Author
Mark C
- 1st January 2026
Best Accounting Software for Making Tax Digital – 2026 UK Guide
Making Tax Digital (MTD) has changed the way businesses, sole traders, and landlords in the UK handle their tax responsibilities. Instead of relying on spreadsheets or manual records, HMRC now requires digital submissions through MTD-compatible accounting software. The challenge? Choosing the best accounting software for Making Tax Digital that not only keeps you compliant but also fits your budget and the way you work.
In this guide, we’ll explore the leading options, highlighting the best MTD software available to freelancers, contractors, and small businesses. From user-friendly platforms to the cheapest accounting software for Making Tax Digital, we’ll break down what each provider offers, helping you find the most reliable and cost-effective solution.
Whether you’re looking for the best bookkeeping software for Making Tax Digital to manage day-to-day finances, or you simply want clarity on what is the best accounting software for Making Tax Digital, this guide will give you everything you need to make an informed choice.
See Our Best Accounting Software Deals for Making Tax Digital
QuickBooks
Accounting Software- Smart invoicing & expense tracking
- VAT & tax return tools
- Payroll & reporting options
- Connects with banks & apps
Xero
Accounting Software- Easy cloud-based bookkeeping
- Send invoices & track payments
- Bank reconciliation made simple
- Payroll & project tracking add-ons
Sage
Accounting Software- Trusted UK accounting software
- Tax & VAT submissions to HMRC
- Invoicing & cashflow tracking
- Multi-user and accountant access
Benefits of using Making Tax Digital Software?
Making Tax Digital isn’t just a government initiative — it’s a smarter way to run your business finances. By switching to MTD-compatible accounting software, sole traders, freelancers, landlords, and small businesses can reduce admin, improve accuracy, and stay fully compliant with HMRC requirements. Here are some of the biggest reasons to embrace Making Tax Digital software:
Stay HMRC Compliant
Ensure all your VAT and tax submissions meet HMRC’s digital requirements by using approved MTD accounting software. No more worrying about penalties for non-compliance.
Accurate Bookkeeping
With the best bookkeeping software for Making Tax Digital, you’ll cut down on errors from spreadsheets and manual entries, giving you reliable records all year round.
Save Time on Admin
The best accounting software for Making Tax Digital automates invoices, expenses, and VAT returns, freeing up hours each month so you can focus on growing your business.
Real-Time Financial Insights
MTD software gives you up-to-date dashboards and reporting tools, so you always know your cash flow, tax liabilities, and financial health.
Cost-Effective & Scalable
From the cheapest accounting software for Making Tax Digital to premium solutions, there’s an option for every budget. As your business grows, the software scales with you.
Best Accounting Software for Making Tax Digital
Finding the right software for Making Tax Digital is essential if you want to stay compliant with HMRC while keeping your finances under control. Currently there are several affordable and reliable MTD accounting software options designed to help sole traders, freelancers, landlords, and small businesses file VAT returns, manage bookkeeping, and simplify digital tax submissions.
The aim of this guide is simple: highlight the best accounting software for Making Tax Digital — from user-friendly bookkeeping platforms to the cheapest MTD software — so you can confidently choose a solution that makes tax compliance faster, easier, and more cost-effective.
Xero – Cloud Accounting for Making Tax Digital
Best for: Small businesses, freelancers, and sole traders who need reliable MTD-compatible accounting software with powerful invoicing, expense tracking, and HMRC integration.
Current Offer: Get 90% off for 6 months — with prices starting from just £1.60/month (T&Cs apply).
Pricing: Plans start from £16 per month (before discount)
Key Features of Xero for Making Tax Digital
✔️ MTD VAT compliance – Submit VAT returns directly to HMRC with full Making Tax Digital compatibility.
✔️ Smart invoicing – Create and send invoices instantly with automatic reminders to speed up payments.
✔️ Bank reconciliation – Link your bank for real-time updates on income and expenses.
✔️ Expense & receipt management – Store and track bills, receipts, and costs in one simple dashboard.
