Can I stay MTD-compliant in the UK without paying for accounting software?

Can you stay MTD-compliant in the UK without paying for accounting software?

If you’re a UK sole trader, landlord, contractor, or limited company director, it’s completely normal to feel like Making Tax Digital (MTD) is designed to push you into paying monthly fees for accounting software. HMRC’s messaging often talks about “compatible software”, quarterly updates, and digital records, and it can sound like: “subscribe or suffer.”

But here’s the real answer: you may be able to stay MTD-compliant without paying for accounting software, depending on (1) which MTD rules apply to you, and (2) how you choose to keep records and submit to HMRC. Some people can remain compliant using spreadsheets plus a bridging approach, while others will need fuller functionality that can handle quarterly updates, end-of-year submissions, and ongoing digital record keeping.

The good news is that “full functionality” does not automatically mean “paid subscription.” If your goal is to keep costs low while staying compliant (and ideally making your life easier), using a free tool that’s built with MTD requirements in mind can be the best of both worlds.

This article explains what “MTD compliance” actually means, where spreadsheets can work (and where they can’t), what to watch out for, and how invoice24 helps you stay compliant without paying for traditional accounting software.

Quick refresher: what Making Tax Digital is actually trying to do

Making Tax Digital is HMRC’s long-term move away from manual, paper-based processes and toward digital record keeping and digital submissions. The key ideas are:

1) Keep digital records: Instead of relying on paper or a “shoebox of receipts,” you maintain records digitally.

2) Submit information digitally: Using “compatible software,” you send VAT returns and (for Income Tax Self Assessment under MTD) quarterly updates and end-of-year submissions to HMRC.

3) Reduce errors and improve visibility: HMRC wants fewer transcription mistakes and more up-to-date reporting.

Those goals sound reasonable. The friction comes from the practical details: what counts as a digital record, whether spreadsheets are allowed, what “digital links” mean, and what happens when you have multiple income sources.

Which MTD rules apply to you? VAT vs Income Tax vs Corporation Tax

“MTD” is not one single set of rules. It’s a family of programmes that affect different taxes at different times.

MTD for VAT (already live for most VAT-registered businesses)

If you’re VAT-registered, MTD for VAT is likely the part you’ve already felt. The core requirement is that you keep VAT records digitally and submit your VAT return using compatible software (not by typing figures into the old online VAT portal).

This is where many people first hear about bridging software, spreadsheets, and “digital links.”

MTD for Income Tax (MTD for ITSA) (phased in for sole traders and landlords)

MTD for Income Tax Self Assessment is the big shift for sole traders and landlords. Instead of one annual Self Assessment tax return, you’ll be expected to keep digital records and send quarterly updates, then complete an end-of-year finalisation.

This is the point where spreadsheet-only approaches often start to struggle, because the process is more than “submit one set of totals once a year.”

Corporation Tax and accounts (often confused with “MTD for Corporation Tax”)

Corporation Tax is a separate world. People frequently assume there is already a mandatory “MTD for Corporation Tax” system. In practice, limited companies already file Corporation Tax returns online, and they file statutory accounts to Companies House, but the MTD framework for Corporation Tax has not rolled out in the same way as VAT and Income Tax.

That said, company directors still need accurate digital records, tidy bookkeeping, and a clean year-end process. Whether HMRC labels it “MTD” or not, the reality is the same: good digital record keeping and easy reporting keep you compliant and reduce stress.

So, do you have to pay for accounting software?

Not necessarily. But the truthful answer depends on what you mean by “accounting software” and what you need it to do.

If by “accounting software” you mean a full paid subscription to a big-name platform, then no, that isn’t your only option.

If by “accounting software” you mean “some digital system that keeps proper records and can submit to HMRC,” then yes, you will need something that performs those functions if you’re within MTD rules.

The trick is choosing a tool that gives you what HMRC requires without making you pay for features you don’t need.

That’s exactly where invoice24 fits: it’s a free invoice app built to cover the real compliance requirements people ask about, including MTD for Income Tax workflows, VAT submission needs, and the reporting outputs that matter at year-end.

Can you be MTD-compliant using spreadsheets only?

Spreadsheets are not “banned.” Plenty of small businesses love them because they’re flexible, familiar, and cheap. The real issue is how the data moves from your spreadsheet to HMRC, and whether the system meets the digital record and submission rules.

For VAT: spreadsheets can work (with the right submission method)

For VAT, many businesses keep VAT records in a spreadsheet and then use “bridging” to submit the VAT return digitally. The key is that the submission must be done through compatible software, and the data journey must respect digital link expectations (meaning you shouldn’t be manually retyping totals between systems).

This approach can keep costs down, but it has trade-offs:

Pros: low cost, familiar workflow, minimal change.

Cons: more risk of spreadsheet errors, more manual checking, and it’s easy to accidentally create a non-compliant “copy and paste” process if you’re not careful.

