Making Tax Digital for Income Tax is now live for higher-earning sole traders, and it brings a requirement you cannot really get around: you need HMRC-recognised software to keep your records and send your quarterly updates. A carrier bag of receipts and a spreadsheet you tally up each January no longer does the job.
The upside is that you have plenty of choices, and some of the strongest options cost little or nothing. The downside is that the sheer number of products, each one insisting it is the simplest and cheapest, makes the decision harder than it ought to be. So this guide keeps it grounded. I will explain what actually makes software MTD-compatible, run through the realistic options for a UK sole trader, and help you settle on the right one for how you work.
If you are not yet sure whether MTD even applies to you, it is worth starting with my plain-English guide to Making Tax Digital for Income Tax, then coming back to choose your tool.
What “MTD-compatible” really means
Not every accounting app qualifies, and this is where people waste money. To be usable for MTD for Income Tax, software has to appear on HMRC’s list of recognised products and be able to do two specific things. It has to keep your income and expense records digitally and send your quarterly updates and Final Declaration to HMRC via a digital link, with no manual retyping in between.
That second point is the sticking point with spreadsheets. You can technically keep records in a spreadsheet, but on its own, it cannot talk to HMRC, so you would need separate “bridging software” to connect it. For most sole traders, it is simpler to use a single tool that handles everything, as the options below do. Whatever you pick, check it is on HMRC’s current approved list before you commit, because that list changes, and a tool that is not on it will not keep you compliant, however good it looks.
The realistic options for a sole trader
I have focused on tools that suit a one-person business rather than the heavyweight packages built for larger companies. Prices shift around and vary by plan and promotion, so treat the figures below as a rough guide and check current pricing before you sign up for anything.
FreeAgent
FreeAgent is a sensible starting point for sole traders, partly because of a detail that plenty of people miss: it is free for many NatWest, Royal Bank of Scotland, and Mettle business banking customers. If you bank with one of those, you may already have access to a full accounting package at no extra cost, which is very hard to beat.
Even when you pay for it, it is built with freelancers and small businesses in mind, with a clean interface, self-assessment features and straightforward MTD support. If you want the lowest-cost route and your bank offers it, this is often the obvious answer.
Best for: sole traders who bank with NatWest, RBS or Mettle, or who want a freelancer-friendly tool without a steep learning curve.
Xero
Xero is one of the most popular cloud accounting platforms in the UK, and deservedly so. It is polished and capable, and it connects to a wide range of other apps. For a single sole trader, it can feel like slightly more than you need, but if you expect to grow, take on help, or run more complex finances, it scales without complaint.
Pricing generally starts around the mid-teens per month, with cheaper plans aimed at sole traders. The main trade-off is simply that its depth can be mild overkill for a one-person operation.
Best for: sole traders who want room to grow and value a large ecosystem of integrations.
QuickBooks
QuickBooks is Xero’s biggest rival and covers much the same ground. It is widely used and well supported, with plans specifically aimed at the self-employed, often at a lower entry price than you might expect, especially with frequent introductory discounts. Its self-employed tier handles income, expenses, and MTD with little fuss, and its mobile apps are excellent.
Best for: sole traders who want a well-known, affordable all-rounder that works well on a phone.
Simpler and niche options
Beyond the big three, there are lighter tools built specifically around the self-employed and MTD, such as Coconut and other freelancer-focused apps, along with bridging tools for people who genuinely want to keep using a spreadsheet. These can be cheaper and less cluttered, though some are narrower in scope. If your finances are very simple, a lean tool may suit you better than a full accounting suite.
Best for: sole traders with straightforward finances who want minimal features at a low price, or spreadsheet loyalists who need a bridge to HMRC.
What to actually look for
Rather than hunting for the “best” tool in the abstract, judge each option against the way you work.
The bank feed matters most. Being able to connect your business bank account so transactions import automatically is the single biggest time-saver, because it turns bookkeeping from a chore into a quick weekly review. Ease of use comes next; you will be using this software regularly, so a clean, understandable interface counts for more than a long feature list you will never open. Confirm it handles the four quarterly submissions and the Final Declaration directly rather than as an awkward add-on. Make sure the cost fits your stage so you are not paying for enterprise features as a solo freelancer, and not choosing something so basic it cannot grow with you as you scale. And decent support plus mobile access, so you can snap a receipt on your phone or get help as a deadline looms, is worth a lot in day-to-day use.
How to choose quickly
you want the shortest possible decision path. It goes something like this.
If you bank with NatWest, RBS or Mettle, check whether FreeAgent is free for you before anything else, because it often is, and free-plus-capable is tough to argue with. You are planning to grow, take on help, or add complexity, lean towards Xero for its scalability and integrations. If you want a cheap, well-known all-rounder with great mobile apps, QuickBooks is a safe bet. And if your finances are very simple and you are watching every pound, consider a lean, freelancer-specific app or a spreadsheet paired with bridging software.
There is no single winner for everyone, only the right fit for your situation. The genuinely bad option is not to choose at all, because MTD deadlines do not wait.
A note on switching
If you already use some accounting tool that is not MTD-ready, moving over is usually less painful than people fear. Most platforms let you import historical data, and the sooner you switch, the less mid-year mess you have to reconcile. Do it at the start of a quarter if you can, connect your bank feed straight away, and give yourself an afternoon to get familiar before your first update falls due.
Where this leaves you
For most UK sole traders, the honest shortlist is FreeAgent (especially if it is free through your bank), Xero if you are growing, or QuickBooks for an affordable all-rounder. Whichever you land on, the priorities stay the same: make sure it is on HMRC’s approved list, connect your bank feed, and get comfortable before the deadline rather than after it. Sort it now, and MTD stops being a threat and becomes what it is meant to be: a tidier, calmer way to manage your money.
Frequently asked questions
Do I legally need software for MTD as a sole trader?
Yes, if MTD for Income Tax applies to you. You must keep digital records and send updates to HMRC through recognised software. A standalone spreadsheet only works if paired with approved bridging software.
What is the cheapest MTD software for sole traders?
Often FreeAgent, which is free for many NatWest, RBS and Mettle business banking customers. Beyond that, QuickBooks and lean freelancer apps tend to have low entry prices, though costs change, so check current rates.
Is a spreadsheet allowed under MTD?
Only with bridging software that creates a digital link to HMRC. On its own, a spreadsheet cannot submit to HMRC and does not meet the rules.
Xero or QuickBooks for a freelancer?
Both work well. Xero suits those who want to scale and integrate lots of apps; QuickBooks is a strong, affordable all-rounder with excellent mobile apps. For a very simple solo business, either can feel like more than you need.
How do I know if software is MTD-compatible?
Check HMRC’s official list of recognised software before subscribing. Marketing claims alone are not enough; the product needs to be on that list to stay compliant.
This guide is general information, not personal tax or financial advice. Prices and product availability change, so verify current details and check HMRC’s approved list before choosing.
James Whitfield writes about the tools, software and automation that help UK freelancers and small businesses work smarter. He tests apps hands-on and breaks down what actually works, without the jargon.
Related reading
- Making Tax Digital for Income Tax: A Freelancer’s Plain-English Guide (2026)
- Late Payment Rights for UK Freelancers: How to Get Paid on Time
- How to Set Up No-Code Automation for Client Onboarding
Small Business & Productivity Writer
James Whitfield writes about the tools, software, and automation that help UK freelancers and small businesses work smarter. He tests apps hands-on and breaks down what actually works, without the jargon.