Is your software MTD-ready—and are you? Here’s how to find out
Worried your accounting isn’t fully MTD capable? Learn how to check it does the full job, including with HMRC’s recognition—so you can handle MTD with confidence.
Making Tax Digital (MTD) for Income Tax is now live, and the question from many sole traders is simple:
Will my software actually do the job when it matters?
Right now, you should be keeping your income and expenditure digitally. That’s the fundamental MTD rule. But the first quarterly deadline is approaching on 7 August. You don’t want to get to that date and find your accounting software can’t handle it.
Here’s what we cover in this article so you can be confident that you—and your software—are genuinely ready for MTD for Income Tax:
What does “MTD-recognised” actually mean?
“MTD-recognised” has a specific technical meaning: it’s software that appears on HMRC’s recognised list of software that, to quote HMRC, “works with Making Tax Digital for Income Tax”.
For reference, Sage is included on the HMRC MTD-recognised list, as you might expect. This includes Sage Sole Trader Free, which is available for no cost.
Software earns its place on HMRC’s recognised list by passing technical tests that confirm it can connect to HMRC’s systems, and also has features required for MTD submissions and digital record keeping.
That’s genuinely reassuring, but Chris Downing, a former accountant and Director of Accountants and Bookkeepers at Sage, urges caution:
“Saying an app is ‘HMRC-recognised’ is a good starting point—but it isn’t a gold star. It’s a tick-box. It means the software can do the bare minimum for parts of MTD. Not necessarily all of it!
“The endorsement most people picture simply doesn’t exist. The fact is that choosing the right software for your situation requires a bit of thought.
“And then there’s lots of software vendors making unclear claims such as having software that’s ‘designed’ for MTD. This could cause havoc at deadline crunch times unless you inspect the app’s function list thoroughly.”
Is your software MTD-ready? Here’s a checklist to find out
Here’s a checklist you can test your current MTD solution against:
- Does the accounting software let you activate dedicated MTD functionality? Be careful here that what you read isn’t referring to the older MTD for VAT. That’s certainly important if you’ve VAT registered—but MTD for Income Tax is entirely separate, and requires new, updated software features.
- Does it let you keep income and expenses as digital records in a way that’s legally compliant with MTD for Income Tax? The minimum data that needs to be recorded is amount, date, and the tax category, as defined by HMRC for MTD for Income Tax.
- Can you submit MTD quarterly updates? Again, take care that the software isn’t limited to MTD for VAT quarterly returns. MTD for Income Tax is not related to those at all.
- Can you submit an MTD digital tax return? Take care that the software isn’t limited to just MTD for Income Tax quarterly submissions or, even worse, to just digitally submitting Self Assessment tax returns. The latter is a totally different way of submitting your tax return and it no longer applies if you’re using MTD for Income Tax (outside of your final Self Assessment return, covering 2025/26, that you’ll need to submit by 31 January 2027.)
- Does the software support landlord income as well as sole trader income? There are two types of tax payers in scope for MTD for Income Tax: sole traders, such as tradespeople or freelancers, and private landlords. You need to ensure the software supports your type of income.
Which MTD terms trip people up—and what do they really mean?
A handful of similar-sounding terms cause most of the confusion.
Chris Downing adds: “Most people pick MTD software by looking at where they need to start. My advice: Pick it by where you finish, with your digital tax return.
“If a tool can’t create your digital tax return, it doesn’t matter how beautifully it handles everything before it. There are a surprising number of ‘MTD-recognised’ apps that can only do part of the job.”
Here’s each type of software described in plain English, so you can choose your software with confidence.
- Self Assessment software: This is a tricky one that catches out many people. MTD for Income Tax is a different way of doing your income taxes compared to Self Assessment. Any accounting software compatible with Self Assessment will not necessarily be compatible with MTD. This is because the rules of how you tell HMRC about your income and expenses are very different. Desktop accounting software in particular can have this issue, because it’s more difficult to update compared to cloud accounting software, where updates are distributed automatically over the internet.
- MTD software: This is accounting software that’s been updated to be compatible with MTD. But be careful because there are two types of MTD: MTD for VAT, and MTD for Income Tax. MTD for VAT has been around since 2019, while MTD for Income Tax started in April 2026. So, to be compatible with MTD for Income Tax, the software will probably have been specifically updated in the last year or so. Crucial fact: MTD for VAT and MTD for Income Tax are totally different systems, with no crossover whatsoever. An app compatible with MTD for VAT will not necessarily be compatible with MTD for Income Tax.
- MTD bridging software: This is a small bit of software whose sole purpose is to securely link to HMRC’s systems for MTD submissions. Usually this is to enable third-party software to become MTD compatible, such as older accounting apps, or spreadsheet applications. Some bridging software handles just the quarterly updates, while some other software can handle digital tax returns, too. Yes, it’s very confusing! In any event, MTD bridging software is effectively a stop-gap measure. Spreadsheets aren’t banned under MTD and the value of bridging is to let them be compliant. However, switching to full MTD-recognised accounting software is the real long-term solution.
