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Making Tax Digital Compliant Software

Choosing the Right Tool for Your Business

To follow Making Tax Digital (MTD) rules, businesses must use MTD compliant software a key requirement for submitting VAT returns, income tax updates, and eventually, corporation tax digitally to HMRC.

Whether you’re a sole trader, landlord, or run a limited company, choosing the right MTD software is essential for staying compliant, saving time, and managing your finances efficiently.

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Under Making Tax Digital (MTD), using MTD compliant software isn’t optional it’s a legal requirement if you want to submit your VAT returns, income tax updates, and soon Corporation Tax returns digitally to HMRC.

Whether you’re a sole trader, a landlord, or run a limited company, choosing the right MTD software is essential for:

  • Staying compliant with HMRC’s digital links and reporting rules
  • Saving time on bookkeeping, submissions, and admin
  • Keeping your records secure, accurate, and ready for inspection

This guide explains what makes software MTD compliant, what features to look for, popular tools for VAT, income tax, and corporation tax, and how to choose the best option for your business.

What Is MTD Compliant Software?

MTD compliant software is any software tool, platform, or app that meets HMRC’s requirements for Making Tax Digital. To qualify as compliant, the software must be able to:

  • Keep and maintain your digital tax records securely and accurately.
  • Create and store digital summaries of transactions, such as sales, expenses, or rental income.
  • Communicate directly with HMRC through a secure Application Programming Interface (API) no manual data entry or uploading spreadsheets alone.
  • Submit tax returns, quarterly updates, and final declarations for VAT, Income Tax, or Corporation Tax in line with MTD rules.

HMRC maintains an official list of approved MTD software providers, covering:

  • Full cloud accounting platforms like Xero, QuickBooks, FreeAgent.
  • Bridging software tools that connect spreadsheets to HMRC’s system if you’re not using a full accounting solution yet.
  • Niche tools specialist apps designed for landlords, freelancers, or industries with unique tax needs.

Tip: You can view the current list of approved software on GOV.UK: Find software that works with Making Tax Digital.

Who Needs MTD Software?

If you’re affected by any of the current phases of Making Tax Digital (MTD), you must use MTD-compatible software to remain compliant with HMRC’s digital reporting rules. Manual submissions and paper records are no longer accepted.

Here’s who needs it right now:

MTD PhaseWho It’s Required For
MTD for VATAll VAT-registered businesses — mandatory for everyone since April 2022, regardless of turnover.
MTD for Income Tax (ITSA)Sole traders and landlords with annual gross income over £50,000 from April 2026, extending to those over £30,000 from April 2027.
MTD for Corporation TaxCancelled. HMRC has confirmed there are no plans to introduce MTD for Corporation Tax.

Key Point

Even if you currently use spreadsheets for bookkeeping, you cannot submit to HMRC manually under MTD. You’ll need bridging software to create a secure digital link between your spreadsheets and HMRC’s systems.

Expert Tip: Switching to fully integrated cloud accounting software is usually the smarter move. It saves time, reduces errors, and offers better visibility of your finances compared to managing spreadsheets and bridging tools separately.

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MTD Quick Links

What is Making Tax Digital
Do I Need to Register for Making Tax Digital?
Making Tax Digital Timeline and Rollout
How to Sign Up for Making Tax Digital
Making Tax Digital Deadlines and Dates
Making Tax Digital for VAT
MTD Income Tax (MTD for ITSA)
Making Tax Digital for Corporation Tax
Making Tax Digital Exemptions
Common MTD Mistakes and Avoiding Them
Making Tax Digital for Partnerships
Making Tax Digital for Limited Companies
Making Tax Digital for Sole Traders
Making Tax Digital for Landlords
Making Tax Digital Compliant Software
Making Tax Digital Bridging Software
How Accountants Can Help with MTD

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Top Making Tax Digital Compliant Software Options

Top MTD-Compliant Software Options

Choosing the right MTD-compatible software is key to staying compliant and making your bookkeeping easier. Below are some of the most popular HMRC-approved options for UK businesses:

QuickBooks Online

  • Excellent for VAT-registered businesses and small companies
  • Mobile-friendly with an easy-to-use interface
  • Built-in MTD filing for both VAT and Income Tax Self Assessment (ITSA)

Xero

  • Fully cloud-based, ideal for limited companies and growing businesses
  • Powerful reporting and forecasting features
  • Seamless compliance for VAT and ITSA

FreeAgent

  • Perfect for freelancers, contractors, and microbusinesses
  • Supports both VAT and ITSA under MTD
  • Free with certain NatWest, RBS, and Mettle business accounts

Sage Business Cloud

  • A trusted, long-established brand with robust accounting tools
  • Scalable for small to medium-sized businesses
  • Comprehensive suite covering VAT, payroll, and accounting in one system

All of these tools are listed on HMRC’s official software directory as approved MTD-compatible solutions.

Bridging Software for Making Tax Digital

If you’re still using spreadsheets to manage your tax records, bridging software can help you stay MTD compliant for now.

Bridging software acts as a digital connector, pulling VAT figures or income tax data directly from your spreadsheet and securely submitting it to HMRC through an approved API link.

Popular bridging tools include:

  • BTCSoftware MTD  a well-known bridging tool for accountants and small businesses.
  • Absolute Excel VAT Filer integrates directly with Excel for straightforward VAT submissions.
  • VitalTax a free Microsoft Excel add-in for simple MTD VAT returns.

