Do you have to pay for Making Tax Digital software?

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No, you do not have to pay for Making Tax Digital (MTD) software. While there are plenty of paid options on the market, there are genuinely free ways to meet HMRC’s new rules without adding another monthly bill to your self-employed business expenses.

If you are a sole trader, freelancer, or landlord in the UK, tax rules can be stressful enough without having to worry about new software costs. Here is a simple, plain-English guide to getting your Making Tax Digital software for free.

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The New MTD Rules Are Here

As of April 2026, the government’s Making Tax Digital for Income Tax (MTD for ITSA) has officially started. Instead of filing one big Self Assessment tax return once a year, you now have to:

• Keep your income and expense records digitally.
• Send quick summary updates to HMRC four times a year.
• Send one final declaration at the end of the tax year.

Who does this apply to?

• From April 2026: Self-employed people and landlords earning over £50,000 a year before expenses.
• From April 2027: Those earning over £30,000 a year before expenses.

If you fall into these brackets, you are legally required to use MTD-compatible software to send your updates to HMRC. It is important to know that HMRC does not provide its own free software for this new system, meaning you cannot just log into the old Government Gateway to type in your figures. But you get to choose which commercial software you use—and you can absolutely choose a free option.

How to Do MTD for Free

Software companies and banks know that small businesses are looking for cost-effective solutions. Here are the three best ways you can handle MTD for free:

1. Let Your Accountant Handle It (and the Software)

If you already use an accountant to help with your tax return, you might not need to worry about software costs at all. A good accountant will often provide you with access to premium MTD software (like Xero, QuickBooks, FreeAgent, or Dext) completely free of charge, as the cost is already included in their service fee. Even better, a good accountant will take the stress completely off your shoulders by reviewing your records and submitting those new quarterly updates to HMRC on your behalf. If you have an accountant, just ask them what is included in your current package!

2. Free Tiers from Accounting Apps and Banks

Many well-known accounting companies and business banks offer “free tiers” tailored specifically for smaller sole traders. For example, brands like Tide, Starling Bank, and Clear Books offer free MTD tools built right into their platforms or apps. These let you track your income and expenses, and send your quarterly updates directly to HMRC without paying a monthly subscription.

3. “Bridging” Software (If you love spreadsheets)

If you already use an Excel or Google spreadsheet to track your income and expenses, you do not have to give it up. You can use something called “bridging software.” This is a simple digital tool that takes the final totals from your spreadsheet and securely beams them over to HMRC’s system. Several companies offer free or incredibly cheap bridging software options for straightforward businesses.

When Might You Want to Pay?

If genuinely free options exist, why do people pay for software? Usually, it comes down to needing extra tools to run a growing business. You might want to pay if you need to:

• Send professional, automated invoices to clients and track who owes you money.
• Automatically link multiple different business bank accounts so you do not have to type in transactions.
• Run payroll for employees.
• Submit VAT returns alongside your Income Tax.

If your business is simple, the free options or the software provided by your accountant will be more than enough.

Next Steps: How to Find Your Free Software

If you are managing your taxes on your own, the safest way to choose your software is to use the official directory on the UK Government website.

1. Go to the GOV.UK website and search for “Find software that’s compatible with Making Tax Digital for Income Tax.”
2. Use the filters on the side of the page to only show “Free” options.
3. If you want to keep using your own spreadsheets, filter by “Bridging software.”

Making Tax Digital is a big change, but it does not have to be an expensive one. Talk to your accountant or do a little bit of research, and you can easily find a free tool that keeps HMRC happy and keeps your hard-earned money in your pocket!

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