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Making Tax Digital Software: Which Software Should You Use?
Making Tax Digital software must allow you to keep the required digital records, send quarterly updates to HMRC and submit your annual tax return.
There is no single best software package for every sole trader or landlord. The right choice depends on your income sources, number of transactions, existing bookkeeping system, whether you use an accountant and which additional features you actually need.
Some taxpayers may benefit from a complete cloud accounting package with bank feeds, invoicing and receipt capture. Others may be able to continue using spreadsheets alongside MTD compatible software that bridges the information to HMRC.
The important point is to choose software that meets HMRC’s requirements while remaining practical for the way you already manage your business or property records.
Who Needs Making Tax Digital Software?
Making Tax Digital for Income Tax is being introduced in stages for sole traders and landlords based on their gross qualifying income from self-employment and property.
The current timetable is:
| Qualifying income | MTD for Income Tax start date |
|---|---|
| More than £50,000 | 6 April 2026 |
| More than £30,000 | 6 April 2027 |
| More than £20,000 | 6 April 2028 |
The £50,000 group is already within the mandatory regime.
Taxpayers approaching the £30,000 threshold should therefore be preparing for 6 April 2027, while those above £20,000 will follow from April 2028.
Qualifying income is based on gross income before expenses from relevant self-employment and property sources.
What Must Making Tax Digital Software Do?
HMRC requires Making Tax Digital software for Income Tax to support several core functions.
Your software needs to be able to:
- Create digital records
- Store digital records
- Correct digital records
- Record self-employment income and expenses
- Record property income and expenses where relevant
- Create quarterly updates
- Send quarterly updates to HMRC
- Submit your annual tax return
The software also needs to connect with HMRC’s Making Tax Digital system.
A general bookkeeping package is not automatically suitable simply because it stores accounts digitally.
It needs the functionality required for MTD for Income Tax.
What Are Digital Records?
Digital records are electronic records of your business or property income and expenses.
Depending on your circumstances, these can include:
- Sales income
- Rental income
- Business expenses
- Property expenses
- Transaction dates
- Transaction values
- Expense categories
The purpose is to maintain the information digitally throughout the year rather than relying on paper records that are only entered into a system at year end.
The software then uses these records to prepare the quarterly information sent to HMRC.
What Are Quarterly Updates?
Quarterly updates are summaries of income and expenses taken from your digital records.
They are not separate tax returns.
Your compatible software calculates totals from your digital records and sends the required information to HMRC.
For someone with more than one qualifying income source, such as both self-employment and property income, separate quarterly information may be required for each relevant activity.
Quarterly updates help HMRC provide an estimate of the taxpayer’s developing tax position during the year.
Does Making Tax Digital Mean Four Tax Returns a Year?
No. Making Tax Digital does not mean completing four full tax returns every year.
The quarterly updates contain summaries of business or property income and expenses.
You still submit one annual tax return.
For the first mandatory MTD year beginning 6 April 2026, the 2026–27 tax return is due by 31 January 2028.
Tax is also still paid under the normal Self Assessment timetable.
What Is MTD Compatible Software?
MTD compatible software is software capable of meeting HMRC’s Making Tax Digital requirements and communicating with HMRC’s systems.
HMRC provides a software finder that allows taxpayers to identify products supporting MTD for Income Tax.
Software products can vary substantially.
Some offer only the core MTD functions, while others provide complete accounting systems.
Before selecting software, check that it supports your specific income sources.
For example, you may need software capable of handling:
- Sole trader income
- UK property income
- Foreign property income
- Multiple businesses
- Other income needed for the annual tax return
Which Software Should You Use for Making Tax Digital?
There is no universal answer to which software to use for Making Tax Digital.
The best choice depends on how complex your finances are.
A simple sole trader with a small number of monthly transactions may need very different software from a landlord with several properties or a business with employees, VAT and hundreds of transactions.
Start by deciding which functions you actually need.
What Features Should You Look for in MTD Software?
Useful features can include:
Digital Record Keeping
The software should record the income and expenses required under MTD.
HMRC Quarterly Updates
It should be able to generate and submit the required quarterly information.
Annual Tax Return Submission
Check whether the software supports the complete annual tax return you need to file.
Bank Feeds
Automatic bank feeds can import transactions directly from your bank account.
This can reduce manual data entry.
Receipt Capture
Some software allows you to photograph receipts using a mobile phone and attach them to transactions.
Invoicing
Sole traders may benefit from being able to create and track customer invoices within the same system.
Property Records
Landlords should check whether the software can separately manage different properties and property-related expenses.
Accountant Access
If you use an accountant, it can be useful for both you and your adviser to access the same records.
