Best MTD for Income Tax Software in 2026 - FreeAgent vs Xero vs QuickBooks

TL;DR - The Quick Answer

FreeAgent - Best for most sole traders, freelancers and contractors. Free with NatWest, RBS, Ulster Bank or Mettle, and GoForma accounting packages.

Xero - Best when you work with an accountant, have a growing property portfolio or plan to scale.

QuickBooks - Best on price (from £10/mo) and the strongest mobile app for business owners on the move.

MTD ITSA is Live - Here is What You Need to Know

From 6 April 2026, Making Tax Digital for Income Tax (MTD ITSA) is live. If your qualifying income from self-employment or property exceeded £50,000 in the 2024/25 tax year, you must now keep digital records and submit quarterly updates to HMRC.

This is not a soft launch. Penalties apply. HMRC will not enrol you automatically, so you must register for MTD ITSA yourself and connect HMRC-recognised software to your Government Gateway account.

That is where top 3 MTD ready FreeAgent, Xero, and QuickBooks accounting software require to be compared. These are the most widely used MTD for income tax software in the UK, and at GoForma we use all three with our clients every day. This guide gives you a clear comparison and practical advice from ACCA and AAT-qualified accountants.

What is MTD for Income Tax?

MTD for Income Tax replaces the replaces the traditional Self Assessment tax return for sole traders and landlords. You won’t just file once a year anymore. Now, you keep digital records all year and send quarterly updates to HMRC using MTD-compatible software.

MTD for Income Tax Rollout Schedule

What counts as qualifying income?

Qualifying income for MTD ITSA in the UK is the total gross income (turnover) from self-employment and property rentals before deducting expenses.

What Do You Actually have to Do under MTD for IT?

• Keep digital records of all income and expenses in HMRC-recognised software
• Send four quarterly updates to HMRC per year, per income stream
• File a final declaration by 31 January following the end of the tax year

Making Tax Digital for Income Tax Quarterly Deadlines

Important:

Being registered for Self Assessment or MTD for VAT does NOT automatically enrol you into MTD for Income Tax.

You must sign up separately through your Government Gateway account before you can use any MTD software.

If your qualifying income for 2024/25 was above £50,000, start recording your income and expenses now, the first quarterly deadline is 7 August 2026.

FreeAgent MTD ITSA

Best for:

‍Freelancers, contractors, sole traders and landlords who want a simple, all-in-one solution

Starting price:

‍Free (with eligible NatWest, RBS, Ulster Bank or Mettle accounts) ~ £19/month standard

Why FreeAgent is Good for MTD

FreeAgent is designed for UK sole traders and landlords. It’s HMRC-recognised and covers the entire MTD process from recording income and expenses, sending quarterly updates, right through to your final declaration.

File quarterly updates in a couple of clicks

FreeAgent auto-populates your quarterly update with the income and expenses you have already recorded. You check the figures and send them to HMRC in one click.

Get ahead with your final declaration

FreeAgent pre-populates your final declaration. You add any extra income and tax reliefs, then submit directly to HMRC.

Keep Digital records with AI assistance

Connect your business bank account and FreeAgent's AI categorises your transactions automatically. Capture receipts on your phone and the software extracts the data, keeping a complete digital record all year.

Track deadlines and tax in real time

The Tax Timeline shows upcoming deadlines and sends reminders. Tax Radar gives a live estimate of your tax bill, helping you plan ahead.

Self Assessment included

‍FreeAgent handles both MTD quarterly updates and your Self Assessment return in one place, with no need for extra software or added cost.

Built-in landlord support

FreeAgent for Landlords lets you record all your property income, manage mixed portfolios, and send quarterly updates for all UK property income. It auto-fills your final declaration with your property figures. When you’re ready, you file directly to HMRC in one click.

Who Gets FreeAgent for Free?

If you have a business current account with NatWest, Royal Bank of Scotland, Ulster Bank, or Mettle, you can use FreeAgent at no cost for as long as you keep the account. This gives you full access to the platform, including MTD submissions, invoicing, expense tracking, bank feeds, and Self Assessment, with no limits or reduced features.

This is one of the best value options in UK accounting software. GoForma also includes FreeAgent in all accounting packages, which is typically worth around £330 per year at the standard price.

FreeAgent limitations

• Receipt capture is limited to 10 smart captures per month on the standard plan. If you capture every small expense, you may need the unlimited add-on at £5 per month
• Sole traders with rental income need separate accounts for each income stream. One for sole trader activity and one for property income
• FreeAgent supports around 50 third-party integrations, which is fewer than platforms like Xero or QuickBooks

Who should choose FreeAgent?