✔️ Scalable accounting – Add payroll, project tracking, and advanced reporting as your business grows.
✔️ Accountant collaboration – Share access with your accountant to simplify year-end reporting.
Ideal For:
- Businesses and self-employed individuals needing HMRC-approved MTD accounting software.
- Freelancers and contractors who want easy VAT submissions and clear financial insights.
- Companies looking for a balance between affordability and advanced accounting features.
Why Choose Xero for MTD Compliance?
Xero is one of the most popular choices for Making Tax Digital accounting software in the UK. It combines ease of use with robust features, making it ideal for small businesses that want to stay compliant with HMRC without overcomplicating their bookkeeping. Whether you’re filing VAT returns, managing invoices, or keeping track of expenses, Xero keeps everything digital, simple, and compliant.
Exclusive Xero Offer:
👉 Click here, sign up today and get 90% off your first 6 months across all Xero plans.
Read our full Xero Accounting Software Review >> here for more details!
QuickBooks – Accounting Software for Making Tax Digital
Best for: Sole traders, small businesses, and contractors who want an all-in-one platform that simplifies Making Tax Digital VAT returns, bookkeeping, and cash flow management.
Current Offer: Get 90% off for 7 months across all QuickBooks plans (T&Cs apply).
Pricing: Plans start from £14 per month (before discount).
Key Features of QuickBooks for MTD
✔️ MTD VAT-ready – File VAT returns directly to HMRC with QuickBooks MTD-compatible software.
✔️ Automated bookkeeping – Track income, expenses, and bank transactions in real time.
✔️ Mobile-first tools – Create invoices, snap receipts, and check cash flow on the go.
✔️ Tax forecasting – Get estimates of your upcoming tax liabilities so you can budget ahead.
✔️ Multi-user access – Invite your accountant or bookkeeper to collaborate seamlessly.
Ideal For:
- Self-employed individuals who need affordable MTD software with strong mobile features.
- Startups that want simple, scalable bookkeeping.
- Small businesses looking for reliable VAT return filing tools.
Why Choose QuickBooks for MTD Compliance?QuickBooks is one of the most widely recognised names in UK accounting software and a trusted choice for Making Tax Digital. Its intuitive design makes it easy for beginners, while advanced features support growing businesses. If you’re looking for a cost-effective, HMRC-approved platform that scales with your business, QuickBooks is a strong option.
Exclusive QuickBooks Offer:
👉 Sign up today and get 90% off your first 7 months on all QuickBooks plans.
Read our full QuickBooks Accounting Software Review >> here for more details!
Sage – Trusted MTD Software for UK Businesses
Best for: SMEs and sole traders who want established Making Tax Digital software with robust VAT tools, compliance features, and industry reputation.
Current Offer: Get 90% off for 3 months on Sage Accounting (T&Cs apply).
Pricing: Plans start from £14 per month (before discount).
Key Features of Sage for Making Tax Digital
✔️ Direct HMRC filing – Submit VAT returns through HMRC-approved Sage MTD software.
✔️ Simple invoicing – Create and send professional invoices with payment tracking.
✔️ Expense management – Record and categorise expenses quickly, reducing manual entry.
✔️ Cash flow forecasting – Monitor upcoming payments and expenses to plan ahead.
✔️ Payroll add-on – Run payroll alongside your bookkeeping when your business grows.
Ideal For:
- UK businesses needing trusted MTD VAT compliance software.
- Sole traders and small businesses who want simple but reliable bookkeeping.
- SMEs that value strong customer support and a proven brand.
Why Choose Sage for MTD Compliance?
Sage has been a trusted name in UK accounting for decades and remains one of the best bookkeeping software for Making Tax Digital. Its platform is built to handle VAT submissions with ease while also giving small businesses professional invoicing and cash flow visibility. For those wanting tried-and-tested reliability, Sage is a standout option.
Exclusive Sage Offer:
👉 Sign up today and get 90% off for 3 months on Sage Accounting.
