tax Digital Software? As the name suggests, MTD software is software that meets the requirements for using HMRC’s MTD services. The exact functionality required depends on the MTD service you need to use. For Making Tax Digital for Income Tax, compatible software must be able to create and store digital records, send quarterly updates to HMRC, and submit the relevant tax return. Additionally, HMRC provides a software finder that helps sole traders and landlords find software that meets their MTD for Income Tax needs. If you are a VAT-registered business, your Making Tax Digital VAT software must allow you to maintain digital VAT records and submit VAT Returns to HMRC. You can also use bridging software in certain circumstances to connect existing records, such as spreadsheets, to HMRC systems. Who Needs Making Tax Digital Software? Keep in mind that not everyone in the UK needs to use MTD software for Income Tax yet. The requirements are being introduced in stages. For MTD for Income Tax: From 6 April 2026, landlords and sole traders with qualifying income exceeding £50,000 must use MTD for Income Tax. From 6 April 2027, the requirement extends to those with qualifying income exceeding £30,000. From 6 April 2028, it extends to those with qualifying income exceeding £20,000. This means the thresholds are based on qualifying income from self-employment and property, rather than simply the amount of profit left after expenses. So, if your qualifying income is £20,000 or less, you are currently exempt from MTD for Income Tax. In specific circumstances, other exemptions can also apply. What is Making Tax Digital Software for Sole Traders? Making Tax Digital software for sole traders needs to support the requirements that apply to the individual. From 6 April 2026, a sole trader who meets the first MTD for Income Tax threshold needs to use compatible software to keep digital records and report information to HMRC. You can use Making Tax Digital software to record business income and expenses and send quarterly updates. If you are a sole trader, check that your chosen software supports your particular income sources. What Are MTD Compatible Software Requirements? When looking for Making Tax Digital compatible software, you should check what the software can actually do. Do not assume every accounting package is suitable. For MTD for Income Tax, the software needs to create digital records, send quarterly updates, and submit the End of Period Statement (EOPS) and a Final Declaration. Depending on your circumstances, you may also need to consider whether the software supports self-employment income, UK property income, VAT requirements, if applicable, foreign property income, and your tax agent’s software. Is There Making Tax Digital Software for Income Tax? Yes, there is MTD software for Income Tax.  The software is specifically relevant to sole traders and landlords within the MTD for Income Tax rules. However, the system is different from simply submitting an annual Self Assessment tax return. Under MTD for Income Tax, eligible businesses use compatible software to keep digital records and send quarterly updates. Also, they must submit their tax return and pay any tax due by the applicable deadline. The quarterly updates are not additional tax returns. They provide HMRC with information about income and expenses during the year. When Are the Quarterly Updates Due? For most taxpayers in the UK, the first quarterly update under MTD for Income Tax covers the period from 6 April to 5 July, with the update due by 7 August. If taxpayers use calendar update periods, they can have different periods and deadlines. Businesses should check their individual MTD obligations and deadlines with HMRC because the applicable reporting periods can depend on the accounting period you use. Can You Use Spreadsheets for Making Tax Digital? Yes, you can use a spreadsheet for MTD, but you must also use compatible bridging software. This is to digitally link your spreadsheet records and send the required information to HMRC. Additionally, for MTD for Income Tax, spreadsheets can be used for digital records if connected to compatible software. How to Choose the Right Making Tax Digital Software Choosing MTD compatible software involves more than comparing monthly subscription prices. Before choosing the right MTD software, you should: Check whether the software is compatible with the specific MTD service you need. Check the features of the software to see whether the software supports the functions you actually need. Check your income sources and ensure the software supports the relevant income sources. Consider your accountant and discuss the software choice with them before making a decision. Compare costs because the price of MTD software varies between providers. What Are the Benefits of Making Tax Digital Software? Making Tax Digital software can help you: Keep digital records of your income and expenses. Reduce errors by automating calculations and reducing manual data entry. Save time when preparing and submitting tax information. Send quarterly updates to HMRC for MTD for Income Tax. Monitor your estimated tax bill and cash flow throughout the year. Keep records organised and accessible in one digital system Do You Still Need an Accountant If You Use MTD Software? Using Making Tax Digital software does not necessarily mean you no longer need an accountant. Software