• You are a freelancer, contractor, or sole trader with simple finances
• You bank with NatWest, RBS, Ulster Bank, or Mettle and want to use it for free
• You want one platform that handles both MTD quarterly updates and Self Assessment
• You are a GoForma client, as FreeAgent is included in all packages
• You want a simple, easy-to-use tool that does not require an accounting background

Xero for MTD Income Tax

Best for:

‍Growing businesses, complex property portfolios and businesses working closely with an accountant

Starting price: £16/month (Ignite plan - the entry-level MTD-ready plan)

How Xero Handles MTD

Xero is one of the most widely used cloud accounting platforms among UK accountants. Its MTD for Income Tax features are built into eligible plans and connect directly to HMRC for quarterly updates and final declarations.

Seamless compliance in one place

Xero manages your MTD obligations within a single platform. Bank feeds import transactions automatically, you categorise them, and the software submits your quarterly updates to HMRC. There is no need to switch between systems.

Accurate, automated reporting

Xero uses real-time data, so your quarterly updates reflect up-to-date figures. Automation reduces manual errors, with your bookkeeping flowing directly into submissions.

Easy accountant collaboration

Your accountant can access your Xero account directly without needing your login details. They can review transactions, submit updates, and handle year-end tasks. This is a major advantage if you work closely with an MTD accountant.

Multi-property landlord support

Xero treats all your UK property income as a single source, but its tracking categories let you separate individual properties. This works well for landlords with larger portfolios who need detailed reporting across multiple properties.

1,000+ integrations

Xero connects with a wide range of tools, including Shopify, Stripe, PayPal, and HubSpot. Its integration ecosystem is larger than FreeAgent or QuickBooks.

Built to scale

Xero is built to grow with you. If you currently operate as a sole trader but plan to incorporate, hire staff or expand internationally, Xero handles the transition smoothly and keeps your financial data in one place.

Xero limitations

• Self Assessment tax return filing is not built in. You need Xero Tax (used by accountants) or a separate filing service. GoForma handles this for clients on any platform
• While Xero offers a £7/month Simple plan with MTD for Income Tax, you need the £16/month Ignite plan if you are VAT-registered or need more advanced features
• Xero does not offer a free plan with any bank partners. Even the most basic account requires a paid subscription.

Who should choose Xero?

• Your accountant already uses Xero
• You manage a growing or more complex property portfolio
• You plan to scale, hire staff, or move to a limited company soon
• You need integrations with a wide range of business tools
• You trade internationally and need multi-currency support

QuickBooks MTD ITSA

Best for:

‍Budget-conscious sole traders and mobile-first business owners

Starting price:

‍£10/month (Sole Trader plan, the cheapest paid MTD-ready option in the UK)

What QuickBooks does for MTD

QuickBooks is recognised by HMRC and supports MTD for Income Tax. It covers quarterly submissions, digital record keeping, bank feeds, and tax reporting within one platform.

MTD ITSA compliance covered

QuickBooks keeps digital records of your income and expenses, submits quarterly updates to HMRC for each income stream, and supports your final declaration. It covers the full MTD for Income Tax process.

Strong mobile app

QuickBooks stands out for its mobile experience. You can manage transactions, capture receipts, track mileage using GPS, and send invoices directly from your phone. This is especially useful if you work on-site or travel between clients.

Self Assessment support

QuickBooks supports Self Assessment workflows within the platform, so you can manage your tax reporting without relying on multiple tools.

Smart expense categorisation

QuickBooks learns from your transaction history and suggests categories automatically. This speeds up bookkeeping, though it is still worth reviewing entries before confirming them.

CIS support

QuickBooks includes Construction Industry Scheme features. If you work as a subcontractor, it can handle CIS deductions, making it a strong option for those in construction.

Important: QuickBooks Plan Upgrade Trigger

The QuickBooks Sole Trader plan (£10/mo) is for non-VAT-registered sole traders only.

Once you pass the VAT registration threshold (currently £90,000turnover), you must upgrade to Simple Start at £16/month.

QuickBooks Limitations

• The interface can feel cluttered, especially for users new to accounting software.
• Fewer UK accountants specialise in QuickBooks compared to Xero, which can make collaboration slightly more difficult.
• Not ideal for complex property portfolios or multiple ownership structures, where Xero tends to perform better.

Who Should Choose QuickBooks?

• You want a low-cost, MTD-ready option starting from £10 per month.
• You manage most of your business on your phone.
• You travel often and need automatic GPS mileage tracking.
• You work as a CIS subcontractor in construction.
• You want Self Assessment filing included at no extra cost.

Freeagent vs Xero vs Quickbooks - Quick Comparison

Use this table to compare FreeAgent, Xero and QuickBooks across the features that matter most for MTD for Income Tax compliance.

All three software are HMRC-recognised for MTD for Income Tax and meet the full compliance requirements. The key differences come down to Self Assessment filing, pricing, integrations, mobile experience, and who each platform suits best.