Integrations
Consider whether the software connects with other systems you already use.
What Is the Best Making Tax Digital Software?
The best Making Tax Digital software is the software that meets HMRC’s requirements while matching the taxpayer’s actual needs.
A more expensive package is not automatically better.
The right software should ideally:
- Be HMRC compatible
- Support your income sources
- Be easy for you to use
- Fit your transaction volume
- Integrate with relevant existing systems
- Allow your accountant access where required
- Produce the reports you need
- Cost an amount justified by the features you use
The objective should be to find the simplest system that comfortably handles your compliance and accounting requirements.
Businesses exploring cloud accounting services in Wimbledon can assess whether a cloud-based platform offers the right combination of digital record keeping, bank feeds, quarterly reporting and accountant access.
Making Tax Digital Software for Sole Traders
Sole traders may want features such as:
- Sales invoicing
- Expense tracking
- Bank feeds
- Receipt capture
- Mileage records
- Quarterly MTD updates
- Annual tax return submission
- Accountant access
A sole trader with relatively straightforward income may not need a complex full accounting platform.
However, businesses with significant transaction volumes may benefit from automation that reduces manual bookkeeping.
Sole traders seeking automated bookkeeping Farringdon support can explore connected bank feeds, transaction categorisation and digital accounting processes that reduce manual data entry while maintaining accurate MTD records.
Making Tax Digital Software for Landlords
Landlords should consider whether the software can manage property income and expenses clearly.
Useful functionality may include:
- Rental income tracking
- Property expense categories
- Separate property records
- Bank feeds
- Receipt storage
- Quarterly updates
- Multiple property support
- Annual tax return submission
A landlord with one property may require a simpler system than someone managing a larger portfolio.
What If You Have Both Property and Self-Employment Income?
Your software needs to support all relevant income sources covered by MTD.
For example, someone who is both:
- A self-employed consultant
- A landlord
may need to maintain separate digital records for the two activities and provide quarterly updates for each.
When comparing software, confirm that the product supports multiple qualifying income sources.
Do not assume that software designed mainly for sole traders will automatically handle property reporting correctly.
Can You Still Use Spreadsheets for Making Tax Digital?
Yes. You can continue using spreadsheets if your records are connected to HMRC using suitable bridging software.
This can be useful for taxpayers who already maintain well-structured spreadsheets and do not want to move immediately to a full accounting package.
The basic arrangement is:
Spreadsheet → Bridging software → HMRC
The spreadsheet holds the digital records.
The bridging software provides the connection needed to submit the required information.
What Is Bridging Software?
Bridging software connects an existing digital record system, such as a spreadsheet, to HMRC’s Making Tax Digital service.
It can allow taxpayers to retain familiar bookkeeping processes while still satisfying the submission requirements.
However, bridging software may provide fewer features than a complete accounting package.
For example, it may not offer:
- Automated bank feeds
- Receipt capture
- Customer invoicing
- Cash-flow reporting
- Detailed management accounts
The decision therefore depends on whether you simply need MTD compliance or also want broader bookkeeping functionality.
Is a Spreadsheet Enough for MTD?
A spreadsheet can form part of an MTD-compliant system, but the spreadsheet alone normally cannot communicate directly with HMRC.
You need compatible software to make the required submissions.
Taxpayers using spreadsheets should also make sure that their overall record-keeping process satisfies the digital record requirements.
For someone with many transactions, using spreadsheets may also become increasingly time-consuming compared with more automated accounting software.
Free vs Paid Making Tax Digital Software
Both free and paid software options may be available.
Free Software
A free package may suit someone with:
- Simple tax affairs
- Low transaction volumes
- One source of qualifying income
- Limited additional accounting needs
However, check which features are actually included.
Paid Software
Paid systems can provide additional features such as:
- Bank feeds
- Automated reconciliation
- Invoicing
- Receipt capture
- Management reporting
- Multi-property support
- Accountant collaboration
The cheapest option is not necessarily the most cost-effective if it creates more manual work.
Should You Choose Software Based Only on Price?
No. Price matters, but it should not be the only factor.
Consider the total cost of using the software.
This can include:
- Subscription charges
- Setup costs
- Training
- Migration
- Add-ons
- Accountant costs
- Time spent entering information manually
Software that costs slightly more but saves several hours of administration every month may offer better value.
Should Your Accountant Choose Your MTD Software?
Your accountant can help recommend software, but the final choice should reflect how you actually work.
An accountant can help determine:
- Which MTD functions you need
- Whether your current software can continue to be used
- Whether bridging software is sufficient
- Whether your records need restructuring
- How software will fit with year-end tax work
Using software that your accountant already supports can also make collaboration easier.
