MTD for Income Tax Software: How to Choose for April 2027
Affiliate disclosure: Some links on this page may earn us a small commission at no extra cost to you — this never influences our editorial recommendations.
If your qualifying income from self-employment and property is more than £30,000, Making Tax Digital for Income Tax (MTD for Income Tax) becomes mandatory for you from 6 April 2027. This is no longer a future scheme: it has been mandatory for sole traders and landlords with qualifying income over £50,000 since 6 April 2026. Choosing your software now, and getting comfortable with it before your first real submission, is the simplest way to avoid a stressful first year.
The trouble is that the software market is crowded and full of marketing claims, while HMRC’s requirements are specific. Not every bookkeeping app will do.
This guide explains what MTD-compatible software has to do, how to check that HMRC recognises a product, what to compare, why a spreadsheet on its own won’t work, and whether it’s worth signing up before you have to.
What MTD for Income Tax Means From April 2027
Who Is in the April 2027 Group?
HMRC is phasing MTD for Income Tax in by income level. You’re in the April 2027 group if your qualifying income on your 2025/26 Self Assessment return was more than £30,000.
Qualifying income is your gross income (turnover before expenses) from self-employment and property added together. Profit is irrelevant. If you had £20,000 of rent and £12,000 of self-employment income, your qualifying income is £32,000 and you’re in scope, even though neither source is over £30,000 by itself. If you own a property jointly, only your share counts. Employment income, your share of partnership profits, dividends and pensions don’t count at all. HMRC explains the detail in its guide to working out your qualifying income.
The rollout timetable:
| Qualifying income | Tax year HMRC checks | MTD starts |
|---|---|---|
| Over £50,000 | 2024/25 | 6 April 2026 (already live) |
| Over £30,000 | 2025/26 | 6 April 2027 |
| Over £20,000 | 2026/27 | 6 April 2028 |
Partnerships will follow at a date HMRC hasn’t yet announced. Some people are exempt, for example if they’re digitally excluded. HMRC’s online checker tells you whether and when you need to start, and whether you might be exempt.
HMRC reviews each Self Assessment return and writes to people who are over the threshold. If you don’t receive a letter, it’s still your responsibility to check and sign up.
Key Dates for the April 2027 Group
| Date | What happens |
|---|---|
| 31 January 2027 | Your 2025/26 Self Assessment return is due. HMRC uses it to decide whether you’re in scope. |
| 6 April 2027 | MTD starts. Keep digital records from this date (from 1 April if your accounting period ends on 31 March). |
| 7 August 2027 | First quarterly update due |
| 7 November 2027 | Second quarterly update due |
| 31 January 2028 | Your 2026/27 Self Assessment return is due, filed the usual way |
| 7 February 2028 | Third quarterly update due |
| 7 May 2028 | Fourth quarterly update due |
| 31 January 2029 | Your 2027/28 tax return is due, submitted through your MTD software |
Your last traditional return and your third quarterly update fall a week apart in early 2028, so it pays to have your software bedded in well before then.
What Changes Under MTD for Income Tax?
Instead of filing one return a year, you’ll need to:
- Keep digital records of your self-employment and property income and expenses in compatible software.
- Send HMRC a quarterly update for each business by 7 August, 7 November, 7 February and 7 May.
- Make any year-end adjustments, add your other income and submit your tax return through your software by 31 January after the end of the tax year.
Two points often get missed. Quarterly updates are cumulative: each one covers the tax year to date, not just the latest three months, so a mistake in one quarter is put right in the next update rather than by resending the old one. And an update is a running summary rather than a return, so it doesn’t change when you pay. Your tax is still due on the usual Self Assessment dates.
If you’ve read older guides, you may have seen a fourth step called the End of Period Statement (EOPS). It was scrapped before MTD for Income Tax went live, and its adjustments now happen as part of preparing your tax return. You may also see that return called the “Final Declaration” in some software; HMRC’s current guidance calls it your tax return.
What Compatible Software Must Actually Do
HMRC doesn’t supply its own MTD software, so you or your agent will need a commercial product. Between them, the product or products you choose must handle three jobs.