Read our full Sage Accounting Software Review >> here for more details!
ANNA Money + Taxes – Smart MTD Solution for Sole Traders
Best for: Freelancers, sole traders, and small business owners who want simple banking plus tax support in one app — with built-in Making Tax Digital VAT filing.
Current Offer: Get a 30-day free trial of ANNA Money + Taxes.
Pricing: Plans start from £14.90 per month (before discount).
Key Features of ANNA Money + Taxes for MTD
✔️ Automatic VAT filing – File VAT returns directly to HMRC via ANNA’s MTD-approved software.
✔️ Integrated banking – Business account plus accounting in one easy-to-use platform.
✔️ Receipt scanning – Snap receipts on the go, and ANNA categorises them automatically.
✔️ AI-powered tax reminders – Get alerts for tax deadlines and estimated liabilities.
✔️ Invoicing made simple – Create and send invoices directly from the ANNA app.
Ideal For:
- Sole traders and freelancers needing low-cost MTD software.
- Startups looking for a business account with built-in tax tools.
- Entrepreneurs who prefer mobile-first, app-based accounting.
Why Choose ANNA Money + Taxes for MTD Compliance?
ANNA combines a business current account with Making Tax Digital-ready software, making it an all-in-one solution for startups and sole traders. Instead of juggling multiple apps, you can handle banking, invoicing, and VAT submissions in one place. For anyone wanting a lightweight but powerful alternative to traditional accounting software, ANNA Money + Taxes is an excellent choice.
Exclusive ANNA Money + Taxes Offer:
👉 Sign up today and get a 30-day free trial to test all features of ANNA Money + Taxes.
What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative introduced by HMRC to modernise the UK tax system. Instead of relying on manual paperwork or spreadsheets, businesses and individuals are now required to keep digital records and submit their tax information through MTD-compatible accounting software. The scheme was launched in 2019 for VAT-registered businesses and has since expanded, with further stages planned to cover Income Tax Self-Assessment and eventually Corporation Tax.
The main purpose of Making Tax Digital is to reduce errors, improve accuracy, and give both HMRC and taxpayers a clearer picture of their finances in real time. For sole traders, freelancers, landlords, and SMEs, it means adopting accounting software for Making Tax Digital that not only files VAT returns directly to HMRC but also keeps day-to-day bookkeeping organised.
By moving to digital systems, businesses can benefit from greater efficiency, fewer mistakes, and a more streamlined approach to tax compliance. Choosing the best accounting software for Making Tax Digital ensures you stay compliant while also making it easier to track cash flow, plan for tax bills, and run your business with confidence.
Who Needs to Use Making Tax Digital Software?
Making Tax Digital applies to a growing number of individuals and businesses across the UK. When it was first introduced in 2019, MTD only covered VAT-registered businesses with a turnover above £85,000. Since then, the scheme has expanded and now includes all VAT-registered businesses, regardless of their size.
This means that whether you’re a sole trader, a freelancer, a landlord with rental income, or running a small to medium-sized business, you may already need to keep digital records and file your VAT returns through MTD-compatible accounting software.
In the coming years, MTD will also apply to Income Tax Self-Assessment (ITSA) for self-employed individuals and landlords with income over £50,000 (from April 2026, with the £30,000 threshold following in 2027). Corporation Tax is also expected to be included at a later stage.
For many, the shift to Making Tax Digital software might feel like an added responsibility. However, adopting the right tools brings clear benefits — from automating bookkeeping tasks to ensuring accuracy and compliance with HMRC. Choosing the best accounting software for Making Tax Digital now will put you ahead of the curve and help future-proof your business.
How Does Making Tax Digital Work?
Making Tax Digital works by requiring businesses, landlords, and self-employed individuals to keep their financial records in a digital format and submit tax returns online using HMRC-approved software. Instead of manually entering figures into paper forms or spreadsheets, every transaction is stored within the accounting platform. The software then compiles the records, calculates VAT or income tax, and submits the return securely through HMRC’s digital gateway.