Businesses seeking a Zoho accountant Fulham can receive guidance on whether Zoho Books supports their record-keeping requirements, quarterly MTD updates and existing bookkeeping processes.
Should You Change Existing Accounting Software?
Not necessarily.
If your current software supports MTD for Income Tax and provides the features you need, there may be no reason to change.
Check with the software provider whether your existing package supports:
- Digital record keeping
- Quarterly MTD submissions
- Your relevant income sources
- Annual tax return submission
If it does not, you may be able to add bridging software or another compatible product rather than replace the entire bookkeeping system.
Working with a QuickBooks accountant Farringdon businesses can consult may help determine whether their current QuickBooks setup supports MTD for Income Tax or requires additional compatible software.
How Should You Compare MTD Software?
A simple comparison can help.
| Feature | Why It Matters |
|---|---|
| HMRC Compatibility | Required for MTD submissions |
| Income Sources | Must support your business or property income |
| Quarterly Updates | Core MTD requirement |
| Annual Tax Return | Needed for final annual reporting |
| Bank Feeds | Reduces manual entry |
| Receipt Capture | Helps maintain digital evidence |
| Invoicing | Useful for many sole traders |
| Property Support | Important for landlords |
| Spreadsheet Integration | Useful if retaining existing records |
| Accountant Access | Helps collaboration |
| Price | Determines ongoing cost |
| Support | Important when problems occur |
You should compare functionality you genuinely need rather than simply choosing the product with the longest feature list.
What Should Landlords and Sole Traders Check Before Buying Software?
Before choosing a product, ask:
- Does It Work With MTD for Income Tax?
- Does It Support All My Income Sources?
- Can It Submit Quarterly Updates?
- Can It Submit My Annual Tax Return?
- Can I Keep My Existing Records?
- Does It Work With My Bank?
- Can My Accountant Access It?
- Can I Export My Data?
- What Is the Full Annual Cost?
- What Support Is Available?
Testing these points before committing can reduce the risk of needing to change software again later.
Why Is Data Export Important?
Your accounting records belong to your business, not to the software provider.
Before choosing a system, check whether you can export:
- Transactions
- Customer records
- Supplier records
- Invoices
- Expense records
- Reports
- Tax information
Easy data export gives you more flexibility if you later change accountant or software provider.
When Should You Choose Your MTD Software?
You should choose and prepare your software before your MTD start date.
For taxpayers entering MTD from 6 April 2027, waiting until April itself can create unnecessary pressure.
Before the start date, you may need time to:
- Select software
- Create an account
- Import existing records
- Connect bank feeds
- Authorise the software with HMRC
- Check accounting periods
- Train staff
- Give your accountant access
Starting earlier also gives you time to identify problems before the first quarterly submission is due.
What Should Existing MTD Users Check Now?
Taxpayers already using MTD from April 2026 should review whether their software is working effectively rather than assuming the initial choice must remain permanent.
Consider:
- Are Records Up to Date?
- Are Bank Feeds Working?
- Are Quarterly Updates Easy to Prepare?
- Are Expense Categories Correct?
- Can Your Accountant Access the Information?
- Are You Paying for Features You Do Not Use?
- Is the Software Saving Time?
The first year of MTD can reveal whether the chosen system genuinely suits the business.
Choose Making Tax Digital Software Based on How You Actually Work
Choosing Making Tax Digital software should not be about finding the product with the most features.
The right system should meet HMRC’s requirements while making your bookkeeping easier rather than more complicated.
Before choosing software, consider:
- Your Income Sources
- Transaction Volume
- Existing Bookkeeping System
- Whether You Need Bank Feeds
- Whether You Need Invoicing
- Whether You Want Receipt Capture
- Whether You Use an Accountant
- Whether You Prefer Spreadsheets
- Data Export Options
- Full Annual Cost
Some taxpayers may benefit from a complete accounting package.
Others may find that spreadsheets and bridging software continue to meet their needs.
The important requirement is that your chosen MTD compatible software can maintain the necessary digital records, submit quarterly updates and support your annual tax return.
CIGMA Accounting can help sole traders and landlords assess their Making Tax Digital requirements, compare suitable software approaches and prepare their bookkeeping systems for MTD for Income Tax.
CASE STUDY: Choosing Making Tax Digital Software for a Self-Employed Landlord
James, a self-employed consultant who also owned a rental property, visited our Farringdon office after learning that his combined gross qualifying income would bring him within Making Tax Digital for Income Tax from April 2027. He had been maintaining his business records using spreadsheets and was unsure whether he needed to purchase a complete accounting package.
