Making Tax Digital (MTD) is part of a UK government initiative to simplify the tax management of individuals and businesses, making it easier to keep accurate financial records and correctly calculate tax.
Since 2022, all VAT-registered businesses have needed to follow MTD rules, whether they are a sole trader, a limited company, a partnership, a charitable trust or a landlord with at least one property in the UK. Businesses registering for VAT now are automatically signed up for MTD by HMRC.
From April 2026, some businesses or landlords that are not VAT-registered but submit tax returns through self-assessment will need to register for MTD for Income Tax (if above the £50,000 threshold). There are currently plans to extend this for self-assessment incomes over £30,000 from April 2027. This means that a huge number of small businesses, and their accountants, will need to start thinking about the impact MTD will have on their current processes.
For accountants handling the financial record keeping, tax return preparation and filing responsibilities on behalf of clients, a common question from businesses relates to which accounting software solution should be used.
With a huge range of bookkeeping and accountancy tools and software available, it’s important that UK businesses choose to use one that is MTD-compliant. That still leaves a choice of many (over 500 at the time of writing), so we have compiled our list of the top solutions we believe offer everything needed to meet MTD compliance and more. Accountants can use this summary to help their clients choose the best option for their needs.
Many of the MTD software options covered in this article are suitable for most SMEs and the majority of UK accountants will also have experience of working with them, helping to make the MTD transition as smooth as possible.
It’s important to note that Advancetrack does not endorse any of these softwares specifically, because all businesses and accounting needs are unique. It is down to every organisation to ensure that a software solution meets their individual requirements.
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In order for software to be compliant for MTD, it needs to:
It’s also possible to use MTD bridging software, which works with non-compatible software such as spreadsheets, enabling businesses to send the necessary stored information digitally to HMRC in the right format.
Below, we have overviewed some of the most popular MTD software options currently available, listed in no particular order.
This software comes in various packages, depending on the business needs of your client. With no contract and a good track record for support, this can be a good option for record keeping and accounting purposes.
View Quickbooks pricing and plans.
Another software with a variety of packages to suit different types of business, Sage has a good suite of tools for quick and efficient processing of tax and accounts, and a range of support options if needed.
View Sage Accounting options.
Depending on the package chosen, Xero offers accounting software that is well-suited for everyday business needs along with submitting the necessary returns to HMRC. There is also 24/7 online support if needed.
View Xero package options.
With a reputation for being easy to use, Zoho Books is one of many Zoho software products that can be used on its own or with others from the portfolio. There is a free option, which may be enough for some businesses to handle their MTD responsibilities, but the paid plans give access to more features.
View Zoho Books plans and prices.
With a variety of available plans, aimed at everyone from solo freelancers to larger organisations with multiple employees, Freshbooks offers all of the features you’d expect from MTD software and also includes lots of useful online help and tutorials.
View Freshbooks plans and pricing.
With packages aimed at several different business types, such as sole traders and other self-employed individuals, as well as limited companies and other setups, FreeAgent offers plans with a variety of features as standard. You can also add-on more features optionally, which gives flexibility for those wanting some premium features but not a larger subscription cost.
View FreeAgent plans and pricing.
All of these options, plus many more available MTD-compliant software options, have their own pros and cons, so some research in light of how they meet a specific company’s needs is always important before making a choice. Opting for a tool with a free trial period or a monthly rolling contract can be a good idea to test out a particular solution before making a stronger financial commitment.
When advising your accountancy clients on the best MTD software for both their and your needs, it’s important to factor in elements such as:
Find out more about MTD.
At Advancetrack, we’re a professional accountancy and tax outsourcing provider, so we understand the importance of the right accountancy software in making life easier for you and your clients. We work with all of the major tools and software and can tailor our services to whatever your clients need to help make their financial records and tax preparation accurate and compliant.
We can also help with accounting software migrations to assist your clients moving from one solution to another if that is required as part of the MTD compliance process or simply to facilitate business growth or change. See how we have helped with successful accountancy software migrations.
Book a call with us to find out how we can help your accountancy firm to grow.
