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Choosing software

The three types of MTD software, what to look for, free options, and red flags to avoid.

5 min read

MTD requires you to use software that HMRC has recognised, you can't submit updates to HMRC from a plain spreadsheet or a paper ledger. Good news: you have plenty of options, including free ones.

The three types of software

1. All-in-one accounting apps

The most common option. One app handles your records, your quarterly updates and your final declaration. Examples include Kite, FreeAgent, QuickBooks, Xero, Sage and many more. Typically priced from a few pounds a month for sole traders/landlords, up to £15–25/month for fuller-featured business tools.

2. Bridging software

If you're attached to your spreadsheet and don't want to change, you can use bridging software. This sits between your spreadsheet and HMRC: you keep recording in Excel/Google Sheets, and the bridging app turns your totals into a valid MTD submission. Some bridging tools are free or very cheap. The catch: you need to keep your spreadsheet in a format the bridging tool can read, and there's less room for assistance (no bank feeds, categorisation help, receipt capture, etc.).

3. Spreadsheet templates + bridging

Effectively the same as option 2 but the bridging vendor provides the spreadsheet for you so you don't have to design one.

What all compliant software has to do

HMRC requires MTD software to:

  • Store digital records of your income and expenses in a structured form.
  • Send quarterly updates to HMRC in the format HMRC's APIs expect.
  • Submit your final declaration to HMRC.

Beyond those minimums, features vary wildly. Nice-to-haves include:

  • Open-banking bank feeds (transactions flow in automatically).
  • AI-assisted categorisation.
  • Receipt capture (snap a photo, it attaches to a transaction).
  • A running tax estimate so you know roughly what you'll owe.
  • Mileage tracking, invoicing, expense claims.
  • Agent/accountant collaboration.

The official list

Product names and availability change, so don't rely on blog posts. HMRC maintains the up-to-date, searchable list:

The list shows software that is:

  • Ready now, supports MTD ITSA end-to-end.
  • In development, expected to be ready before you need it.
  • For agents only, aimed at accountants/bookkeepers acting for clients.

Filter it by what you need (sole trader, landlord, both) and by features.

Free options worth knowing about

  • Some banks (for example NatWest, Royal Bank of Scotland and Ulster Bank customers) offer certain accounting software free as part of your current account. Check with your bank.
  • Some products have free tiers for very simple sole traders or for landlords with a single property.
  • Bridging software is often the cheapest route if you're happy with spreadsheets.

Free isn't always best, if free software is hard to use and makes you late on an update, you'll regret saving £6 a month. Think about total cost including the time it takes.

Choosing: questions to ask yourself

  1. Sole trader, landlord, or both? Some products are excellent for one and weak at the other. Kite covers both.
  2. Do I have an accountant? If yes, pick software your accountant already supports. Ask them for their shortlist.
  3. Do I already use anything? If you're on something like FreeAgent or Xero and it's MTD-ready, the cheapest move is often to stay put.
  4. Bank feeds matter to me? If you hate manual entry, prioritise products with open banking feeds for your specific bank.
  5. How many businesses? A sole trader with one rental property needs software that can model two "businesses" in one account.
  6. Mobile or desktop? If most of your admin happens on a phone in between jobs, make sure the mobile experience is decent.
  7. Support? Look at reviews for quality and speed of customer support. At year-end you will have questions.

Switching software mid-year

You are not locked in. You can switch MTD software at any point in the tax year, even between quarters. Because HMRC stores your submitted year-to-date totals, your new software can pull them back and carry on.

If you do switch:

  • Set up the new software, connect it to HMRC, and import your opening balances and historical transactions from your old software.
  • Check that your next quarterly update, when generated by the new software, matches what HMRC already holds for the year to date.

Kite handles this automatically when you connect: it fetches your year-to-date figures from HMRC so you don't have to re-enter the history manually.

What you don't need to worry about

  • Submitting directly to HMRC yourself. You won't. Your software does the submission for you once you've authorised it.
  • Building your own API integrations. Unless you're a developer wanting to do something custom, use off-the-shelf software.
  • Paying for "MTD certification" as a one-off fee. MTD recognition is a vendor issue, not something you pay for.

If you have an accountant

Talk to them now. The conversation has three parts:

  1. Who does the quarterly updates? You, them, or a split?
  2. Who does the final declaration? Usually them, but confirm.
  3. What software do they want you to use? Most accountants standardise on one or two products so they can support clients efficiently.

Accountants can be authorised as your agent in HMRC's systems, they can see your MTD obligations and submit on your behalf.

Red flags when picking software

Sources