During our review, we explained that Making Tax Digital software must support digital record keeping, quarterly updates to HMRC and annual tax reporting. Because James received both self-employment and property income, his chosen software also needed to accommodate separate reporting for each activity.
We compared two approaches: continuing with his existing spreadsheets using suitable MTD bridging software, or moving to a cloud accounting platform offering bank feeds, receipt capture and automated transaction categorisation.
James initially assumed that the most expensive package would provide the best compliance solution. We explained that MTD compatible software should be selected according to income sources, transaction volume, existing records and practical bookkeeping requirements.
We also discussed the importance of checking HMRC compatibility, accountant access, data-export options and ongoing subscription costs before committing.
James decided to test a suitable software arrangement before his April 2027 start date.
He left understanding that choosing the best Making Tax Digital software is not about purchasing the most features. The priority is finding a reliable system that meets HMRC requirements and makes regular bookkeeping manageable.
Prepare for Making Tax Digital With the Right Software and Reporting Processes
Making Tax Digital introduces new digital record-keeping and quarterly reporting responsibilities for qualifying sole traders and landlords. Stay informed about MTD-compatible software, bridging solutions, HMRC deadlines, Income Tax reporting and digital accounting developments.
Expert accountants in London providing practical tax advice for businesses and individuals.
Making Tax Digital Software and Accounting Support in London With Cigma Accounting
Choosing the right Making Tax Digital software is essential for businesses, self-employed individuals and landlords preparing to meet HMRC’s digital record-keeping and reporting requirements. Cigma Accounting supports clients across Fulham, including Sands End and Imperial Wharf with practical accounting and software guidance through our offices across London. As a Zoho Books MTD Income Tax Certified Partner, we help clients assess suitable digital accounting solutions, organise financial records and understand how their software supports ongoing tax compliance.
Selecting MTD compatible software involves more than comparing features or subscription costs. Businesses need to consider their income sources, bookkeeping processes, reporting obligations and compatibility with HMRC systems. Our team helps clients understand which software to use for Making Tax Digital, evaluate Making Tax Digital software for Income Tax and establish reliable digital reporting processes. We also support software setup, transaction categorisation and quarterly reporting preparation, helping reduce errors and avoid unnecessary compliance difficulties.
Frequently Asked Questions About UK Business Software Competition and the CMA Microsoft Investigation
What is UK business software competition?
UK business software competition refers to how software providers compete to offer businesses productivity tools, operating systems, cloud services, security software and AI applications. Effective competition can encourage innovation, competitive pricing and greater customer choice when businesses select or change software providers.
Why is the CMA investigating Microsoft in the UK?
The CMA Microsoft investigation UK was launched on 14 May 2026 to assess whether Microsoft has strategic market status in its business software ecosystem. The Competition and Markets Authority is examining whether Microsoft’s market position and business practices could restrict competition or limit customers’ ability to choose alternative software.
What is Microsoft's strategic market status in the UK?
Microsoft strategic market status UK refers to the CMA’s investigation into whether Microsoft meets the legal conditions for designation under the Digital Markets, Competition and Consumers Act 2024. On 16 October 2026, the CMA proposed designating Microsoft with strategic market status, but a final decision has not yet been made.
What are the CMA's concerns about Microsoft software bundling?
The Microsoft software bundling competition concerns involve whether combining products and services within Microsoft’s software ecosystem makes it harder for rival providers to compete. The CMA is examining whether bundling, default settings and limited interoperability could discourage customers from choosing alternative software solutions.
Which Microsoft products are covered by the CMA investigation?
The CMA business software investigation covers Microsoft’s wider business software ecosystem, including productivity applications, operating systems, database management systems and security software. Products such as Microsoft 365, Teams and Copilot are relevant to the CMA’s assessment of competition and customer choice.
Could the CMA investigation give UK businesses more software choices?
Potentially, yes. If the CMA confirms Microsoft’s strategic market status, it could consider targeted measures to improve competition and make it easier for businesses to use alternative software providers. However, any specific intervention would require further consideration, and no immediate change to business software contracts is guaranteed.
What does software interoperability mean for UK businesses?
Software interoperability means different applications and systems can exchange information or work together effectively. Better interoperability could allow businesses to combine Microsoft products with software from competing providers, reducing dependence on a single supplier and potentially improving flexibility.
Find the Right MTD Software for Your Tax Reporting Needs
Cigma Accounting helps businesses, landlords and self-employed individuals choose suitable Making Tax Digital software for HMRC compliance. As a Zoho Books MTD Income Tax Certified Partner, we provide practical guidance on software selection, digital bookkeeping, system setup and quarterly reporting to help clients maintain accurate records and meet MTD requirements.
Trusted guidance from London-based accountants, focused on accuracy, clarity, and compliance.