For VAT-registered businesses, this means submitting quarterly VAT returns digitally. In the future, the same process will apply to income tax self-assessment and corporation tax, making it essential for businesses of all sizes to get used to digital record-keeping now. While it may feel like an adjustment for those who are used to traditional bookkeeping methods, Making Tax Digital accounting software makes the process far more accurate, efficient, and reliable.
Why Use Making Tax Digital Software?
Using Making Tax Digital software is about more than just compliance with HMRC. It allows business owners to work smarter, reduce manual effort, and access real-time financial data whenever they need it. By choosing the right MTD accounting software, you can ensure tax submissions are accurate while also enjoying features that make day-to-day bookkeeping easier.
✔️ Save time by automating VAT submissions, expense tracking, and invoice generation
✔️ Gain instant financial visibility with real-time dashboards and reports
✔️ Reduce the risk of penalties by filing accurate returns on time
✔️ Keep all records secure in one digital platform instead of chasing paper receipts
For sole traders, freelancers, and SMEs, the ability to manage finances digitally is more than a convenience — it’s quickly becoming a necessity. With the right software, you can run your business with confidence, knowing that your tax obligations are always under control.
Benefits of Making Tax Digital Software
The benefits of using Making Tax Digital software go far beyond staying compliant with HMRC rules. By moving to digital accounting, businesses gain more control and efficiency in every aspect of their finances. One of the biggest advantages is accuracy — MTD-compatible software eliminates the common errors that arise from manual entry, spreadsheets, or outdated systems.
Time is another major benefit. Automation means the software handles tasks like invoicing, categorising expenses, reconciling bank transactions, and compiling VAT returns. Instead of spending hours on bookkeeping, you can redirect that time towards growing your business or serving clients.
✔️ Improved accuracy in financial records
✔️ Automated reporting for VAT and tax deadlines
✔️ Clearer visibility of cash flow and tax liabilities
✔️ Affordable plans that scale with your business growth
Another key advantage is future-proofing. Since HMRC plans to extend Making Tax Digital to cover more taxes in the coming years, adopting digital software now means you’ll be ready for those changes.
Do I Need Making Tax Digital Software?
Whether you need Making Tax Digital software depends on your business structure and income, but the scope is expanding rapidly. All VAT-registered businesses in the UK are already required to use MTD software for VAT returns, regardless of turnover. From April 2026, self-employed individuals and landlords with income over £50,000 will also have to comply, and those earning more than £30,000 will join them in 2027. Corporation Tax is also expected to be brought under MTD in the near future.
Even if your business is not yet legally required, adopting Making Tax Digital-compatible accounting software early can be a smart decision. It helps prepare for future obligations while also giving you the benefits of better organisation, automated processes, and accurate financial insights. Many small business owners and freelancers find that switching to MTD software reduces stress, saves time, and makes them feel more in control of their finances.
How to Choose the Best Making Tax Digital Software
Choosing the best Making Tax Digital software involves looking at several factors that align with your business needs. Start with your budget — there are options ranging from free MTD-compatible tools for sole traders to advanced platforms designed for SMEs with payroll and reporting requirements. Consider usability, since the right software should be intuitive and easy to navigate, even if you don’t have an accounting background.
✔️ Compare features such as invoicing, expense tracking, and payroll
✔️ Check pricing plans and trial periods to find cost-effective solutions
✔️ Ensure the provider is HMRC-approved and fully MTD compatible
✔️ Consider scalability so the software can grow with your business
It’s also worth considering whether you need cloud-based access, mobile apps, or integrations with other tools you use. Taking the time to compare the leading MTD accounting software providers will help you make an informed choice.
Pros and Cons of Making Tax Digital Software
Making Tax Digital software comes with many advantages for sole traders, freelancers, landlords, and SMEs, but there are also some drawbacks to consider. Here’s a breakdown to help you weigh up whether adopting MTD-compatible accounting software is right for your business.