Prices are correct as of April 2026. Always check the provider’s website for the latest pricing before subscribing.

Which MTD ITSA Software is Right for You?

Here’s a simple, real-world breakdown based on different business needs, the same approach we use with GoForma clients.

You are a freelancer or contractor

‍Choose FreeAgent. It’s built for UK freelancers and contractors. You get Self Assessment, MTD quarterly updates, invoicing, time tracking and expenses in one place. If you bank with NatWest, RBS, Ulster Bank or Mettle, it’s free. It’s also included for FREE if you work with GoForma.

You are a landlord

‍FreeAgent or QuickBooks work well for landlords with one or two properties. If your portfolio is growing, Xero is a better fit. Its tracking categories handle multiple properties, ownership splits and complex expenses more effectively. GoForma can help you choose based on your setup.

You are a sole trader on a tight budget

‍QuickBooks Sole Trader at £10/month is the lowest-cost paid MTD-ready option. If you qualify for free FreeAgent through your bank, that’s the better deal.

You are a mobile-first business owner

‍QuickBooks stands out. Its app is the strongest for receipt capture, transaction management and automatic mileage tracking. If you work on the move, it can save hours of admin each month.

You are a CIS subcontractor in construction

‍QuickBooks is the best fit. It’s the only one with built-in CIS deduction handling, making it easier to track and reconcile deductions accurately.

You expect to scale or incorporate

‍Choose Xero. It grows with your business, so you don’t need to switch platforms later. You keep your financial history in one place, and its 1,000+ integrations make it easy to connect new tools as you expand.

You work with a GoForma accountant

‍FreeAgent. It’s included in the package. Your making tax digital accountant manages reconciliations, submits quarterly updates and files your Self Assessment. You focus on the business while compliance is handled for you.

Best MTD ITSA Software - GoForma Recommendation

Making Tax Digital for Income Tax is now live. All three platforms meet the compliance requirements but they suit different types of users.

FreeAgent is the best all-round choice for most UK sole traders and freelancers. Its combination of MTD compliance, Self Assessment filing, real-time tax estimates and free availability through major UK banks makes it hard to beat.

Xero is the right choice if your business is growing, your accountant already uses it, or you need detailed tracking for a larger or more complex property portfolio.

QuickBooks wins on price and mobile experience, particularly for tradespeople, construction subcontractors and sole traders who manage their finances on the go.

Whichever platform you choose, get started now. The first quarterly deadline for those starting in April 2026 is 7 August 2026. HMRC won’t set this up for you, registration and software setup are your responsibility.

Ready to Get Started with MTD for Income Tax?

GoForma handles the entire process for you from setup to submission.

• FreeAgent included at no extra cost
• Dedicated ACCA/AAT-qualified MTD accountant
• Quarterly MTD submissions handled for you
• Full Self Assessment and final declaration included

You don’t need to deal with HMRC, learn new software, or worry about deadlines.

Use our Making Tax Digital for Income Tax service and get MTD ready with GoForma.

FAQs on MTD Income Tax Software

What software is compatible with MTD for Income Tax?

MTD-compatible software must connect directly to HMRC and allow you to keep digital records and submit quarterly updates. Popular options include FreeAgent, Xero and QuickBooks. These are all HMRC-recognised and meet the requirements. Your choice depends on your business needs and budget.

Do I need software for MTD ITSA or can I use HMRC?

You must use compatible software for MTD ITSA. HMRC does not provide a way to submit updates manually. The system only accepts digital submissions through approved software. You cannot use the current Self Assessment portal for this.

What is the best software for MTD ITSA?

There is no single best option for everyone. FreeAgent works well for freelancers and sole traders. Xero suits growing businesses with more complex needs. QuickBooks is a good option for low cost and strong mobile features.

Is QuickBooks, Xero or FreeAgent MTD ITSA compliant?

Yes, all three are HMRC-recognised for MTD for Income Tax. They support digital record keeping and quarterly submissions. They also help you stay compliant with HMRC rules. The main differences are features, pricing and usability.

Can I submit MTD for Income Tax without software?

No, you cannot submit MTD updates without software. HMRC requires all submissions to go through approved digital tools. This ensures your records stay accurate and compliant. You will need to choose and set up software before you start.

Is FreeAgent free for MTD for Income Tax?

Yes, for customers with a business current account at NatWest, Royal Bank of Scotland, Ulster Bank or Mettle. The full product including all MTD features is free for as long as you hold an eligible account. The standard plan costs approximately £19 per month for everyone else.

What is the cheapest MTD ITSA software?

QuickBooks offers one of the lowest-cost paid options, starting from around £10 per month. It includes core MTD features and Self Assessment filing. Pricing can change, so always check the latest plan details. Cheaper plans may have fewer features.

