From April 2026, all unincorporated businesses and landlords with income over £50,000 must comply with Making Tax Digital for Income Tax (MTD ITSA). This follows the MTD rules already in place for VAT. The move to digital reporting is not optional, and choosing the right software now will make the transition smoother and more efficient.
Our blog, Making Tax Digital Update 2025, provides more information about the changes. This article outlines options for MTD software to help you prepare.
You must use MTD-compatible software
HMRC does not provide its software for MTD. Instead, you are required to use software that is officially recognised as MTD-compatible. It must be able to:
- Maintain digital records of income and expenses
- Submit quarterly updates and final declarations directly to HMRC
- Link data digitally throughout your records—manual data transfers or copying between systems is not allowed
To meet these requirements, you can either use one complete accounting package or combine software with a bridging tool, provided everything is digitally linked.
Check that your current software is compliant
Many businesses still rely on spreadsheets or desktop accounting packages that may not meet MTD requirements. You must upgrade or switch if your current system does not support MTD. Early adoption is recommended to train staff, test the new system and avoid rushing before the deadline. To find HMRC-approved software, click on this link – Find software that works with Making Tax Digital for Income Tax.
What to look for when choosing software
There is a wide choice of software on the market. Focus on:
- Integration – look for systems that connect well with your existing tools, such as banking or stock systems
- Automation – software that calculates VAT, updates in real-time, or flags errors can reduce admin time
- Ease of use – user-friendly dashboards and transparent reporting will help your team stay on top of compliance
- Scalability – consider how the software will grow with your business
Popular options to consider
Well-established options such as Xero, QuickBooks, Sage Accounting and FreeAgent are already MTD-compatible and regularly updated to meet new regulations. Bridging software like MTDSorted can also help if you are not ready to move away from spreadsheets but still need to be compliant.
Benefits of switching early
Businesses that have already adopted MTD software report improved accuracy, better visibility of their finances and smoother workflows. While there is an initial learning curve, the long-term benefits include fewer errors, quicker processes and reduced reliance on manual paperwork.
Take action now
We recommend all businesses start reviewing their software before the 2026 deadline. We can help you assess your current systems, identify MTD-ready alternatives, and make a plan to implement the right tools for your business.
Contact our team if you want personalised advice or support setting up MTD-compatible software. You can call us on 01623 490 120 or email