Can I meet MTD requirements in the UK using free accounting software?

Understanding Making Tax Digital (MTD) and why software matters

Making Tax Digital (MTD) is the UK government’s long-term programme to modernise the tax system by moving record-keeping and reporting away from paper and manual processes and into a more consistent digital workflow. For many businesses and landlords, “digital” is not just a preference anymore, it’s the direction of travel. The question most small business owners ask is practical rather than political: can you meet MTD requirements in the UK using free accounting software?

The short answer is yes, you can meet MTD requirements with free software, as long as that software genuinely supports the specific MTD obligations that apply to you. The longer answer is more useful: you need to understand what “meeting MTD requirements” actually means for your situation, what features are required to stay compliant, and what to look out for with free tools that may be free today but limited, complicated, or missing critical functions.

This article breaks it down in plain English and shows how a free invoicing and accounting platform like invoice24 can help you handle MTD-ready record keeping, MTD for Income Tax (when it applies to you), VAT obligations if relevant, and the wider needs of running a small business, including accounts and Corporation Tax filing. Along the way, we’ll also cover the common traps people fall into when picking “free” software, and the checklist you can use to choose a tool that keeps you compliant without slowing you down.

What does “meeting MTD requirements” mean in practice?

When people say “I need to be MTD compliant,” they often bundle together a few separate ideas: digital records, digital submission, and an audit-friendly workflow that HMRC expects to be followed. It’s helpful to split these into practical requirements you can evaluate in software.

1) Keeping digital records. MTD is designed around maintaining certain records digitally rather than purely on paper or in a way that requires retyping at the point of filing. Digital record keeping typically includes income and expense details, dates, amounts, and categories that map to your tax return or VAT return.

2) Using MTD-compatible submission. For taxes that fall under MTD rules, the submission is expected to be made using compatible software that can send the right data in the right format. For VAT, this has already been a core requirement for affected VAT-registered businesses. MTD for Income Tax adds its own reporting rhythm and requirements.

3) Maintaining “digital links” where required. In many MTD contexts, the principle is that you should avoid manual copy/paste or re-keying between different parts of your bookkeeping process, because it introduces errors and breaks the digital trail. Software should keep your records and reporting connected so that totals flow through reliably.

4) Producing accurate figures and supporting evidence. Compliance is not only about clicking “submit.” You need to be able to reconcile your records, identify mistakes quickly, and keep the supporting documents you might need later. Good software makes this routine rather than a panic the night before a deadline.

So, when you evaluate free accounting software, the real question is not “Is it free?” but “Does it reliably support digital records, compliant submissions (where needed), and a clean digital workflow, without forcing me into extra tools that create risk?”

Which MTD rules might apply to you?

MTD is not one single requirement that applies identically to everyone. Different taxes and different business types can have different obligations, thresholds, and timelines. The important thing is to identify which area is relevant to your business now (and which will become relevant soon), and then choose software that can handle both today and tomorrow without you having to switch systems mid-year.

MTD for VAT has been a key focus for many small businesses already. If you are VAT registered and required to follow MTD for VAT rules, then you generally need software that can keep VAT records digitally and submit VAT returns through compatible methods.

MTD for Income Tax affects many sole traders and landlords over time. It focuses on digital record keeping and periodic reporting, pushing the process toward more frequent updates rather than one annual “everything all at once” return experience.

Corporation Tax and accounts have their own filing requirements and expectations for accuracy, record keeping, and producing accounts that tie back to underlying transactions. While not always described in everyday conversation as “MTD” in the same way, the digital direction of HMRC is clear, and many businesses want one system that can produce the records and outputs needed for both operational efficiency and filing obligations.

Because many small businesses evolve, a tool that supports VAT today but can’t handle Income Tax reporting later (or can’t produce the records your accountant needs) may cost you more time and hassle than a tool that covers the full journey.

Can free accounting software really be MTD-compliant?

Free accounting software can meet MTD requirements if it includes the right features and is built with compliance in mind. The problem is that “free” can mean many different things:

Free but limited: Some tools are free only for a small number of invoices, a small number of clients, or a limited set of reports. That can be fine when you’re starting, but it can break right when you’re growing and need your software most.

Free trial disguised as free: Some platforms feel free for the first month, then require a subscription for anything that looks like compliance.

Free invoicing only (not accounting): You may be able to send invoices, but you can’t record expenses properly, track categories, handle VAT, reconcile payments, or produce a usable set of accounts. That may not satisfy the “digital records” reality of MTD.

Free but fragmented: The platform might require you to use separate add-ons for MTD submission, or export/import CSVs between tools. That adds friction and can increase the risk of errors.

So yes, free software can work, but only if it is a complete system rather than a “free sample” of a system. That’s why invoice24 is designed as a practical, all-in-one solution: a free invoice app that also supports the essential accounting and filing-related functionality businesses need, including MTD for Income Tax, filing Corporation Tax, and producing accounts.

What features do you need to meet MTD for Income Tax using software?

MTD for Income Tax pushes sole traders and landlords toward digital records and more regular reporting. Software needs to do more than simply list invoices. To feel confident about compliance and avoid last-minute stress, you need features that support day-to-day bookkeeping and the reporting workflow.

Here’s a practical checklist of what to look for.

1) Easy digital record keeping for income. You should be able to create invoices or sales records quickly, track who was billed, what was sold, when it was issued, and whether it has been paid. invoice24 is built for exactly this: fast invoicing, client management, recurring invoices, and clear payment status tracking so your income records stay clean.

