Best MTD Income Tax Software Compared: Xero, FreeAgent, VitalTax and More
Last updated: March 2026
Choosing the right software for Making Tax Digital for Income Tax is one of the first practical decisions you need to make. From April 2026, sole traders and landlords with qualifying income above the £50,000 threshold must use Making Tax Digital to keep digital records and send quarterly updates to HMRC. This guide compares the main Making Tax Digital software choices side by side, so you can pick what suits your circumstances and budget.
What Making Tax Digital for Income Tax means for your software choice
Making Tax Digital for Income Tax (often shortened to MTD ITSA or MTD for Income Tax) replaces the traditional Self Assessment tax return with a new system of quarterly digital reporting. Instead of filing one annual tax return, you will use Making Tax Digital compatible software to submit quarterly updates to HMRC summarising your income and expenses for each period, followed by a final declaration at the end of the tax year.
HMRC requires all MTD ITSA submissions to go through recognised compatible software. You cannot submit using Making Tax Digital through your HMRC online account. The options range from free tools to full cloud accounting platforms costing £30 or more per month.
Who needs to use Making Tax Digital software
You need Making Tax Digital software if you are a sole trader or landlord with qualifying income above the threshold. The rollout is phased:
- April 2026 (Phase 1): Sole traders and landlords with qualifying income over £50,000 must use Making Tax Digital for Income Tax
- April 2027 (Phase 2): The threshold drops to £30,000
- Future phases: HMRC plans to extend Making Tax Digital to all self-employed individuals and landlords
If you are self-employed with income below the threshold, you do not need to use Making Tax Digital yet but can sign up voluntarily. There are also exemptions from Making Tax Digital for those who are digitally excluded or have religious objections. If you qualify for an exemption, you can continue using the existing Self Assessment tax return process.
Two types of MTD software
Before comparing individual products, it helps to understand that Making Tax Digital software falls into two broad categories.
Full accounting software handles your bookkeeping, bank feeds, invoicing, and MTD submissions in one place. Xero, FreeAgent, QuickBooks, and Sage all fall into this group. You keep your digital records directly in the software and it submits your quarterly updates to HMRC through its built-in API connection. This is the simplest option if you are happy to move your record-keeping into the cloud.
Bridging software sits between your existing spreadsheet and HMRC. You continue keeping records in Excel or Google Sheets, and the bridging tool extracts the summary figures and submits them. VitalTax, 123 Sheets, and Forbes MTD are the best-known bridging tools for Making Tax Digital for Income Tax. This option suits people who are comfortable with spreadsheets and do not want to learn a new system.
Full accounting software compared
| Software | MTD ITSA ready | Starting price | Best for | Key features |
|---|---|---|---|---|
| Xero Simple | Yes | £7/month | Sole traders and landlords with simple affairs | Bank feeds, 10 invoices/month, MTD quarterly filing, accountant access |
| Xero Starter | Yes | £15/month | Growing businesses needing more invoices | Everything in Simple plus unlimited invoices, quotes, 20 bank reconciliations/month |
| FreeAgent | Yes | £14.50/month | Freelancers and sole traders | Built-in time tracking, automatic bank feeds, MTD VAT and ITSA, Self Assessment filing |
| QuickBooks Simple Start | Yes | £12/month | Small businesses familiar with QuickBooks | Income and expense tracking, receipt capture, basic reports, MTD submissions |
| Sage Accounting Start | Yes | £12/month | Businesses wanting Sage ecosystem | Invoicing, bank feeds, cash flow forecasting, MTD VAT and ITSA |
All four major platforms support both MTD for VAT and Making Tax Digital for Income Tax. If you are already using one for VAT submissions, staying with the same Making Tax Digital software for income tax is the path of least resistance. Prices shown are correct as of March 2026 and most offer discounted introductory rates for the first few months.
Xero
Xero is the most widely used cloud accounting platform among UK accountants. Its £7 Simple plan is the cheapest entry point from a major provider and includes everything a sole trader or landlord with straightforward affairs needs for Making Tax Digital for Income Tax. Bank feeds pull transactions in automatically, you categorise them, and the software submits your quarterly updates to HMRC. The accountant access feature means your accountant can review and submit on your behalf without needing your login details.
For landlords with multiple properties, Xero handles all UK property income as a single income source using tracking categories to separate individual properties. The multi-business feature (available on Standard plan and above) supports separate submissions for different income sources. As a Xero Gold Partner, we have found it handles the transition to Making Tax Digital smoothly for most clients.
FreeAgent
FreeAgent has a loyal following among freelancers and contractors. Its interface is slightly more opinionated than Xero, with built-in time tracking and project costing that some self-employed sole traders find useful. It also files Self Assessment tax returns directly, which means you can handle everything through one platform. The downside is that FreeAgent is less well suited to property income, as it was designed primarily with service-based sole traders in mind.
QuickBooks and Sage
Both QuickBooks and Sage offer competent Making Tax Digital solutions, though their UK market share among small businesses is smaller than Xero and FreeAgent. QuickBooks has a clean mobile app that works well for receipt capture on the go. Sage integrates with its wider product range (payroll, HR), which may appeal to businesses using multiple Sage products. For a straightforward sole trade or property income, either will do the job, but you may find fewer accountants experienced with them compared to Xero.