Pros of Making Tax Digital Software
✔️ Ensures compliance with HMRC by submitting VAT and tax returns digitally
✔️ Improves accuracy by reducing errors linked to spreadsheets or manual data entry
✔️ Saves time through automation of invoicing, expense tracking, and bank reconciliation
✔️ Provides real-time financial visibility with dashboards and reporting tools
✔️ Scales with your business, with options ranging from the cheapest MTD software to advanced accounting suites
Cons of Making Tax Digital Software
❌ Monthly subscription costs can be a challenge for microbusinesses or those on tight budgets
❌ A learning curve for those used to traditional bookkeeping methods or spreadsheets
❌ Requires internet access and comfort with cloud-based systems
❌ Some features may be unnecessary for very small businesses, meaning you pay for tools you don’t use
What are the Different Types of Making Tax Digital Software
There are multiple types of Making Tax Digital software to choose from, depending on your business needs. Cloud-based platforms like Xero, QuickBooks, and Sage offer full accounting suites that include VAT submissions, invoicing, and payroll. For freelancers and sole traders, lightweight solutions such as FreeAgent or ANNA Money + Taxes provide affordable, easy-to-use tools focused on essentials.
Bridging software is another option for businesses that still prefer spreadsheets but need to comply with MTD rules. This type of tool connects Excel files to HMRC’s digital system, acting as a temporary bridge for those not ready to fully switch. The wide variety of options means there’s an MTD solution for every type of business, from small startups to larger SMEs.
Steps to Get Started with Making Tax Digital Software
Getting started with Making Tax Digital software is a straightforward process, but it does require some preparation. The first step is to register for MTD with HMRC if you haven’t already. Once you’re registered, you’ll need to choose an HMRC-approved software provider that fits your needs and budget.
After signing up for the software, you’ll link your account directly with HMRC’s system. From there, you can import your existing financial data, set up your invoicing, and start tracking expenses. The software will then allow you to prepare and submit your VAT returns directly to HMRC in line with MTD requirements. By following these steps, you’ll not only stay compliant but also enjoy the benefits of digital bookkeeping from day one.
At a glance - Best Accounting Software for Making Tax Digital:
Alternative Options to Making Tax Digital Software
For businesses not ready to commit to a full accounting package, there are alternatives to Making Tax Digital software. Bridging software allows you to keep using spreadsheets while still filing returns digitally. This is often used as a transitional tool for businesses adjusting to MTD. Another alternative is outsourcing tax and bookkeeping responsibilities to an accountant who uses MTD-compatible systems on your behalf.
While these options can work in the short term, they don’t offer the same efficiency and control as using your own MTD software. Over time, most businesses find it beneficial to adopt digital accounting tools directly, as it not only ensures compliance but also simplifies financial management across the board.
FAQs: Best Accounting Software for Making Tax Digital
What is the best accounting software for Making Tax Digital?
The best accounting software for Making Tax Digital depends on your business size and budget. Popular choices include Xero, QuickBooks, Sage, and FreeAgent, all of which are HMRC-approved and designed to simplify VAT returns.
Do sole traders need the best MTD software?
Yes, sole traders who are VAT-registered must use the best MTD software to file VAT returns. From 2026, MTD will also apply to Income Tax Self-Assessment for self-employed individuals above certain income thresholds.
What is the cheapest accounting software for Making Tax Digital?
The cheapest accounting software for Making Tax Digital often includes entry-level plans from providers like ANNA Money + Taxes, FreeAgent, or Zoho Books, which start from low monthly fees or even free options through certain bank partnerships.
Can I use spreadsheets with the best bookkeeping software for Making Tax Digital?
You can still use spreadsheets, but they must be linked to HMRC through bridging tools. However, the best bookkeeping software for Making Tax Digital offers a smoother, more automated experience.
Why do businesses need the best accounting software for Making Tax Digital?
Businesses need the best accounting software for Making Tax Digital to stay HMRC compliant, reduce errors in VAT returns, and manage finances more efficiently with real-time insights.
