Software for MTD – what’s right for you?

In April 2026, self-employed people or landlords with an income of £50,000 or more will have to comply with Making Tax Digital (MTD) for Income Tax. The following year, they’ll be followed by those with an income of £30,000. In April 2028, those bringing in £20,000 will be brought into the net. One thing’s for sure, there’s going to be a steady surge in people looking for software for MTD! In this post, we look at how you can find cloud accounting software for MTD that meets your needs. We’ll also look at three strong contenders that, between them, are good for sole traders, growing businesses and landlords.

What is MTD?

To learn in detail about MTD, we recommend you read our guide on Making Tax Digital. In very simple terms, MTD is about moving over to a digital system of tax reporting. MTD for VAT has been going for some years now. MTD for Income Tax is just around the corner. To comply, most people and businesses need to choose accounting software for MTD that’s compatible with HMRC’s requirements.

How do I choose software for MTD?

Different MTD software packages have different strengths and weaknesses. What may be ideal for a sole trader or occasional Airbnb host is going to be very different to what’s needed by a landlord with a portfolio of ten rental properties.

To help you find appropriate software for Making Tax Digital for Income Tax, HMRC has released a helpful online tool. This asks you for the different types of income you have, things you need to tell HMRC about (such as charitable giving or private pension contributions) and the accounting period you use. Based on your answers to these and other questions, the tool will make a list of suitable and compliant software.

If your needs aren’t too complex, you’ll find that the tool will recommend lots of different options. However, HMRC does make one very important point:

If you have an agent (like an accountant or bookkeeper), talk to them about your choice of software to make sure they can support you.

While THP can support clients using a number of different types of software for MTD, we tend to recommend three packages, depending on your needs. Using one of these three packages helps us to help you better, allowing us to give you helpful tips for using them and speeding up the work we do on your accounts. These three packages are FreeAgent, Xero and Hammock. Below we look a little more closely at which package is best for different needs.

FreeAgent – top choice for freelancers and micro-businesses

FreeAgent really is an excellent package for people who want a simple-to-use, compliant tool. It’s owned by the NatWest Group and has come on in leaps and bounds over recent years.

A main strength of FreeAgent is that it has a highly intuitive interface. You don’t need to be an expert accountant to use it! Features include easy invoicing, cash-flow forecasting and project tracking. It also has handy tax timelines, a handy mobile app (great for scanning receipts on the go), and it fills out much of your Self-Assessment Tax Return automatically.

While ideal for most freelancers, sole traders, contractors and small businesses, it does have fairly limited CIS support. While it’s quite a good choice for landlords with simple portfolios, we strongly recommend comparing it with Hammock (below) if you are in the buy-to-let market.

FreeAgent is highly affordable and is free to many customers of the NatWest group of banks. At THP, we also offer it free to our clients.

Learn more about FreeAgent.

Xero – scalable and feature rich software for MTD

Xero is an excellent choice for growing businesses and startups, especially those with more complex accounting needs. It has strong VAT management and CIS support, the latter making it very useful for construction industry users.

The software has deep functionality, offering everything from invoices and bank feeds through to payroll, inventory, fixed assets and much more. Superior automation helps to digitise and reconcile documents quickly. A key benefit is Xero’s scalability, offering a huge number of integrations, custom reports and unlimited users.

On the downside, Xero is rather trickier to use than FreeAgent. It also costs more, with various add-ons potentially increasing that cost. That said, its adaptability and potential for integrations can make processes faster, more accurate and cost-efficient. If you feel you are outgrowing your current cloud accounting software for MTD, Xero could well be the solution for you. THP is also a Xero Gold Partner, so we are well suited to helping you use the software to grow!

Learn more about Xero.

Hammock – designed for landlords

Hammock is cloud accounting software for MTD that’s been designed with landlords and property investors in mind.

This software stands out because it has been built by people who really understand the buy-to-let market. It has tailored landlord features such as rent arrears tracking, property-by-property dashboards, alerts for late payments and alerts for issuing documents. It can also handle different structures, such as joint ownership, limited companies, HMOs and more.

The first landlord software recognised by HMRC, it’s great for landlords who want a solution that gives them insights into rental yields, occupancy, arrears and more.

If you are a landlord, THP offers you Hammock free of charge as part of our Landlords’ Platinum Accounting Service.

Learn more about Hammock.

Need advice on software for MTD?

If you’d like advice on how to find the best MTD software for your needs, please get in touch with your THP account manager. If you’re not currently a client, we’ll happily help you find the right software when you sign up to one of our tax return services.