Digital Record-Keeping
The software must let you create, store and correct digital records of your self-employment and property income and expenses. Each record needs an amount, a date and a category, and MTD uses the same categories as the Self Assessment return.
You don’t have to record transactions the moment they happen. Records for each quarter must be in your software before you send that quarter’s update, or by its deadline if that comes first, although HMRC recommends recording them as close to the transaction date as you can. A digital record doesn’t need a scanned receipt attached, but you must still keep your original records and supporting documents, such as invoices and bank statements, just as you do now.
Two simplifications can reduce the work. If an income source’s turnover is under £90,000, you can categorise in less detail: a sole trader only needs to mark each transaction as income or an expense, while residential landlords must also flag restricted finance costs such as mortgage interest. And if you let property jointly, you only record your share, with the option of keeping less detailed records for those properties.
Quarterly Updates
Every three months, the software adds up your records and sends HMRC a summary for each business: each self-employment, your UK property business (all your UK lets count as one) and any foreign property business. The software sends it directly; you don’t type figures into an HMRC website.
You don’t need to make accounting or tax adjustments at this stage, and you must still send an update for a quarter with no income or expenses. After each update, you can see an estimate of your tax bill so far, which is one of the genuine benefits of the system.
If your accounts run from 1 April to 31 March, you can use calendar update periods, with quarters ending on 30 June, 30 September, 31 December and 31 March. The deadlines don’t change, but you have to select this option in your software before your first update, so check the product supports it.
Year-End Adjustments and Your Tax Return
After the fourth update, you make any year-end adjustments, such as for disallowable expenses, capital allowances or simplified expenses, then complete and submit your tax return through the software by 31 January.
The return must include all your other income as well. HMRC pre-fills some of it, including PAYE employment income and pensions, which you must check. You’ll need to add items such as savings interest, dividends and your share of any partnership profits yourself. Your software therefore needs to handle every type of income you have, not just your business figures.
You can’t submit this return through HMRC’s online Self Assessment service. A product that only keeps records and sends quarterly updates won’t be enough unless you pair it with another product that handles the return.
Understanding Digital Links — And Why Spreadsheets Alone Won’t Work
You can keep recording your transactions in a spreadsheet, but a spreadsheet can’t send anything to HMRC. You’ll need bridging software that connects to it and makes your submissions. Some bridging products handle both quarterly updates and the tax return; others may not, so check.
What Is a Digital Link?
If you use more than one product, such as a spreadsheet plus bridging software, data has to move between them through a digital link. HMRC accepts methods including:
- formulas or linked cells between spreadsheets
- importing and exporting files, such as CSV or XML
- emailing a spreadsheet so its data can be imported elsewhere
- handing over a file on a memory stick for someone to import
- automated transfers and API connections
Copying and pasting, or retyping figures from one place into another, is not a digital link. If one product does everything, there’s nothing to link.
Using a Spreadsheet With Bridging Software
Bridging software lets you keep a familiar workflow and is a legitimate approach. However, bridging tools vary in quality and cost, and your spreadsheet has to be laid out the way the tool expects. For most small business owners, a single accounting package that does everything is simpler and less error-prone.
You can mix products in other ways too: one for records and quarterly updates and another for your tax return, or a different product for each business. The limit is one product per submission, so a landlord can’t split their property quarterly updates across two products.
How to Find Software That HMRC Actually Recognises
Before you take any provider’s word for it, go to the source. HMRC’s software finder on GOV.UK asks a few questions and gives you a personalised list of options, and you can also search for software you already use. Every product listed has been through HMRC’s recognition process, although HMRC doesn’t recommend any of them.
That list is the authoritative reference: not a vendor’s website, not an affiliate review site (including ours), and not a recommendation made without checking it.
If you’re VAT-registered, don’t assume the software you use for MTD for VAT covers Income Tax. Check that it’s recognised for MTD for Income Tax as well, or that the product you switch to can also handle your VAT.
Key Features to Look For When Comparing Options
Once a product appears in HMRC’s finder, here’s what to weigh up.
