Why HMRC Requires MTD Software
HMRC’s aim is to remove manual entry between business records and the tax authority. Compatible software enforces digital record-keeping and direct digital submission.
What MTD Software Must Do
Software must store digital records of income and expenses, maintain digital links through to the figures submitted, and connect to HMRC’s MTD APIs for submissions.
Types of MTD Software Available
Options range from full cloud bookkeeping platforms with bank feeds and invoicing, to simpler tools focused purely on the MTD submission requirement.
Bridging Software Option
If you keep records in spreadsheets, bridging software can connect those spreadsheets to HMRC and meet the digital link requirement.
Free vs Paid MTD Software
A small number of free options exist, typically with limited features. Most businesses find paid software offers significantly better functionality for the cost.
When you might not need to buy new software
You always need compatible software to be within MTD, but you may not need to buy something new. If you already use cloud bookkeeping software, check whether it is on HMRC’s recognised list — many popular packages already are, and MTD may just be a setting to switch on. If you keep spreadsheets you like, bridging software can make them compliant rather than replacing them. And if you have been granted an exemption on digital- exclusion grounds, you continue under the old system and do not need MTD software at all.
What to check before you buy
- It appears on HMRC’s recognised MTD-compatible software list
- It supports MTD for Income Tax (not only MTD for VAT) if you need ITSA
- It handles all your income types — self-employment and/or property
- The cost and features match your transaction volume and skills
How to Choose the Right Software for Your Situation
Choice depends on your income types, business complexity, existing systems and budget. Our software setup service helps you choose and configure the right tool.