UK guide · Prices and MTD rules checked 18–19 October 2026
Best Accounting Software UK 2026: Making Tax Digital Picks
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Short answer
Not VAT-registered sole trader or landlord? Start with Sage Sole Trader Free (£0, MTD for Income Tax ready). Step up to Xero Simple or Sage Sole Trader at £7 a month when you need more invoices. VAT-registered small business: Xero Ignite (£18) or QuickBooks Simple Start (£16) both submit VAT returns to HMRC. Staff or subcontractors: Sage Accounting includes payroll on every Sage Accounting plan, and CIS from Standard. Bank with NatWest, RBS, Ulster Bank or Mettle? FreeAgent is free.
Prices exclude VAT and are regular prices from each provider’s official UK pricing page (18–19 October 2026). MTD rules are from GOV.UK. Outside the UK? Compare small business accounting software for your country.
Making Tax Digital in 2026: what changed
Making Tax Digital (MTD) means keeping digital records and sending them to HMRC from compatible software. There are two parts:
- MTD for VAT already covers everyone. GOV.UK says all VAT-registered businesses should now be signed up and submit VAT returns using compatible software.
- MTD for Income Tax started on 6 April 2026 for sole traders and landlords registered for Self Assessment. It applies if your qualifying self-employment and property income was over £50,000 (2024–25). The threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Partnerships will follow at a date HMRC hasn’t set yet.
Under MTD for Income Tax, GOV.UK says your software must create and store digital records of your self-employment and property income and expenses. It must also send quarterly updates to HMRC and submit your tax return by 31 January. Quarterly updates are summaries, not tax returns. Full details are in HMRC’s guide to choosing MTD software. Deadlines, bridging software and setup are in our MTD software guide.
MTD-ready software at a glance
| Software | MTD for Income Tax | MTD for VAT | CIS | Free option |
|---|---|---|---|---|
| Sage | Sole Trader Free, £0 | Accounting Start, £20 | Sole Trader £7; Standard £43 | Yes (non-VAT sole traders) |
| Xero | Simple, £7 (non-VAT) | Ignite, £18 | Calculations from Simple; returns +£5/mo | No (one month free offer) |
| QuickBooks | Sole Trader Plus, £10 | Simple Start, £16 | Sole Trader Plus, £10 | No (30-day trial or 90% off) |
| FreeAgent | Yes (sole traders & landlords) | Yes | Not listed on the pricing page | Yes, with eligible bank accounts |
| Zoho Books | Free plan | Free plan | Tracking free; returns on Professional £24 | Yes |
| FreshBooks | Not listed on the pricing page | Lite, £16 | Not listed | No (30-day trial) |
Want UK plans side by side with every feature? Open them in our comparison table and choose United Kingdom.
Sage: best free option for sole traders, and best for payroll
Sage covers both ends of the UK market. For non-VAT-registered sole traders, Sage Sole Trader Free costs nothing, with no billing, and is Making Tax Digital ready. It records self-employed and landlord income, connects 1 bank account, produces an SA103S Self Assessment summary and sends 5 invoices a month. The paid Sole Trader plan (£7 a month) adds unlimited invoices, receipt scanning, multiple bank accounts and CIS. Full details in our Sage Accounting review.
Once you’re VAT-registered or employ people, Sage Accounting takes over: Start (£20, 1 user), Standard (£43, 3 users, CIS) and Plus (£59, unlimited users, inventory and multi-currency). Payroll is included on all three, which is rare.
Xero: best all-rounder
Xero now has a plan for every stage. Simple (£7) is for non-VAT-registered businesses: 10 invoices, MTD for Income Tax ready, bank reconciliation and CIS calculations. Ignite (£18) adds VAT returns to HMRC, 20 invoices and 10 bills, and optional payroll at £1.50 per person. Grow (£39) removes the invoice cap and includes payroll for 1 person. Comprehensive (£55) adds multi-currency, and Ultimate (£70) project tracking. There are no per-user fees on any plan.
The catch is the entry caps (10 invoices on Simple, 20 on Ignite). Submitting CIS returns, not just calculating them, is a £5-a-month add-on. When we checked, every UK plan was 90% off for 6 months, or one month free.