Full MTD for Income Tax Coverage
Check that the product, or combination of products, supports all your income sources, sends quarterly updates, submits your tax return, lets you report your other income and works with your accounting period. Don’t assume: check the provider’s documentation or ask their support team. If your income sources might change, for example if you’re a landlord thinking about starting a business, check the software will cope with that too.
HMRC Assist
Some products have HMRC Assist built in. It draws on your submissions and the information HMRC already holds to give feedback and flag likely errors in your tax return before you submit it. HMRC lists it as a feature worth considering.
Ease of Use for Non-Accountants
Many sole traders and landlords manage their own books without an accountant, so the software needs to make sense to you. Look for clear guidance on categories, bank feeds that bring transactions in automatically, and an interface you can navigate without an accounting qualification.
Bank Feeds and Receipt Capture
Bank feeds import your transactions automatically and cut down manual entry, though HMRC notes you may still need to add detail such as the Self Assessment category, and some transactions may not come through in full. Receipt capture through a mobile app makes it easier to log expenses on the go. HMRC doesn’t require either feature, but both make compliance much easier in practice.
Property Income Support
If you have rental income, check how the software handles it. All your UK lets form one UK property business with a single quarterly update. Foreign property is a separate business, and its records have to be kept for each property. If you let jointly, look for support for HMRC’s simplifications, including recording only your share and leaving joint-let expenses out of your quarterly updates until after the year end.
Pricing and Value
Most MTD-compatible software is sold as a monthly or annual subscription. Free products are available for people with simple tax affairs, although HMRC warns they may come with limits, such as a cap on the number of transactions.
At the time of writing, Sage offers a free Sole Trader plan, and FreeAgent is free if you have an eligible business account with NatWest, RBS, Ulster Bank or Mettle (Mettle’s offer requires at least one transaction a month). Paid plans start at £10 a month for QuickBooks Sole Trader Plus, £16 for Xero Ignite, £19 for FreeAgent’s sole trader plan and £20 for Sage Accounting, with larger plans such as Xero Grow (£37) and QuickBooks Essentials (£38) costing more. All of these prices exclude VAT. If you’re weighing up two of the best-known options, our QuickBooks vs FreeAgent comparison goes into more detail.
Before you buy, check with the provider that the specific plan includes MTD for Income Tax and covers all your income sources. And compare what you need with what you’re paying for: a straightforward sole trader with no employees and no VAT registration probably doesn’t need a system built for a limited company.
Accountant Collaboration
Even if you do everything yourself now, you may want an accountant to help with year-end adjustments or your tax return. Check whether you can invite an accountant into the software. HMRC lets you appoint a main agent and supporting agents, but only your main agent can submit your tax return, so if you use more than one adviser, check the software allows multiple agents.
Support and UK-Focused Development
MTD for Income Tax is a UK-specific requirement, and HMRC’s rules have been revised several times since the scheme was first announced. Choose a provider with UK-based support and a clear record of keeping its software in step with HMRC changes.
Should You Sign Up Before April 2027?
HMRC lets you sign up before you’re required to, for either the current tax year or the next one. To sign up, you need to be registered for Self Assessment and have submitted a tax return in the last two years, and HMRC advises choosing your software first. You can sign up online yourself, or an agent can do it for you. For the April 2027 group, that leaves two realistic options.
Option 1: Volunteer for the Rest of 2026/27
You’d start using MTD in the current tax year. Because 2026/27 began on 6 April 2026, you’d need to catch up your digital records from that date and send any quarterly updates you’ve missed. Late quarterly updates don’t attract penalties while you’re volunteering, and your 2026/27 tax return would go through your software, giving you a full practice run a year early.
The trade-off is penalties. When you volunteer, you agree to HMRC’s new penalty regime, and you can’t go back to the old one even if you stop volunteering. As a volunteer, each late tax return earns a penalty point, with a £200 penalty once you reach 2 points. The new late payment penalties apply too, and you use up the one-off 30-day grace period HMRC gives in your first year under the new rules. That means once you’re required to use MTD from April 2027, you’d have 15 days rather than 30 to pay, or set up a payment plan, before late payment penalties start. HMRC sets out the detail in its guidance on penalties for volunteers.
