Best MTD Compliant Software 2026: 7 UK Tools Compared

MTD compliant software is not optional.

MTD for VAT is already live and mandatory for all VAT-registered businesses. MTD for Income Tax started 6 April 2026 for sole traders and landlords with qualifying gross income above £50,000.

The current VAT registration threshold is £90,000 – but MTD for VAT applies to all VAT-registered businesses, including those registered voluntarily, unless HMRC has granted an exemption. The threshold and the mandate are separate things.

From April 2026, sole traders and landlords with qualifying gross income above £50,000 join the same requirement: digital records, quarterly updates, HMRC-compatible software. April 2027 brings in £30,000. April 2028 brings in £20,000.

“The firms that struggle most with MTD are not the ones using the wrong software. They are the ones that chose software without checking whether it covers both VAT and Income Tax – and now face switching mid-year as the Income Tax mandate kicks in.” – Clare, Finexer

TL;DR

MTD compliant software – in this guide, software that appears on HMRC’s compatible software list or works with HMRC’s MTD requirements for the relevant tax type. For VAT: mandatory for all VAT-registered businesses since April 2022. For Income Tax: mandatory from April 2026 for qualifying gross income above £50,000, April 2027 above £30,000, April 2028 above £20,000. Qualifying income means gross self-employment income plus gross UK property income before expenses – employment income does not count. The 7 tools below cover free bridging software for Excel users through to full-suite accounting platforms for practices.

Key Takeaways

What does MTD compliant software need to include? 

MTD-compatible software must maintain digital records, connect to HMRC APIs, support digital links, and submit returns directly to HMRC. A spreadsheet alone does not qualify – bridging software creates the required digital link.

What is the cheapest MTD compliant software? 

MTDSorted Lite and Adminsoft Accounts are genuinely free with no time limits. 123 Sheets starts at £1.65/month for Excel bridging. Free does not mean limited – MTDSorted covers unlimited VAT submissions.

Do I need MTD compliant software for Income Tax in 2026? 

Only if qualifying gross income from self-employment and UK property exceeded £50,000 in 2024-25. HMRC uses your previous Self Assessment to determine mandation. Below £50,000, you remain on traditional Self Assessment until April 2027.

Can I still use Excel under MTD?

Yes – but only with HMRC-compatible bridging software creating the required digital link between your spreadsheet and HMRC. 123 Sheets is built for this. Excel without bridging software does not meet MTD requirements.

MTD Compliant Software in 2026: Who Needs What

What does HMRC require from compatible software?

In this guide, “MTD compliant software” refers to software that appears on HMRC’s compatible software list or works with HMRC’s Making Tax Digital requirements for the relevant tax type. HMRC’s own terminology uses “compatible software” or “software that works with Making Tax Digital.” The market uses “compliant” as shorthand for the same status.

For software to be on HMRC’s list, it must pass HMRC’s technical assessment: HMRC API connectivity, digital record keeping, and digital links between systems.

Any tool calling itself mtd compliant software without appearing on HMRC’s list is making an unverified claim. Before choosing any mtd compliant software, confirm it appears at gov.uk for VAT, or the equivalent ITSA software finder for Income Tax.

Who needs MTD compliant software in 2026:

• All VAT-registered businesses – mandatory since April 2022, regardless of turnover, unless HMRC has granted an exemption
• Sole traders and landlords with qualifying gross income above £50,000 in 2024-25 – mandatory from 6 April 2026
• Qualifying income above £30,000 – mandatory from April 2027
• Qualifying income above £20,000 – mandatory from April 2028

What counts as qualifying income for MTD ITSA: Gross income from self-employment plus gross UK property income – before expenses. Employment income, dividends, and savings interest do not count. A sole trader earning £35,000 from freelance work plus £20,000 from a buy-to-let has qualifying income of £55,000 and is in scope from April 2026.

HMRC’s MTD for VAT evaluation reported measurable error rate reductions linked to digital record keeping.

The 7 Best MTD Compliant Software Options for UK Businesses

Which tool fits which use case?

The seven best mtd software options below cover every common scenario. Free VAT-only tools, Excel bridging for existing spreadsheet users, full accounting platforms, and multi-client tools for accountants.

Note: This guide covers several common categories of MTD compatible software. All seven mtd compliant software options in this guide have been assessed against HMRC's MTD requirements at time of writing - verify each tool's current VAT and ITSA status at HMRC's compatible software finder before committing, as coverage can change.

All pricing should be verified directly with each provider – rates change without notice.