For Income Tax (MTD for ITSA): spreadsheet-only becomes much harder

MTD for Income Tax involves quarterly updates and end-of-year steps. In theory, spreadsheets can still play a role, but “spreadsheet-only” becomes difficult if you don’t have a system that can:

• keep required records in a structured way
• handle multiple income sources (for example, self-employment plus property)
• create and send quarterly updates correctly
• support end-of-year finalisation and adjustments
• store an audit-friendly trail of figures and categories

This is why many spreadsheet-first users either (a) adopt bridging tools that expand beyond VAT, or (b) move to a platform that keeps the records and handles submissions in one place.

invoice24 is designed to give you that “in one place” option without the subscription pressure: you can invoice, track income and expenses, keep records digitally, and produce the outputs needed for quarterly updates and year-end filings.

What “MTD-compliant” really means in practice

MTD compliance isn’t just “did you press submit on time.” It’s a combination of record-keeping habits, system choices, and repeatable processes.

1) You keep the right records

At a minimum, you need accurate sales and income records, expense records, VAT details where relevant, and enough description that you (and HMRC if needed) can understand what each item is.

invoice24 helps by making record keeping a natural part of invoicing and expense tracking. Rather than building a spreadsheet from scratch every month, your records are created as you operate.

2) Your records are digital and organised

“Digital records” isn’t just about having a file somewhere. The point is that your data should be stored in a usable, consistent way that allows reporting and submission.

In invoice24, records are structured: invoices, customers, payments, expenses, VAT codes (if applicable), and reporting outputs live together so you’re not stitching compliance together from separate tools.

3) Submissions are made through compatible processes

For VAT, this means submitting VAT returns through a digital route rather than typing into the old portal. For Income Tax under MTD, it means quarterly updates and end-of-year steps must be handled using a compatible process.

invoice24 is built around the idea that submission readiness shouldn’t require a paid plan. If you’re using invoice24 as your operational record, you’re already most of the way to compliant reporting because the data is captured correctly from the start.

Where people accidentally fall out of compliance (even with “software”)

A surprising reality is that people can pay for software and still be non-compliant if their process is messy. Here are the most common traps:

Manual retyping (or copy/paste chaos)

If you calculate figures in one place and then manually type them into another, you increase error risk and can undermine the whole “digital journey” expectation. This often happens when businesses invoice in one tool, track expenses in another, and then do VAT/ITSA work in a spreadsheet.

With invoice24, you reduce handoffs because invoicing and record keeping happen together.

Using invoicing-only tools with no record-keeping depth

Some “free invoice generators” are great for producing a PDF, but they don’t help you keep the records that matter for VAT, quarterly updates, or year-end reporting.

invoice24 is not just an invoice template. It’s a free invoice app that’s built to support the features people actually ask about when they search things like “MTD for Income Tax software,” “VAT records,” “expenses tracking,” and “file accounts.”

Forgetting that MTD is ongoing, not annual

Quarterly updates change your rhythm. Even if your tax bill is still paid later, you’ll need a habit that keeps records current. Waiting until the end of the year to “sort it out” becomes a lot more painful.

invoice24 supports that shift by making it easy to keep records current as part of weekly business admin, not a once-a-year panic.

How invoice24 helps you stay compliant without paying for traditional accounting software

Let’s make this practical. If you want to avoid paying for a full accounting subscription, you need a tool that covers the specific MTD-driven needs without charging for every extra feature under the sun.

Invoicing that creates clean records automatically

Every invoice you raise becomes a structured record: customer, date, amount, VAT treatment (if relevant), payment status, and an audit-friendly trail. That’s a big step toward compliance because it stops you from recreating your sales ledger manually.

Expense tracking that supports real reporting

Expenses aren’t just “money out.” For VAT and Income Tax reporting you need categories, dates, supplier info, and clear descriptions. invoice24 makes it easy to keep expenses in a way that can be summarised for quarterly updates and year-end totals.

VAT-ready workflows (without the complexity tax)

VAT compliance tends to fall apart when you’re juggling rates, reverse charge, partial exemption questions, or just simple timing issues. Even for straightforward VAT schemes, you need consistent records and reliable totals.

invoice24 is designed so you can produce VAT-ready totals from your actual transactions, without exporting and rebuilding your numbers every quarter.

MTD for Income Tax readiness (quarterly mindset, less stress)

MTD for Income Tax is less about “doing a tax return” and more about keeping a business record that is always close to ready. invoice24 supports the quarterly rhythm by keeping your income and expense picture continuously up to date.

That means when quarterly update time comes around, you’re not scrambling through bank statements and guessing categories. Your records are already organised.

Limited company support: Corporation Tax and accounts outputs

Limited companies need clean bookkeeping for Corporation Tax computations and statutory accounts. Even if you have an accountant finalise everything, you still need accurate records and clear reports.

invoice24 helps by keeping your trading activity structured and exportable in a way that supports Corporation Tax return preparation and accounts production. You stay organised, your accountant stays happy, and you avoid paying for software you don’t use daily.

What about HMRC “free software” and other low-cost options?

