Choosing the Right Accounting Software for Making Tax Digital (MTD)

Most business owners don’t dream of spending their evenings picking accounting software. I get it — you’d probably rather focus on running and growing your business. But with Making Tax Digital (MTD) now firmly here for VAT and coming soon for Income Tax, it’s one of those decisions you really do want to get right.

Here’s a practical guide to the main software choices, based on what I see working (and not working) for real businesses like yours.

What You Need Your Software to Do

Before diving into specific brands, it’s worth being clear on what you actually need from your accounting software.

At a minimum, for MTD compliance, your software must:

• Record your financial transactions digitally
• Connect directly to HMRC to file VAT or Income Tax returns
• Maintain a digital link between your records and your submissions

But beyond ticking the compliance box, good software can also help you:

• Save time on invoicing and chasing payments
• Understand your cash flow in real-time
• Make bookkeeping (almost) painless
• Spot problems before they turn serious

In short: good software isn’t just about avoiding penalties. It can make running your business a lot easier if you pick the right one.

The Main Players: Quick Overview

QuickBooks

Starting price: £16 + VAT per month (£19.20)
Sole trader option: £10 + VAT per month (£12) for a lighter package (mainly for non-VAT registered businesses)

QuickBooks has been a popular name in small business accounting for years, and with good reason.

The software lets you:

• Create and send invoices
• Track payments and what you’re owed
• Connect to your bank account for easier reconciliation
• Submit VAT returns directly to HMRC

It’s officially MTD compliant for VAT — but at the time of writing, it’s still a little unclear whether their Self Assessment version is fully MTD for Income Tax.

Good for: Businesses that want simple invoicing and VAT returns, especially if you’re already familiar with QuickBooks or using an accountant who supports it.

Xero

Starting price: £16 + VAT per month (£19.20)

Xero has built a strong reputation as an intuitive, modern platform that integrates well with other apps and services.
With the starter plan you can:

• Send up to 20 invoices per month
• Record up to 10 purchase invoices per month
• Connect your bank for automatic transaction feeds
• Prepare VAT returns for MTD

Good for: Small businesses that want flexibility, nice reporting, and easy integrations with other software.

FreeAgent

Starting price: Around £14.50 + VAT per month (varies slightly depending on provider)
Bonus: Free if you bank with NatWest, RBS, or Mettle.

FreeAgent often flies under the radar compared to the bigger brands, but it’s a brilliant choice for certain businesses.
Key features include:

• Unlimited invoicing and expenses
• Bank feeds and automatic transaction matching
• Time tracking and project management
• VAT returns and Self Assessment submissions direct to HMRC

Good for: Sole traders, freelancers, small limited companies, or anyone who wants simple accounting without getting bogged down in jargon.

Sage Cloud Accounting

Starting price: £15 + VAT per month (£18)

Sage might not have the trendy reputation of Xero or the flashy ads of QuickBooks, but in my experience, it’s one of the most reliable and straightforward tools for small businesses.
You get:

• Easy invoicing and payment tracking
• Bank connections for automatic reconciliation
• Simple, clear reports for cashflow, profit and loss, and more
• VAT return preparation and filing for MTD

Good for: Business owners who want solid, no-nonsense software that covers all the essentials.

My Practical Advice

Don’t overthink it — but do trial it.

Most of these providers offer a free 30-day trial.

Spend a little time clicking around and setting up a few test invoices or bank transactions.

You’ll quickly get a feel for whether the system clicks with how your brain works.

• If you’ll be doing your own bookkeeping: Pick the software that feels simplest and clearest to you.
• If your accountant will be handling everything: Pick the one they like using (it’ll save you both a lot of time and questions).

And a word to the wise: Don’t leave it until the last minute. If you’re not MTD-ready and your first quarterly return deadline is looming, now’s the time to get moving.

Need a Hand?

If you’re feeling stuck or not sure which way to go, I’m always happy to have a chat.

No hard sell – just practical help if you need it.

Drop me a message or get in touch via the website.