Specialist landlord software
| Software | MTD ITSA ready | Starting price | Best for |
|---|---|---|---|
| Hammock | Yes | £8/month | Landlords wanting property-specific features |
| Landlord Studio | Yes | Free (basic) / £8/month (Pro) | Landlords with portfolios wanting mobile-first management |
| RentalBux | Planned | £6/month | Small landlords wanting a simple option |
These tools are built specifically for landlords managing rental property income. They understand concepts like tenant deposits, letting agent statements, and property expenses natively, rather than forcing you to adapt a general business accounting tool. The trade-off is that they do not handle sole trade income, so if you have both property and self-employment income, you may need two tools or a general platform like Xero that covers both.
Bridging software compared
| Software | MTD ITSA ready | Price | How it works |
|---|---|---|---|
| VitalTax | Yes | £30 + VAT per NI number/year (or £90 unlimited) | Excel add-in. Maps spreadsheet cells to HMRC submission fields. |
| 123 Sheets | Yes | £30 + VAT per year | Provides a pre-formatted Excel template. Submit directly from the workbook. |
| Forbes MTD | Yes | From £40/year | Standalone Windows application. Import CSV data from any spreadsheet. |
| TaxCalc | Yes | From £75/year | Desktop software with built-in bridging. Also handles Self Assessment tax returns. |
Bridging software is the cheapest route to Making Tax Digital compliance. VitalTax at £30 per year is less than the cost of a single month’s subscription to most full accounting platforms. The catch is that you remain responsible for keeping accurate spreadsheet records. The bridging tool only transmits the summary figures; it does not check whether your underlying digital records meet HMRC’s digital record-keeping requirements.
Your spreadsheet must maintain a digital link to the bridging software. This means the data must flow electronically from your records to the submission without manual retyping. Copy-pasting figures from a paper notebook into the bridging tool does not count as a digital link. The spreadsheet itself, connected to the bridging tool, is the digital record.
Keeping digital records under Making Tax Digital
Whichever Making Tax Digital software you choose, you must keep digital records of all your income and expenses. HMRC requires that these records are maintained digitally from the point of entry — you cannot keep paper records and type them up later. For each tax year, your digital records must include the amounts and categories of income and expenses for each income source.
Full accounting software handles this automatically as you enter transactions. If you use bridging software with a spreadsheet, the spreadsheet itself serves as your digital record, provided it is linked electronically to the bridging tool that submits your quarterly updates to HMRC.
Worked example: choosing software on a budget
Consider Ahmed, a part-time landlord in Birmingham with two rental properties generating £24,000 in gross rent and a small consultancy earning £32,000. His qualifying income is £56,000, putting him above the threshold for Phase 1 from April 2026. He has been tracking everything in a detailed Excel spreadsheet for the past five years and currently files a Self Assessment tax return each January.
Ahmed’s Making Tax Digital software options break down like this:
| Option | Annual cost | What changes for Ahmed |
|---|---|---|
| VitalTax (bridging) | £36 (inc. VAT) | Keeps his spreadsheet. Installs VitalTax as an Excel add-in. Maps his income and expense totals to the submission fields each quarter. |
| Xero Simple | £84 | Moves to cloud accounting. Sets up bank feeds for his rental account and business account. Categorises transactions monthly. Xero submits quarterly updates to HMRC. |
| Landlord Studio + VitalTax | £132 | Uses Landlord Studio (free plan) for property income, VitalTax for consultancy. Two separate submission routes. |
If Ahmed values keeping his existing spreadsheet workflow, VitalTax is the obvious choice at £36 per year. If he wants to modernise and have his accountant access his records remotely, Xero Simple at £84 per year offers better long-term value, especially as his accountant can review transactions and submit quarterly updates on his behalf.
What to consider when choosing Making Tax Digital software
Price matters, but it should not be the only factor. Think about these questions:
Do you have an accountant? If your accountant uses Xero, choosing Xero means they can access your records directly, review your quarterly figures before submission, and handle year-end adjustments without chasing you for paperwork. Most accountants do not support bridging software for ongoing Making Tax Digital work because they cannot see your underlying records.
How many income sources do you have? A sole trader with one business and no property can use almost any tool. Someone with a sole trade, two rental properties, and a side business needs software that handles multiple income sources cleanly. Xero (Standard plan or above) handles this well. Most bridging tools can handle multiple sources but require separate submission runs.
Are you already VAT-registered? If you already use Making Tax Digital compatible software for VAT submissions, check whether it supports MTD for Income Tax too. Using one platform for both simplifies your life considerably.
Do you want bank feeds? Automatic bank feeds save significant time by pulling transactions directly from your bank into the software. All full accounting platforms support this. Bridging software does not, since your digital records stay in a spreadsheet.
Free and near-free Making Tax Digital software
HMRC’s software finder tool lists all recognised products. Among the genuinely free or near-free MTD software options:
- Landlord Studio Free covers basic property record-keeping and Making Tax Digital submissions for up to two properties at no cost
- VitalTax at £30 per year is the cheapest bridging option for spreadsheet users
- Zoho Books Free offers a free plan for businesses with turnover under £35,000, including Making Tax Digital submissions
Be cautious with free tools. Some have limited support, restricted features, or lack the ability to handle multiple income sources. For straightforward single-source self-employment or property income, they work fine. For anything more complex, the £7 to £15 per month for a full accounting platform is usually worth it.
How Jack Ross can help with Making Tax Digital
Choosing Making Tax Digital software is only the first step. Setting it up correctly, connecting it to HMRC, and configuring it for your specific income sources matters just as much. Jack Ross Chartered Accountants can advise on the best option for your circumstances, handle the setup, and manage your quarterly updates and submissions on your behalf. As a Xero Gold Partner, we offer Xero setup, training, and ongoing support for sole traders and landlords using Making Tax Digital for Income Tax. Get in touch to discuss your options.