What does MTD-compatible software need to do?

The software must keep digital records of your income and expenses. It must submit quarterly updates and a final declaration to HMRC. It should also connect securely to HMRC systems. These features are required for full compliance.

Does MTD software include Self Assessment filing?

Some software includes Self Assessment filing, but not all. FreeAgent and QuickBooks include it within their plans. Xero usually requires an accountant or additional tools for final submission. Always check what is included before choosing.

Can MTD software handle quarterly updates and final declaration?

Yes, most MTD software handles both tasks. It submits quarterly updates based on your records. It also supports the final declaration at the end of the tax year. This ensures you meet all HMRC requirements.

Does MTD software track income and expenses automatically?

Most software connects to your bank and imports transactions automatically. It helps you categorise income and expenses in real time. This reduces manual work and errors. You still need to review and confirm your records.

Can I use spreadsheets for MTD ITSA?

You can use spreadsheets, but only with bridging software. The spreadsheet must connect to HMRC through compatible tools. Manual uploads are not allowed. Most users find full accounting software easier and more reliable.

How do I register for MTD ITSA software?

You need to sign up for MTD with HMRC first. Then you choose compatible software and connect it to your HMRC account. The setup process varies by provider. Many accountants can handle this for you.

Do I need to switch accounting software for MTD?

You only need to switch if your current software is not MTD compliant. Many popular tools already support MTD ITSA. If yours does not, you will need to move to a compatible option. Switching early makes the transition easier.

How do I choose the right MTD software?

Start by looking at your business type and complexity. Consider pricing, features and ease of use. Think about whether you need Self Assessment filing included. Your accountant can also recommend the best option for you.

Can my accountant set up MTD software for me?

Yes, most accountants can handle the setup for you. They can register you for MTD and connect your software to HMRC. They can also manage submissions on your behalf. This saves time and reduces the risk of errors.

Do I need separate software for different income sources?

No, most MTD software can handle multiple income streams. You can track self-employment and property income in one place. Some tools offer better tracking features than others. Choose software that fits your setup.

Can I change MTD software later?

Yes, you can switch software if your needs change. You will need to transfer your data and reconnect to HMRC. This can take time if your records are complex. Choosing the right software early avoids disruption.

Which MTD software is best for sole traders in the UK?

FreeAgent is the best choice for most UK sole traders. It covers MTD quarterly updates, Self Assessment filing, invoicing and expenses in one place. It is free for those banking with NatWest, RBS, Ulster Bank or Mettle, and is included in all GoForma accounting packages.

What is the best MTD software for landlords?

FreeAgent and QuickBooks work well for simple property income. Xero is better for larger portfolios with multiple properties. It offers more detailed tracking and reporting. Your choice depends on how complex your setup is.

Which MTD software is best for CIS subcontractors?

QuickBooks is often the best fit for CIS subcontractors. It includes built-in CIS deduction handling. This makes tracking and reconciliation easier. It also supports MTD compliance fully.

Is MTD software easy to use for beginners?

Most modern software is designed to be user-friendly. FreeAgent is often the easiest for beginners. QuickBooks offers strong mobile usability. Xero may take longer to learn but offers more flexibility.

Do I need MTD software if I earn under £50,000?

Not yet. MTD for Income Tax becomes mandatory at £50,000 from April 2026, drops to £30,000 from April 2027, and reaches £20,000 from April 2028. You can sign up voluntarily before your threshold is reached, which is a good way to get used to the process early.

Is MTD ITSA complicated?

MTD ITSA adds more frequent reporting requirements. The right software makes the process much simpler. Once set up, most tasks become routine. Many users find it manageable with the right support.

Is MTD software worth the cost?

Most users find it worth the cost for the time saved. It reduces manual work and improves accuracy. It also helps you stay compliant with HMRC rules. The value increases if you use all the features available.

How does GoForma help with MTD for Income Tax?

Every GoForma package includes FreeAgent at no extra cost, worth around £330 per year at standard pricing. Your dedicated ACCA or AAT-qualified accountant works directly in FreeAgent, keeps your accounts reconciled, submits your quarterly MTD updates to HMRC and files your Self Assessment.

Resources:

https://www.gov.uk/government/collections/making-tax-digital-for-income-tax

https://www.gov.uk/guidance/choose-the-right-software-for-making-tax-digital-for-income-tax

https://www.freeagent.com/features/mtd-for-income-tax/

https://www.xero.com/uk/accounting-software/simplify-mtd-for-it/

Disclaimer

This article is based on our understanding of HMRC's Making Tax Digital for Income Tax rules and software pricing as of April 2026. Tax rules and software pricing can change. This article does not constitute personal tax advice. Speak to a qualified accountant for advice specific to your circumstances.‍