Making Tax Digital needs software on HMRC's compatible list: a spreadsheet on its own no longer complies, though a spreadsheet plus bridging software does. MTD for VAT already applies to every VAT-registered business, whatever the turnover, and MTD for Income Tax has applied since 6 April 2026 to sole traders and landlords with qualifying income over £50,000. The cheapest fully compliant route is FreeAgent, free with a Mettle, NatWest or RBS account; the cheapest way to keep your spreadsheet is bridging software from around £20 a year. Here are the routes that satisfy HMRC, and who each suits.
| Software | Type | Price | VAT | Income Tax |
|---|---|---|---|---|
| FreeAgent | Full accounting | £0 via Mettle (£19+ direct) | Yes | Yes |
| QuickBooks | Full accounting | From £10/month | Yes | Yes |
| Xero | Full accounting | Grow £37/month | Yes | Yes |
| Sage Accounting | Full accounting | Start £15/month | Yes | Yes |
| 123 Sheets | Bridging | From around £20/year | Yes | Yes |
| VitalTax | Bridging | From around £30/year | Yes | Yes |
| ANNA MTD VAT filing | Bridging | First VAT filing free | Yes | VAT only |
The cheapest fully compliant route: free with a Mettle, NatWest or RBS account
Full accounting software, compatible with MTD for VAT and Income Tax. Best for anyone who banks with Mettle, NatWest or RBS.
Open a Mettle accountThe cheapest paid full-accounting route for MTD, at £10 for Sole Trader
Full accounting software, compatible with MTD for VAT and Income Tax. Best for sole traders wanting the cheapest paid full package.
See QuickBooks MTD plansThe full-featured choice once you have payroll and multiple users
Full accounting software, compatible with MTD for VAT and Income Tax. Best for growing limited companies with staff.
See Xero MTD plansA familiar incumbent with MTD built in from the Start tier
Full accounting software, compatible with MTD for VAT and Income Tax. Best for businesses that want a long-established name.
See Sage MTD plansKeeps you on your own spreadsheet and just files it, for a fraction of software cost
Bridging software, compatible with MTD for VAT and Income Tax. Best for spreadsheet users who do not want accounting software.
See 123 Sheets bridgingAn Excel add-in, so filing happens without leaving the workbook
Bridging software, compatible with MTD for VAT and Income Tax. Best for excel users who want filing inside the spreadsheet.
See VitalTax bridgingThe first VAT return costs nothing, useful for a one-off filing
Bridging software, compatible with MTD for VAT only. Best for a one-off or occasional VAT filer on a spreadsheet.
Open an ANNA accountMTD for VAT is the settled part: every VAT-registered business keeps digital records and files through compatible software, whether it registered because it passed the £90,000threshold or chose to register below it. MTD for Income Tax is the part still rolling out. It reached sole traders and landlords with qualifying income over £50,000 on 6 April 2026, drops to over £30,000 on 6 April 2027, and to over £20,000 on 6 April 2028. Qualifying income is your gross self-employment and property income before expenses, so it is turnover, not profit, that decides whether you are in, and a business can be well inside the net on a modest profit.
HMRC requires the figures to reach it through the Making Tax Digital interface, and a spreadsheet cannot do that by itself. It can still hold your records, though, as long as bridging software files them for you. Bridging is the quiet loophole for anyone who does not want to learn accounting software: you keep working in the spreadsheet you already have, and a tool like 123 Sheets or the VitalTax Excel add-in submits the return. One catch worth knowing before you buy: HMRC keeps separate compatible-software lists for VAT and for Income Tax, so a tool cleared for VAT is not automatically cleared for Income Tax. Check the fuel you need, and note that ANNA's free filer covers VAT only.
Late MTD VAT submissions run on a points system: you collect a point per missed deadline, and at the threshold, four points for a quarterly filer, a £200 penalty lands, with a further £200 for each late submission after that while you stay at the threshold. MTD for Income Tax replaces the single annual return with four quarterly updates plus a final declaration, each with its own deadline, so the cost of falling behind is more moments to miss, not fewer. Compatible software matters precisely because it automates those submissions rather than leaving them to memory.
Yes. You must keep digital records and file through software on HMRC's compatible list. A spreadsheet on its own does not comply, but a spreadsheet plus bridging software does, because the bridging tool sends the figures to HMRC in the required format. HMRC keeps separate compatible lists for VAT and for Income Tax.
FreeAgent is free with a Mettle, NatWest or RBS business account, and it covers both MTD for VAT and MTD for Income Tax, which makes it the cheapest fully compliant route. If you would rather keep a spreadsheet, bridging software such as 123 Sheets starts at around £20 a year.
Yes. MTD for VAT applies to every VAT-registered business, including those registered voluntarily below the £90,000 threshold, for VAT periods starting on or after 1 April 2022. The registration threshold and the MTD rules are separate things.
From 6 April 2026 if your qualifying income was over £50,000, from 6 April 2027 if it was over £30,000, and from 6 April 2028 if it was over £20,000. Qualifying income is your gross self-employment and property income before expenses, and HMRC writes to tell you when you must join.
Yes, as long as you add bridging software to file them. The spreadsheet keeps your digital records and the bridging tool submits the return to HMRC through the MTD interface. It is the cheapest way to stay compliant without moving to full accounting software, from around £20 a year.
Figures checked 4 July 2026; confirm details with the provider before applying. We may earn a commission through links on this page.