How do I know what is the best accounting software for Making Tax Digital for my business?
To decide what is the best accounting software for Making Tax Digital, compare features, pricing, and usability. A sole trader may prefer a simple app like ANNA, while SMEs often choose Sage or Xero for advanced tools.
What are the benefits of using the best MTD software?
The best MTD software automates VAT submissions, improves record-keeping, saves time, and gives you accurate financial data, helping you run your business with confidence.
Is there free or cheapest accounting software for Making Tax Digital available?
Yes, some providers offer free plans or low-cost options. For example, FreeAgent is free through certain banks, and ANNA offers entry-level access at no cost, making them some of the cheapest accounting software for Making Tax Digital.
What features should I look for in the best bookkeeping software for Making Tax Digital?
The best bookkeeping software for Making Tax Digital should include invoicing, expense tracking, bank reconciliation, VAT return filing, and HMRC approval for MTD compliance.
Do landlords need the best accounting software for Making Tax Digital?
Yes, landlords will soon need to use the best accounting software for Making Tax Digital to comply with MTD for Income Tax Self-Assessment, starting in 2026 for incomes over £50,000.
Can the cheapest accounting software for Making Tax Digital still be HMRC-approved?
Absolutely. Even the cheapest accounting software for Making Tax Digital, such as ANNA or Zoho, must meet HMRC’s MTD standards before being listed as compliant.
What is the difference between the best MTD software and regular accounting tools?
The best MTD software is specifically HMRC-approved and designed to file VAT and tax returns digitally. Regular accounting tools may not have the compliance features needed for Making Tax Digital.
Who can benefit most from the best bookkeeping software for Making Tax Digital?
Freelancers, contractors, small businesses, and landlords can all benefit from the best bookkeeping software for Making Tax Digital, as it helps simplify tax compliance and everyday financial management.
Is QuickBooks the best accounting software for Making Tax Digital?
QuickBooks is considered one of the best accounting software for Making Tax Digital because it combines ease of use with advanced features, HMRC approval, and affordable plans.
How do I switch to the best accounting software for Making Tax Digital?
To switch, register for MTD with HMRC, choose your provider, migrate your records into the best accounting software for Making Tax Digital, and link the software to your HMRC account for digital VAT submissions.
Conclusion – Choosing the Best Accounting Software for Making Tax Digital
Making Tax Digital is more than just a compliance requirement — it’s a step toward modern, efficient, and error-free financial management. Whether you’re a sole trader, freelancer, landlord, or SME, adopting the best accounting software for Making Tax Digital will save you time, improve accuracy, and keep your business fully HMRC compliant.
From established platforms like QuickBooks, Xero, and Sage to newer, flexible solutions like ANNA Money + Taxes, there is no shortage of options for businesses of every size and budget. Some of the best MTD software even doubles as the best bookkeeping software for Making Tax Digital, helping you manage expenses, invoicing, and VAT submissions in one seamless system. For those looking to keep costs down, the cheapest accounting software for Making Tax Digital still provides compliance without compromising usability.
The key is to choose a provider that matches your current needs while offering room to scale as your business grows. By making the switch now, you’ll not only prepare for today’s VAT requirements but also future-proof your business for upcoming phases of MTD, including income tax and corporation tax.
In short, investing in the right Making Tax Digital software means less time worrying about tax deadlines and more time focusing on building your business.
Start Your Digital Tax Journey Today with the Best Accounting Software for Making Tax Digital
Choosing the best accounting software for Making Tax Digital is one of the smartest investments you can make for your business. The right MTD software helps you stay HMRC compliant, simplifies VAT submissions, and keeps your bookkeeping accurate and stress-free. Whether you’re a sole trader, freelancer, or small business owner, switching to digital tax tools will save you time, reduce errors, and give you greater control over your finances.
Explore our recommended providers, compare exclusive deals, and get started today with the best MTD software that fits your business needs and budget.
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