Making Tax Digital Software: Free and Paid Options Compared (2026)

Making Tax Digital software is any HMRC-recognised program that keeps your business or property records digitally and sends quarterly updates to HMRC through its API. Free options genuinely exist and are enough for one simple sole trade or a single rental with few transactions; paid packages earn their keep when you have several income sources, bank feeds, VAT, or a year-end that needs adjustments. The right choice depends less on brand and more on how many income sources you have and whether the tool can also file your final declaration.

• Making Tax Digital for Income Tax starts on 6 April 2026 for sole traders and landlords whose gross self-employment and property income together exceeded £50,000, based on the 2024/25 tax return.
• Your software must do four jobs: keep digital records, send quarterly updates, let you correct figures, and either file the final declaration or hand the data cleanly to something that can.
• Free tools usually cap the number of businesses or properties, and many stop short of the year-end submission.
• Spreadsheets are still allowed, but only with bridging software and a digital link — no manual retyping into a submission screen.
• Whatever you pay is a deductible business expense, so the real cost is lower than the sticker price — often by a quarter to over 40%.

A note on money: TaxFly's accounting and bookkeeping deals page includes partner offers, and we may earn a commission if you sign up through one. That has no bearing on the comparison below, which is organised by type of product rather than by brand.

What Making Tax Digital software must actually do

Before comparing prices, be clear on the job. Under Making Tax Digital for Income Tax, the annual Self Assessment return is replaced by four quarterly updates plus a final declaration. The software sits between your records and HMRC's systems, and there is no HMRC web form to type quarterly figures into.

The four jobs

1. Digital record keeping. Each item of business income and expense needs a digital record — normally the date, the amount and the category. Paper receipts can still be the source document, but the record itself has to be digital.
2. Quarterly updates. Totals by category for each trade and each property business, sent through HMRC's API. The standard quarters end on 5 July, 5 October, 5 January and 5 April, with deadlines of 7 August, 7 November, 7 February and 7 May. Most software lets you elect calendar quarters (to 30 June, 30 September, 31 December and 31 March) instead, which is easier if your bookkeeping follows calendar months.
3. Corrections. Quarterly updates are cumulative — each one restates the year to date — so a mistake in quarter one is fixed by correcting the figure in quarter two. Good software makes that obvious rather than forcing a separate amendment.
4. The final declaration. After the fourth quarter you add accounting adjustments, capital allowances, private-use restrictions and everything outside the business (employment, dividends, savings interest, pension contributions, Gift Aid), then declare the year complete by 31 January. Plenty of cheap tools handle quarters only. Check this before you commit.

HMRC recognition is not optional

Only software that appears on HMRC's compatibility list can submit. You can filter the list by free products, bridging products, whether it keeps records, and whether it supports agents: see find software compatible with Making Tax Digital for Income Tax on GOV.UK. If you are also VAT registered, MTD for VAT has been compulsory for all VAT-registered businesses since April 2022 and uses a separate compatibility list. One product that covers both saves duplicating your bookkeeping.

Features that matter more than you'd think

• Multiple income sources. A sole trade and a property business are two separate reporting obligations, each with its own quarterly update. If you have both, a tool that only handles one means two subscriptions and two logins.
• Jointly owned property. Couples who own a rental together each report their share. Software that can split income and costs by percentage saves a lot of manual work.
• Bank feeds and receipt capture. The single biggest time-saver, and usually the first thing missing from free tiers.
• Cash basis versus accruals. The cash basis is now the default for unincorporated businesses, but if you use accruals the software needs to cope with debtors, creditors and stock.
• Data export. If you leave, you want your ledger out in a usable format.

Free MTD software: what you get and what you don't

HMRC does not write software itself, but it does require that free products exist for taxpayers with straightforward affairs, and several appear on the compatibility list. In practice, free falls into three shapes.

Free record-keeping apps with a submission function. Typically limited to one business, a modest number of transactions, and manual entry rather than bank feeds. Good for a single sole trade with a handful of invoices a month, or one rental with an agent statement to type in.

Free tiers of paid products. Generous on features, but with a hard cap you will eventually hit — a number of clients, invoices, properties or bank transactions. The upgrade prompt tends to arrive at your busiest moment.

Free bridging tools. These do nothing but pass spreadsheet totals to HMRC. Fine if your spreadsheet discipline is already good.

The trade-offs to expect from anything free: no or limited bank feeds; little or no support beyond a help centre; often no final declaration, so you still need a way to file the year-end; and rarely any handling of joint property, foreign income, or a second business. None of that makes free wrong — for a straightforward single-source taxpayer it is a sensible answer — but read the limits before you build a year of records inside it.

Paid options compared

Paid products cluster into recognisable tiers. The price bands below are indicative monthly ranges rather than quotes, and headline prices are frequently discounted for the first several months.