Option 2: Sign Up for 2027/28 and Practise in the Meantime
Alternatively, you can sign up now for 2027/28, so that’s done well ahead of your start date, then use a trial or free plan, where available, to run a few months of your records through the software without submitting anything. You won’t rehearse the real submissions, but you’ll find out whether the software suits you without changing how your 2026/27 tax year is handled.
Why Starting Early Pays Off
Practice makes it manageable. Your first quarterly update and your first tax return through software will take longer than later ones, and it’s better to work through any confusion before late quarterly updates start earning penalty points in 2027/28.
You identify software problems early. If your chosen product turns out to be awkward, limited or poorly supported, you want to find out with time to switch, not a fortnight before 7 August 2027.
Your accountant can help you trial it. If you work with an accountant, running through the process together ahead of time is a far less stressful way to iron out issues.
You get an earlier view of your tax bill. If you volunteer, the estimate you see after each quarterly update can help you budget for 31 January.
FAQ
Do I Have to Use Cloud-Based Software, or Can I Use Desktop Accounting Software?
HMRC doesn’t require cloud software. What matters is that the product has been through HMRC’s recognition process and can handle the submissions you need to make. If you already use desktop software, search for it in HMRC’s software finder before relying on it for MTD, rather than assuming it’s compatible.
Can My Accountant Choose the Software for Me?
Your accountant can recommend software, sign you up and send submissions on your behalf. It’s still worth understanding the basics yourself, because quarterly updates mean staying on top of your records throughout the year, not just at year end. If you use more than one adviser, remember that only your main agent can submit your tax return.
What Happens If I Miss a Quarterly Update Deadline?
If you’re in the April 2027 group, late quarterly updates will earn penalty points from your first year. HMRC’s no-penalty easement for quarterly updates only covers the 2026/27 tax year. You get one point per missed deadline, even if you have more than one business, and late tax returns earn points too. At 4 points you’re charged £200, plus another £200 for each further missed deadline. Points below the threshold expire after 24 months.
Late payment penalties are separate. For 2027/28 tax, they’re 4% of the tax owed at day 15, another 4% at day 30, and then 10% a year on the outstanding amount from day 31. In your first year under the new rules, you have 30 days to pay or agree a payment plan before penalties start, unless you’ve already used that grace period as a volunteer. These penalties don’t apply to payments on account. HMRC’s penalties guidance has the full rules.
I’m a Landlord With Property Income Only — Does MTD for Income Tax Apply to Me?
Yes, if your gross property income on your 2025/26 return was more than £30,000. It’s the rent before expenses that counts, and if you own a property jointly, only your share is included. All your UK lets are treated as one UK property business with one set of quarterly updates, while foreign property is a separate business. Look for software built with landlords in mind, including support for the joint-letting simplifications covered above.
Conclusion
Choosing accounting software for MTD in April 2027 isn’t complicated once you know what to look for, but it does take some care. Check the product appears in HMRC’s software finder, make sure it covers every submission you’ll need to make (quarterly updates for each business, plus a tax return that includes your other income), and pick something you’ll actually use consistently throughout the year.
For most sole traders and smaller landlords, a UK-focused accounting package with bank feeds, receipt capture and full MTD for Income Tax support will do the job. If you’d rather keep your spreadsheets, reputable bridging software is a legitimate alternative, provided your spreadsheet is set up correctly and every link between the two is genuinely digital.
Then decide how you’ll practise: volunteer for the rest of 2026/27 with the penalty trade-offs in mind, or sign up for 2027/28 now and trial your software in the meantime. Either way, 7 August 2027 shouldn’t be the first time you use it.
And always check GOV.UK for the latest thresholds, deadlines and recognised software. This is one area where things have changed before and may change again.
This guide is for general information only and is not tax, legal or financial advice. Rules, thresholds and deadlines change, and how they apply depends on your circumstances. Check the latest guidance on GOV.UK and speak to a qualified accountant or tax adviser before making decisions.
Pricing and features correct at time of writing. Plans and capabilities are subject to change — always confirm current details on the provider’s website before purchasing.