See Xero’s UK offer (partner link, opens in a new tab)
QuickBooks: cheapest VAT-ready plan
QuickBooks UK starts lower than Xero for VAT. Sole Trader Plus (£10) is MTD for Income Tax ready, prepares Self Assessment and calculates and submits CIS. Simple Start (£16) adds managing and submitting VAT. Essentials (£38) gives 3 users, Plus (£56) 5 users and Advanced (£123) 25 users, each with access for your accountant.
The two entry plans are single-user, so a growing team will move up tiers. For a side-by-side with Xero, see Xero vs QuickBooks.
Letting property rather than trading? See our landlord accounting software guide.
FreeAgent: best if you bank with NatWest, RBS or Mettle
FreeAgent says it is HMRC-recognised for MTD for Income Tax, with quarterly updates and the final declaration filed from the software. It also generates MTD-compatible VAT returns and runs payroll with PAYE and National Insurance filing. Pricing depends on your business type: landlords £10, sole traders £19, partnerships and LLPs £27, limited companies £33 a month.
The headline is the free route. It’s free while you keep a NatWest, Royal Bank of Scotland or Ulster Bank business account, or a Mettle account with at least one transaction a month.
Zoho Books: most features on a free plan
Zoho Books’ UK Free plan lists more tax features than any other free plan here. That includes Self Assessment (SA100) filing, MTD for Income Tax, VAT returns and MTD VAT filing, plus CIS contractor tracking and property tracking. It’s for 1 user plus your accountant. Standard (£12, or £10 billed yearly) adds bank feeds and CT600 & Final Accounts filing, and Professional (£24, or £20 yearly) submits CIS returns.
Start Zoho Books free (partner link, opens in a new tab)
FreshBooks: for VAT-registered freelancers
FreshBooks UK Lite (£16) submits MTD-compliant VAT returns directly to HMRC. On top of that it gives you unlimited invoices to up to 5 clients, unlimited expenses and quotes. Plus (£30) raises it to 50 clients and Premium (£42) to unlimited. MTD for Income Tax isn’t listed on the UK pricing page, so non-VAT sole traders who need it should look elsewhere.
Try FreshBooks free (partner link, opens in a new tab)
Which one fits your business?
- Sole trader or landlord, not VAT-registered, low volume: Sage Sole Trader Free or Zoho Books Free.
- Sole trader who invoices a lot: Sage Sole Trader or Xero Simple (£7), or FreeAgent if your bank makes it free.
- VAT-registered, one person: QuickBooks Simple Start (£16) or Xero Ignite (£18).
- Team of several people: Xero (no per-user fees) or Sage Plus (unlimited users).
- Employees and payroll: Sage Accounting (payroll on every Sage Accounting plan).
- Construction subcontractors (CIS): see our construction guide.
- Freelancer billing clients for time: see our freelancer guide.
The finder can filter for UK MTD VAT and MTD for Income Tax and rank these for your business type.
FAQ
Who needs Making Tax Digital for Income Tax?
Sole traders and landlords registered for Self Assessment with qualifying self-employment and property income over £50,000 have needed it from 6 April 2026. The threshold drops to £30,000 from 6 April 2027 and £20,000 from 6 April 2028, according to GOV.UK.
Is there free MTD software in the UK?
Yes. Sage Sole Trader Free is £0 for non-VAT-registered sole traders, and Zoho Books UK has a free plan listing MTD for Income Tax and MTD VAT. FreeAgent is free with an eligible NatWest, RBS, Ulster Bank or Mettle account.
What is the cheapest MTD for VAT software?
Among the tools checked, Zoho Books’ UK Free plan lists MTD VAT filing. The cheapest paid plans that submit VAT returns are QuickBooks Simple Start (£16), FreshBooks Lite (£16), Xero Ignite (£18) and Sage Accounting Start (£20), all excluding VAT.
Do partnerships need MTD for Income Tax?
Not yet. GOV.UK says partnerships will need to use MTD for Income Tax in the future, with the timeline to be set out later.