Key point: Bridging software is mainly a stopgap it keeps you compliant if you’re not ready to switch fully to an MTD-compatible accounting system yet.

However, HMRC strongly encourages businesses to adopt full cloud-based accounting platforms over time to reduce manual data handling, cut out errors, and simplify digital links.

Tip: For most businesses, investing in dedicated MTD software is more efficient and future-proof than relying on bridging tools long-term.

Read more on our MTD Bridging Software Guide

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What to Look For in MTD Software

Choosing the right MTD-compliant software isn’t just about ticking a box for HMRC it’s about making your tax reporting easier, faster, and more accurate.

When comparing options, look for:

  • HMRC-approved status always check that the software is on HMRC’s official list for VAT, Income Tax, or Corporation Tax.
  • Support for your tax type make sure it covers what you need now (VAT, income tax, or Corporation Tax) and can handle future MTD phases.
  • Ease of use an intuitive interface and good user support or training resources make day-to-day tasks simpler.
  • Automation features time-saving tools like bank feeds, automatic transaction matching, and receipt capture apps can dramatically cut admin.
  • Scalability choose a system that can grow with your business if you take on staff, become VAT-registered, or switch from sole trader to limited company.
  • Integrations look for seamless links with other tools you use, like payroll, invoicing, expense tracking, or project management software.

Tip: Take advantage of free trials or demos — many providers offer these so you can see if the software feels right before you commit.

Can My Accountant Handle This?

Yes absolutely. Many sole traders, landlords, and companies choose to let their accountant take care of MTD compliance for them.

At Accounting Wise, we use MTD-compliant software on your behalf to make sure you stay fully compliant without the stress of managing it all yourself. We ensure:

  • Your returns are filed correctly and on time avoiding penalties and missed deadlines.
  • Your digital records meet HMRC’s standards so you’re always audit-ready.
  • You get reminders and support for important dates, updates, and changes to the rules.

Key benefit: You stay compliant without lifting a finger. We handle the setup, software, submissions, and support, so you can focus on running your business.

Can You Be Exempt from Using MTD Software?

Some exemptions exist for those who:

  • Are unable to use technology due to age or disability
  • Live in areas with poor internet access
  • Have religious objections to digital tools

See our MTD Exemptions and Deferrals page for more info.

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Ready to Go Digital with MTD Compliant Software?

Choosing the right MTD-compliant software doesn’t have to be complicated but starting early is the smart move. Whether you want to manage your digital records yourself or let an expert handle it for you, the key is to get set up now and stay ahead of HMRC’s rollout.

Speak to Accounting Wise today for friendly advice and hassle-free help getting the right MTD software in place so you can stay compliant with confidence.

Get in touch now and futureproof your business for Making Tax Digital.

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Making Tax Digital Compliant Software FAQs

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MTD-compliant software is accounting software that can keep digital records and submit tax information directly to HMRC through secure APIs. Instead of relying on spreadsheets or manual uploads, MTD-compliant tools ensure that your VAT or Self Assessment data is transferred in the required digital format, reducing errors and staying fully aligned with HMRC’s rules.

HMRC maintains a list of software providers that are officially recognised as MTD-compatible. Well-known platforms such as Xero, QuickBooks, Sage, FreeAgent, and The Balance App are widely used. The best choice depends on your business size, reporting needs, and budget. Always check the latest approved list on GOV.UK before choosing.

When choosing software, consider:

  • HMRC approval for VAT or Self Assessment
  • Ease of use for you and your team
  • Automation features like bank feeds, recurring invoices, and auto-VAT calculations
  • Integration with payroll, expenses, or e-commerce platforms
  • Scalability if your business grows
  • Support from accountants or the provider if you need help

Yes, but only if you use “bridging software” that connects your spreadsheet records directly to HMRC. This method is less efficient than using full MTD-compliant accounting software, and it increases the risk of errors. Most businesses benefit from moving to cloud accounting rather than relying on spreadsheets and bridging tools.

  • MTD for VAT software helps VAT-registered businesses keep digital VAT records and submit VAT returns to HMRC.
  • MTD for Income Tax software (ITSA) is designed for landlords and sole traders to maintain income and expense records digitally and send quarterly updates to HMRC.

Some providers support both, while others focus on VAT only so make sure your software covers your current and future needs.

Yes, but options are limited. Some providers offer free versions with basic features, while others may provide trial periods. Free tools often lack the automation, reporting, and integrations that make digital accounting valuable. For most businesses, investing in reliable paid software saves more in the long run by reducing errors and admin time.

At Accounting Wise, we help you find the right MTD-compliant software for your needs, whether that’s VAT, Self Assessment, or general bookkeeping. We can migrate your records, set up your system, and provide training so you’re confident in using it. We also manage submissions on your behalf if you’d prefer a fully supported service.

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1 Choose Your Package

Select the accounting services that best suit your needs. Choose from our ready-made packages or build your own to see exactly how much you’ll be paying each month.

2 Sign up with Us

Once you’ve chosen your service level, just send over a few details using our quick sign-up form or give us a call to get started.

3 You’re ready to go

That’s it! We’ll get your accounting services set up, contact your previous accountant if needed, and begin the authorisation process with HMRC.

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