- Quarterly submission software: This is another type of bridging software, in that it aims to help you submit quarterly updates from older software, or from spreadsheets. Crucially, quarterly submission software only helps with one part of MTD for Income Tax’s requirements. It doesn’t let you submit your final digital tax return. So, if you’re using this kind of software then you are definitely not “MTD ready”!
- Bookkeeping software: Bookkeeping is the day-to-day process of logging your income and expenditure. As such, it’s not guaranteed that any dedicated bookkeeping software will be MTD-compatible, because outside of keeping records digitally, it has no need to be. Indeed, some bookkeeping software expects you to output all the data in order to make MTD submissions via dedicated accounting apps. Again, check with the software vendor to see if your bookkeeping software is MTD-ready.
- End-of-year filing software: You may see this type of software mentioned and, really, it’s usually for accountants to take care of filing all kinds of tax returns for their clients. So, it’s not software you should be looking out for, and not software you need. Some tax specialists use the term to describe accounting software generally, such as Sage Accounting. But that kind of language is prone to causing confusion, especially in this era of MTD requirements.
How do I know if my software is genuinely MTD-ready?
Check it against HMRC’s recognised software list on GOV.UK, then confirm it covers both quarterly updates and the digital tax return for your type of income.
If it does both, you’re set.
The recognised list is searchable and lets you filter by what each product can actually do, which is your safety net.
Some products support only certain income types—self-employment, UK property, or both.
Run through a quick five-point check:
- Is it on the recognised list?
- Does it cover both quarterly updates and the digital tax return?
- Does it support your income types?
- Will it keep your digital records for you?
- Will it also handle sources of income you need to declare such as pensions, savings interest, dividends, and so forth (including from non-UK sources)? You need to tell HMRC about these on your digital tax return (but not your quarterly updates).
What if my software can’t do the whole job?
You can switch MTD software at any point in the tax year, and you won’t lose the submissions you’ve already made with HMRC. If you find your product only handles part of the process, your earlier quarterly updates stay on HMRC’s record regardless of which tool sent them.
Updates are also cumulative, so it’s possible to fix with your current update any errors that have arisen since you submitted the previous ones.
However, if you must switch, ensure you securely keep the accounting data from the old software because HMRC’s rules require you to do so for up to five years after the end of the tax year.
Chris Downing adds: “The simplest MTD setup is a single tool, end to end. Quarterly updates and your digital tax return in one place—like with Sage—means nothing to stitch together and nothing to fall through the cracks.
“Do this and the whole MTD for Income Tax process just quietly works, with no risk of the ball being dropped between bits of software, or apps that simply aren’t MTD-ready for the full journey.”
Spotting a gap in your software early is genuinely a good thing, because it gives you time to fix it calmly before the deadlines arise.
You simply reenter your year-to-date figures in the new software, plus digital records so far for your quarter, and carry on. There’s no need to resubmit past quarters.
The smoothest route of all is to start with software built to handle the full MTD journey end to end, like Sage’s, so your quarterly updates and digital tax return all live in one place.
Choose once, confirm it covers your income types, and the rest becomes routine.
Final thoughts
Hopefully by the end of this article you know enough to find software that’s truly “MTD-ready” for your situation—and understand what it means for software to be HMRC-recognised, too.
But are you MTD-ready? Are you recording your income and expenditure digitally?
This is the only way to ensure that, when you get to the quarterly reporting deadline, you’ll be ready—and submitting the quarterly update will be just a matter of reviewing what the accounting software reports, and tapping a button.
Frequently asked questions
No—it means the software has passed HMRC’s technical tests, not that HMRC rates or endorses it. Recognition confirms a product can connect to HMRC’s systems and submit the right data. It says nothing about price, ease of use, or whether it suits a sole trader or landlord specifically. Treat the list as the starting point for your own comparison, not a ranking of the best products.
No—and this is a common, costly mix-up. HMRC publishes a separate list of commercial Self Assessment software that is not necessarily compatible with MTD for Income Tax. Some people pick a product from the wrong list and assume they’re sorted, only to find out at filing time that they aren’t. Always confirm you’re choosing from HMRC’s MTD for Income Tax-recognised list specifically.
Yes—spreadsheets are still allowed, as long as you connect them to HMRC using recognised bridging software. MTD didn’t kill the spreadsheet. It just added a requirement for a digital link between your figures and HMRC.
There’s some breathing room, but not a free pass. HMRC is taking a lighter-touch approach to late quarterly updates for people newly brought into MTD, but penalties for a late digital tax return still apply from the outset. The safest approach is to treat every deadline as real and choose software that nudges you in good time.
Yes, if you have both—but not every product handles both types of income. MTD treats self-employment and UK property as separate sources, and some software supports only one of them. If you’re a sole trader who also lets out a property, check that your chosen tool handles both income types, or be prepared to run a recognised product for each. Confirming this up front saves a scramble later.
E-Book: Switching from Self Assessment to Making Tax Digital
Worried about following MTD’s rules in April 2026? This brief yet comprehensive guide explains what you need to know: How you do accounting now, and how you should do it in future.
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