Software for Making Tax Digital for Income Tax

Making Tax Digital for Income Tax (MTDfIT) is rapidly approaching. A quick reminder of the rules. From April 2026, individuals earning over £50,000 from self-employment or property income will be required to maintain digital records and submit quarterly updates to HMRC using compatible software. This threshold will drop to £30,000 in April 2027, and eventually to £20,000 in April 2028.

Why software matters

Under MTDfIT, taxpayers must:

• Keep digital records of income and expenses.
• Submit quarterly updates to HMRC.
• File a final declaration by 31 January following the tax year.

This means choosing the right software is no longer optional - it’s essential for compliance, accuracy, and efficiency.

Types of software available

There are two main categories of software for MTDfIT:

1. Full Accounting Systems

These are comprehensive platforms that handle bookkeeping, invoicing, bank feeds, and tax submissions. Popular options include:

• • Xero - Offers end-to-end MTD compliance, including support for landlords and sole traders in one subscription.
  • QuickBooks - HMRC-recognised and widely used by small businesses for its automation and reporting features.
  • Free Agent - Ideal for freelancers and micro-businesses, with built-in MTD functionality.

2. Bridging software

Designed for users who prefer spreadsheets but need a compliant way to submit data to HMRC. These tools “bridge” the gap between manual records and digital submission.

Choosing the right software

When selecting software, consider:

• Income sources: Ensure the software supports all relevant income types (e.g., self-employment, UK property, foreign property).
• Submission capabilities: It must allow quarterly updates and final declarations.
• Ease of use: For clients less confident with tech, simplicity is key.
• Licensing needs: Some platforms require separate licences for different income types, while others (like Xero) consolidate them. 

How we can help

At Larking Gowen LLP, the MTD team has been actively preparing clients for the transition having a great understanding of the options currently available in the marketplace, giving us the expertise to:

• Recommend the most suitable software for your own personal circumstances.
• Provide reliable training and ongoing support.
• Ensure you are staying compliant and avoiding penalties.

The shift to Making Tax Digital is more than a regulatory change – it’s an opportunity to streamline tax processes, reduce errors, and gain real-time financial insights. Whether you’re a sole trader or landlord, choosing the right software makes meeting your MTD filing requirements a breeze.

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk to find out more.

Martin Bugg