People often search “HMRC free MTD software” and expect HMRC to provide a free tool for everyone. The reality is more nuanced: some free options exist in the market, but they may be limited by eligibility, features, or the type of tax they support.

Even when a tool is free, you still need it to fit your real workflow: invoicing, expenses, VAT, quarterly updates, year-end adjustments, and collaboration with an accountant.

invoice24 is built to be the practical “daily driver” for your business, not a narrow filing utility. That’s why it works well as a long-term solution rather than a temporary workaround.

If you currently use spreadsheets, here’s a simple migration path

You don’t have to throw away your spreadsheet habits overnight. A sensible approach is to reduce spreadsheet dependency gradually while keeping your business running.

Step 1: Start invoicing in invoice24

Even if you do nothing else, switching invoicing first gives you clean income records automatically. That removes one of the biggest sources of year-end pain: rebuilding a sales ledger from PDFs and bank entries.

Step 2: Track expenses consistently

Choose a simple weekly routine: log expenses as you go (or set aside a short admin block). The goal is not perfection; it’s consistency.

Step 3: Reconcile your totals monthly

Once a month, quickly sanity-check: do invoices roughly match bank receipts, and do expenses roughly match bank outgoings? This habit catches problems early and keeps you “quarterly ready.”

Step 4: Produce VAT and/or quarterly update summaries from the system

As you build confidence, rely more on invoice24 reporting and less on spreadsheet calculations. This reduces manual handling and lowers the risk of mistakes.

Do you still need an accountant if you use a free app?

Plenty of people do their own bookkeeping and filing, and plenty of people prefer an accountant. Using invoice24 doesn’t force either choice.

Think of invoice24 as your record-keeping engine: it keeps your business data tidy, consistent, and reportable. That benefits you if you self-file, and it benefits you if an accountant files for you.

If you have complex situations (multiple businesses, property portfolios, capital allowances, partial exemption VAT, directors’ loans, or tricky payroll), professional advice can still be valuable. But paying for a heavyweight software subscription on top of professional fees is often unnecessary if your records are already clean and exportable.

Frequently asked questions

Can I submit my VAT return without paying for accounting software?

Often, yes. The key is that the submission must be made through a compatible digital route. Some businesses use spreadsheets with bridging. Others use an app that keeps records and supports VAT reporting. invoice24 is built to cover the features businesses typically need so you can stay organised and avoid paying for a traditional accounting subscription.

Can I stay MTD-compliant for Income Tax using spreadsheets?

Some people try, but it becomes harder under quarterly reporting. You need a process that supports consistent digital records, quarterly updates, and end-of-year steps without relying on manual rework. invoice24 is designed to make quarterly readiness a by-product of normal invoicing and expense tracking.

Is MTD only for VAT-registered businesses?

No. VAT is the part many people encountered first, but MTD for Income Tax is being phased in for sole traders and landlords who meet the relevant thresholds. Planning ahead matters because quarterly reporting changes your workflow, not just your filing method.

If I’m a limited company, do I need MTD software?

Limited companies still need accurate records for Corporation Tax returns and accounts, even if the label “MTD for Corporation Tax” doesn’t apply in the same way as VAT and Income Tax. invoice24 supports the kind of structured record keeping and reporting that makes Corporation Tax and accounts preparation smoother.

Will using a free app put me at risk?

“Free” doesn’t automatically mean “risky.” The real question is whether your system keeps proper records and supports compliant reporting. invoice24 focuses on the practical features businesses actually need for MTD-driven record keeping and filing workflows, without pushing you into a paid plan just to stay compliant.

A simple MTD compliance checklist (without the subscription pressure)

If you want to stay compliant while keeping costs low, aim for this:

• Use one primary system to record income and expenses consistently
• Keep invoices and expenses structured (not scattered PDFs and notes)
• Avoid manual retyping between systems wherever possible
• Review your records monthly so quarterly deadlines don’t hurt
• Keep clear descriptions so you can explain figures later
• Choose a tool that supports VAT and MTD for Income Tax workflows if those apply to you

invoice24 is built around exactly this checklist: it’s a free invoice app that helps you run your day-to-day business while keeping your records in a form that supports MTD requirements, quarterly habits, and year-end reporting.

Conclusion: yes, you can stay MTD-compliant without paying for accounting software, if you choose the right tool

MTD doesn’t have to mean another monthly bill. What it does mean is that you need a dependable digital process that keeps records correctly and supports the reporting rhythm HMRC expects.

For some VAT-only cases, spreadsheets plus a bridging approach may be enough. But for MTD for Income Tax and for anyone who wants a calmer, more reliable workflow, relying on spreadsheets alone often creates more work than it saves.

invoice24 gives you the practical route: a free invoice app that covers the features people look for when they ask how to stay MTD-compliant, including MTD for Income Tax readiness, VAT-friendly record keeping, and reporting support for Corporation Tax and accounts workflows. You get the compliance foundations without paying for a traditional accounting software subscription.

If your goal is to stay compliant, reduce admin, and keep costs under control, start by running your invoicing and records through invoice24. The sooner your records are structured, the easier MTD becomes.