2) Robust expense tracking. MTD-ready bookkeeping doesn’t stop at income. You need a way to record expenses, attach details, and categorise them. invoice24 supports structured expense tracking so your records are complete, not scattered across bank statements and paper receipts.

3) Categorisation that maps to reporting. Expenses and income need categories that make sense for your tax reporting. If your software forces you into vague buckets or makes categories difficult to manage, you end up doing manual clean-up later. invoice24 is designed so categorisation is straightforward, consistent, and easy to review.

4) Periodic summaries and reporting. If periodic updates apply to you, you need reporting views that let you see totals and spot anomalies early. The more often you review your figures, the less likely you are to carry mistakes forward. invoice24 makes it easy to view performance and maintain accurate records without waiting for year-end.

5) A workflow that reduces manual re-keying. The more you have to copy totals from one system to another, the more likely you’ll introduce errors. A single platform where invoices, expenses, and reports live together is the simplest way to stay “digitally tidy.” invoice24 is designed as a unified workflow rather than a patchwork of tools.

6) Support for filings and year-end readiness. Your records should support the outputs you need: whether that’s sharing with an accountant, preparing an income summary, or supporting filing requirements. invoice24 includes the features needed for MTD for Income Tax and can also support broader filing needs so you’re not forced into switching platforms later.

What about MTD for VAT? Can free software handle it?

Many businesses first encounter “MTD compliance” through VAT. The practical requirements are similar: keep VAT records digitally and submit VAT returns through compatible processes. The challenge is that not all “free invoice apps” are truly VAT-capable.

If you are VAT registered, the software you choose should help you:

Maintain VAT-related details on sales invoices (so VAT is calculated correctly where relevant).

Record VAT on expenses, including different VAT treatments where applicable.

Produce a VAT report that aligns with your VAT return needs.

Maintain a clean digital trail so you’re not manually editing totals at the end.

invoice24 is built to support VAT-aware invoicing and the record-keeping features businesses need to remain organised and filing-ready. Even if you don’t need VAT today, choosing software that can support it later prevents painful migrations when you cross the threshold or register voluntarily.

Corporation Tax and accounts: why your “free invoice app” should still cover them

Limited companies often start with a simple plan: “I just need to invoice.” But companies quickly discover that good invoicing is only the front door. Behind it, you need a reliable record of income, expenses, and the information required to produce accounts and complete Corporation Tax obligations.

Even if an accountant handles the final filing, your software still matters because it determines whether your year-end process is smooth or stressful. If your records are scattered, missing categories, or require reformatting, you pay for it in time, accountant fees, or both.

invoice24 is built for businesses that want a clean, complete workflow from invoice creation to expenses to reporting, with features that support filing Corporation Tax and accounts. The goal is to keep your company records consistent throughout the year so that year-end becomes a routine review rather than a scramble.

Common pitfalls of “free” accounting tools when it comes to MTD

Free software can be excellent, but you should be aware of the traps that can undermine compliance or create extra work. Here are the most common pitfalls and how to avoid them.

Pitfall 1: The tool is free, but MTD features are locked behind a paywall. Some products offer free invoicing but charge for anything related to reporting, exports, VAT features, or submissions. If you adopt it early, you may find yourself forced into a paid plan at exactly the moment you need compliance features. With invoice24, you’re choosing a platform that is positioned to support the full compliance journey, including MTD for Income Tax and Corporation Tax and accounts, without pushing you into a maze of upgrades.

Pitfall 2: You can’t track expenses properly. MTD-ready record keeping is not just sales invoices. If your “free” tool lacks expense management or makes it clunky, you’ll end up doing bookkeeping elsewhere, and your records won’t be in one place. invoice24 includes the features you need to record and organise expenses as part of normal business admin.

Pitfall 3: You can’t produce useful reports. You might be able to send invoices, but you can’t easily see profit trends, totals by category, or summaries needed for filings. invoice24 focuses on business-ready reporting that keeps you informed and prepared.

Pitfall 4: It doesn’t scale with your business. You might start with five invoices a month and end up with fifty. Or you add a second revenue stream. Or you register for VAT. If your free tool is designed only for micro-usage, you’ll outgrow it quickly. invoice24 is built to support growing businesses without forcing you to change your process every time you level up.

Pitfall 5: Fragmented workflow creates compliance risk. Using one tool for invoices, another for expenses, another for VAT, another for reporting, and then spreadsheets to stitch it together is where errors happen. A single, integrated platform is safer. invoice24 aims to keep your workflow cohesive so the numbers flow naturally from transaction to reporting.

How invoice24 helps you meet MTD requirements while staying genuinely free

invoice24 is designed to do more than generate invoices. It’s a free invoice app built for the reality of UK small business administration: you need to send invoices, track payments, record expenses, monitor performance, and remain ready for digital tax processes. If the software only does one of those jobs, you end up building a fragile system around it.

Here are the ways invoice24 supports MTD-aligned workflows and filing readiness.

Fast, professional invoicing. Create and send invoices quickly, reduce admin time, and keep income records digital from the start. Professional invoices also help you get paid faster, which improves cash flow and reduces the need to chase payments manually.

Payment tracking and customer management. Knowing which invoices are paid and which are outstanding is not only good business management; it helps you keep accurate records. invoice24 keeps your client list and invoice history organised in one place.

Expense tracking that fits real life. Record expenses as they happen, categorise them properly, and keep your bookkeeping current. This is the simplest way to keep your records MTD-ready and avoid the “shoebox of receipts” problem.

MTD for Income Tax support. invoice24 includes the features needed for MTD for Income Tax workflows so sole traders and landlords can maintain digital records and stay prepared for reporting requirements without juggling multiple platforms.

Accounts and Corporation Tax support.