What actually drives the price

Three things: the number of bank transactions or income sources, whether VAT is included, and whether a human answers your questions. Quarterly submissions themselves are cheap to provide — it is the bookkeeping automation and the support that you are buying. If your records are a dozen transactions a month, you are unlikely to need the top tier of anything.

The net cost after tax relief

Software bought for a trade or property business is an allowable expense, so the effective cost is the price less your marginal tax (and, for self-employment, National Insurance) saving.

Example 1 — sole trader in England, £45,000 profit. Software at £18 a month is £216 a year. On that slice of profit the marginal cost is 20% income tax plus 6% Class 4 National Insurance, a combined 26%. The relief is £216 × 26% = £56.16, so the net cost is £159.84 — about £13.32 a month.

Example 2 — landlord, total income £70,000, England. Rental profits are not subject to National Insurance, so the saving is 40% of £216 = £86.40, leaving a net £129.60.

Example 3 — the same landlord, Scottish taxpayer. Property profit is non-savings income, so Scottish rates apply: at the Scottish higher rate of 42% the saving is £216 × 42% = £90.72, and the net cost is £125.28.

The practical point is that the gap between a free tool and a £216-a-year tool is £130–£160 of real money. If the paid option saves you two hours a quarter, it has already paid for itself.

Spreadsheets and bridging software

Spreadsheets remain legitimate. What changed is that you cannot read a figure off a spreadsheet and retype it into a government portal — the numbers must travel to HMRC through a digital link, which is what bridging software provides. Typically you map cells or a totals row to the API's categories, then submit.

Bridging suits you if you already maintain a clean workbook, your transaction volume is low, and you would rather not learn a new interface. It suits you badly if your spreadsheet is a single column of numbers with no categories, if several people edit it, or if you rely on copy-and-paste between tabs in ways that break the audit trail.

Three cautions:

• Digital links must be unbroken. Linked formulas and imports are fine; manual re-entry between the record and the submission is not.
• Categories have to match HMRC's. Redesign your headings once, at the start of the tax year, not in January.
• Year-end is still separate. Most bridging tools submit quarters. Confirm how the final declaration will be filed.

A middle path that works well: keep the spreadsheet as your working record, and pair it with a bridging tool for quarters plus a year-end filing service — either software that supports the final declaration or an accountant.

Choosing: a short checklist

Work through these in order, and the shortlist usually writes itself.

1. Confirm you are actually in scope. Qualifying income is gross self-employment plus gross property income added together, before expenses. The 6 April 2026 start applies above £50,000; a £30,000 threshold follows in April 2027 and a £20,000 threshold is planned for April 2028. Our MTD scope checker works this out from your figures.
2. Count your reporting obligations. One trade? One property business? Both? Foreign property counts separately again.
3. Decide who files the final declaration — the software, a second product, or an accountant.
4. Add VAT to the question if you are registered, so you are not running two sets of books.
5. Test with real data before 6 April. Import three months of bank transactions and see whether the categories make sense to you.
6. Check the exit. Can you export the ledger, and what happens to your records if you stop paying?

Example: who gets caught

A part-time consultant bills £32,000 gross and also lets a flat for £21,000 gross a year. Together that is £53,000 of qualifying income, so she is in Making Tax Digital for Income Tax from 6 April 2026 — even though her profit after costs and mortgage interest is far lower, because the test looks at gross income. She has two reporting obligations and needs software that covers both the trade and the property, or two tools.

Scotland, Wales and Northern Ireland

The reporting rules are UK-wide, so the software requirement is identical wherever you live. What differs is the tax calculated at the end: Scottish taxpayers pay Scottish rates on non-savings income, including trading and rental profits, while savings and dividend income is taxed at UK rates. Welsh rates currently mirror the rest of the UK. Any HMRC-recognised product handles this from your address details, but it is worth sanity-checking the estimated liability your software shows against a self-employed tax calculator or a rental income tax calculator.

Getting it wrong costs money

Late quarterly updates and late payment both carry penalties under the reformed regime that applies to taxpayers inside Making Tax Digital, and the late-payment charges escalate the longer tax stays unpaid. The practical defence is boring: submit on the 7th, keep the bookkeeping weekly, and do not leave your first quarterly update until August.

What to do next

Start with scope, not shopping. Run your gross trading and property figures through the MTD scope checker to see whether you are mandated from April 2026, April 2027 or later, then read the full Making Tax Digital for Income Tax guide for the quarterly deadlines, record-keeping rules and how the final declaration replaces your tax return. When you know how many income sources you need to report and who is filing your year-end, compare current offers on the accounting software deals page — and remember the price you pay is a deductible expense, so the net cost is 20–48% lower than the headline.