1. MTDSorted: Best Free MTD Compliant Software for VAT

MTDSorted appears on HMRC’s Making Tax Digital compatible software list. Its Lite plan is genuinely free – no time limit, no submission cap, no hidden upgrade pressure.

What the free Lite plan includes:

• Direct HMRC connection for VAT submissions
• Unlimited VAT return submissions for a single company
• VAT deadline reminders and submission confirmations
• Spreadsheet importing and digital bridging
• Accountant access

What the free plan does not include: bookkeeping, bank feed connections, invoice creation, or multi-company management.

The Plus plan (£15/month – verify current pricing at mtdsorted.com) adds full bookkeeping, invoicing, bank reconciliation, and multi-company management.

Important: MTDSorted currently covers MTD for VAT. Businesses in scope for the April 2026 ITSA mandate should verify whether MTDSorted has added Income Tax submission capability before relying on it for ITSA – check the HMRC compatible software list directly.

For the VAT-specific digital requirements including digital links and submission formats, MTD for VAT covers the HMRC API connectivity and submission process in detail.

Best for: Small businesses with straightforward VAT requirements who want zero-cost compliance. Not suitable as a standalone tool for businesses in scope for MTD ITSA.

2. 123 Sheets: Best MTD Compliant Bridging Software for Excel Users

123 Sheets is HMRC-recognised for both MTD VAT and MTD for Income Tax Self Assessment. It does not replace your spreadsheet – it reads summary figures from it and submits them directly to HMRC.

That distinction matters. 123 Sheets is MTD bridging software, not accounting software. Your records stay in Excel. 123 Sheets creates the digital link HMRC requires.

Pricing:

Annual pricing starts at £19.50+VAT for a single business.

Spreadsheet compatibility: Microsoft Excel (1997 to current), Apple Numbers, OpenOffice, LibreOffice.

VAT schemes supported: Flat Rate, VAT Groups, Partial Exemption, Capital Goods Scheme, Margin Schemes, Cash Accounting, Annual Schemes, Retail Schemes.

Best for: Businesses with established Excel-based accounting that do not want to change systems. Accountants managing high client volumes where per-seat accounting software becomes expensive. Self-employed individuals and landlords preparing for the April 2026 ITSA mandate using spreadsheets.

Limitations: Reported frequent log-out issues. Navigation below full accounting software. Not a standalone bookkeeping tool.

3. Adminsoft Accounts: Best Free Full-Featured MTD Compliant Software

Adminsoft Accounts is entirely free desktop mtd compliant software – not a free tier, not a trial. Fully featured, no cost, no time limit.

Created by a small business owner, it covers VAT submissions and full bookkeeping. It functions as both accounting software and bridging software simultaneously.

MTD features:

• Direct VAT return submission to HMRC
• Digital record keeping across all transactions
• One-click export of VAT figures to Excel
• Support for all VAT schemes including post-Brexit requirements

Limitations:

• Desktop only, Windows only – not cloud-based
• Not suitable for businesses requiring remote access or multi-user collaboration

Note: Adminsoft does offer multi-user functionality within the same local network. For businesses needing cloud-based multi-user access across locations, Adminsoft will not fit.

Best for: Sole traders and small businesses managing their own accounts on Windows who want free full accounting with MTD VAT compliance built in.

4. ANNA Money: MTD Compliant Software for Sole Traders

ANNA Money is best mtd software for sole traders – a combined MTD compliant solution and business current account built for sole traders, freelancers, and small businesses. It appears on HMRC’s MTD compatible software list for both VAT and Income Tax Self Assessment.

Key features:

• Automatic transaction categorisation from connected bank transactions
• VAT return preparation and direct HMRC submission
• Quarterly MTD ITSA update preparation
• Invoice creation and payment tracking
• Receipt scanning and expense management

Pricing: ANNA offers a free plan with limited features. Paid plans start from approximately £14.90 per month depending on transaction volume and features. Verify current pricing at anna.money before committing – pricing can change.

ANNA is designed for sole traders managing their own accounts. Not built for accounting practices managing client books or businesses with complex multi-entity structures.

5. EasyBooksApp: MTD Compliant Software for Apple Users

EasyBooksApp offers mtd compatible software for small businesses, with particular strength on Apple devices – iOS, iPad, and Mac. It covers VAT submissions and Income Tax Self Assessment.

A free tier exists with basic features. Paid plans add bank feeds, multi-currency, and additional reporting. Verify current pricing at easybooks.uk (verify current pricing before committing) – confirm ITSA compatibility directly on HMRC’s software finder before relying on it for quarterly updates.

Best for: Small businesses primarily on Apple devices wanting a single app for accounts and MTD compliance.

6. Clear Books: Best MTD Compliant Software for VAT and Income Tax Together

Clear Books is mtd compatible software covering both MTD VAT and MTD for Income Tax from a single platform – removing the need for two separate tools and two separate HMRC connections.

Why it matters for the April 2026 ITSA mandate:

• HMRC-recognised for both MTD VAT and MTD ITSA
• Quarterly update submission direct to HMRC
• Digital record keeping across income and expenses
• Bank feed connections for automatic transaction import
• Multi-user access for accountants and clients

Pricing: From approximately £12-£25 per month depending on plan. Verify current pricing at clearbooks.co.uk.

Best for: VAT-registered businesses also in scope for the April 2026 ITSA mandate. Removes the problem of running two separate compliance tools.

7. IRIS KashFlow: Best MTD Compliant Software for Accountants

IRIS KashFlow is mtd compatible software built for accounting practices, supporting MTD for VAT and MTD for Income Tax with multi-client management from a single practice login.

Key features for accountants:

• VAT return submission to HMRC across multiple clients
• MTD ITSA quarterly update management
• Client portal for record sharing
• Practice management tools
• Integration with the wider IRIS accountancy suite

Pricing: From approximately £15 per month. Verify current pricing at iris.co.uk/kashflow.

For accounting practices building mtd compliant software workflows and embedding live bank feeds into MTD workflows, Open Banking AIS connects bank transaction data directly to the accounting platform – removing the manual bank statement import step that drives most record keeping errors.

Best for: Accounting practices managing MTD compliance across a client base. The IRIS ecosystem integration is the primary differentiator for firms already using IRIS products.

Choosing the Best MTD Software Is Only One Part of MTD Readiness

The software question is real but it is not the hardest part.

Most of the tools in this guide are affordable, HMRC-compatible, and straightforward to set up. 123 Sheets starts at under £2 per month for an Excel user. MTDSorted is free.

Choosing mtd compliant software is the easier half. The harder part is the quarterly discipline.

Four updates per year means four reconciliation deadlines per year. Businesses that currently leave their records until January face a structural change to how they manage financial data throughout the year. The right mtd compliant software makes compliance technically possible. Record keeping discipline is what makes mtd compliant software implementation operationally sustainable.

The businesses that struggle with MTD are typically not struggling with the software. They are struggling with the data quality feeding the software. Transactions entered manually from PDF statements, bank descriptions with no category data, reconciliation that runs on T+1 batch imports – these create the errors that digital record keeping is designed to eliminate.

“The record keeping quality that MTD requires is only as good as the transaction data feeding the system. Bank feeds via Open Banking give accounting platforms bank-verified transaction data – which is fundamentally more accurate than manually re-entered bank statement data.” – Clare, Finexer

For the differences between MTD for VAT and MTD for Income Tax record requirements, MTD record keeping covers what HMRC requires digitally for each tax type and how the quarterly update format differs from annual VAT filing.

How Does Finexer Support MTD Compliant Software Workflows?

Finexer is not mtd compliant software. It does not submit VAT returns or ITSA quarterly updates to HMRC directly. That line matters.

Finexer provides FCA-authorised Open Banking AIS – the bank data infrastructure layer that accounting platforms and ERP systems use to connect live bank transaction data to their MTD workflows.

The record keeping problem that drives MTD errors is upstream of the submission. Transactions entered manually from PDF statements, bank descriptions carrying no category data, reconciliation arriving T+1 – these are what create the errors.

When accounting software receives bank transaction data via Open Banking AIS with merchant identification and categorisation applied through the data layer, the digital records that MTD requires are built from bank-verified data rather than manual entry.

AIS – for MTD-aligned financial record keeping:

• Per-transaction bank data with merchant identification and categorisation applied through the data layer
• Consistent JSON format across almost all major UK banks
• MTD-relevant transaction fields: amount, date, counterparty, category
• Up to 7 years of transaction history for retrospective record reconstruction
• Balance data across connected accounts

This is the data layer that feeds MTD compliant software. The software handles the HMRC connection and submission. Finexer handles the bank transaction data that populates the records.

FCA-authorised (FRN 925695)

3 to 5 weeks of hands-on onboarding support

About the Author

Ravi Ranjan

Ravi Ranjan is Co founder & CEO of Finexer