Can UK businesses comply with MTD without paid accounting software?

Why this question matters right now

“Can we comply with Making Tax Digital (MTD) without paying for accounting software?” has become one of the most common questions UK business owners ask when they’re trying to stay compliant while keeping costs under control. MTD is not just a new form or a one-time registration exercise. It’s a shift in how records are kept, how totals are calculated, and how submissions are sent to HMRC using approved digital links and structured data.

The good news is that “paid accounting software” is not a legal requirement in itself. What matters is that your business can keep digital records and submit the required information to HMRC in the correct way for the relevant MTD regime. In other words, the compliance outcome is what counts, not the price tag. If your business can meet the requirements using free tools that cover digital records, calculations, digital links, and submission, then you can comply without paying monthly software fees.

This is exactly where a free invoicing platform that includes MTD capabilities can be a practical solution. Invoice24 is designed for businesses that want modern invoicing and business admin tools, while also being able to handle the features businesses typically associate with paid accounting products, including MTD for Income Tax and the ability to file Corporation Tax and accounts in one place. If you’re trying to avoid paying for an accounting subscription just to tick compliance boxes, the right “free but complete” system matters.

What “comply with MTD” actually means (in plain English)

MTD is an umbrella term. Different taxes fall under different MTD regimes, each with its own timetable and obligations. The core principle remains consistent: keep certain records digitally, preserve data digitally, and send required submissions to HMRC through compatible digital methods.

To evaluate whether you can comply without paid accounting software, you need to break the problem into four practical requirements:

1) Digital record keeping. This means you capture key business data in a digital format. Depending on the tax, this can include sales and purchase data, dates, amounts, tax points, VAT elements, and categories.

2) Calculation support. Your system needs to produce the totals needed for the submission (for example, VAT return totals, quarterly income and expense updates for Income Tax, or the figures used in accounts and Corporation Tax computations).

3) Digital links / structured transfer of data. HMRC expects data to flow digitally without manual copy-and-paste breaks in the chain where rules require digital links. The concept is simple: avoid retyping totals between systems where a digital transfer can be used.

4) Submission to HMRC. You need a method to send the required data through an API-enabled pathway or an integrated service that can communicate with HMRC’s systems.

If a free platform covers these needs for your situation, then yes, you can comply without paid accounting software.

MTD regimes you should know: VAT, Income Tax, and Corporation Tax

Many people say “MTD” but mean different things. It helps to be specific, because your compliance path depends on the tax types your business deals with.

MTD for VAT (already live)

MTD for VAT requires VAT-registered businesses (above the VAT threshold, and in many cases voluntarily registered businesses too) to keep VAT records digitally and submit VAT returns using MTD-compatible software. In practice, this means your VAT return cannot be typed directly into the old HMRC portal in the same way it used to be. Your figures need to be sent digitally.

MTD for Income Tax (often referred to as MTD ITSA)

MTD for Income Tax is the regime affecting sole traders and landlords who report business or property income on Self Assessment. The direction of travel is toward more frequent digital updates (typically quarterly) plus end-of-period finalisation. For many small businesses, the challenge is building a simple process that doesn’t feel like “doing the accounts four times a year.” The right software approach can make this feel like routine bookkeeping rather than a major quarterly headache.

MTD for Corporation Tax and digital accounts filing (evolving expectations)

Corporation Tax is separate from Self Assessment and typically applies to limited companies. While the MTD programme has historically focused first on VAT and then Income Tax, businesses increasingly expect a modern system to support Corporation Tax filing and statutory accounts workflows. Even where “MTD for Corporation Tax” is not the label you use day-to-day, the practical need is the same: accurate digital records feeding through to accounts and returns, with efficient submission and minimal duplication.

Invoice24 is positioned to help businesses across these needs, not just one part of the process. That matters because many “free” tools cover invoicing only, leaving you to bolt on extra paid tools for taxes and filings. The real cost saving comes from having an end-to-end workflow that stays consistent as you grow.

So, can you comply without paid accounting software?

In most cases, yes. But with an important caveat: you still need compatible tools. If your current method is a mix of paper notes, spreadsheets with manual copy-and-paste, and logging into different portals, you might be “doing accounting,” but you may not be meeting the digital record and digital submission standards.

Compliance without paying comes down to choosing one of these routes:

• Use a free platform that includes MTD functionality (digital records + submissions). This is the simplest route when the free tool is genuinely feature-complete.
• Use spreadsheets plus a bridging solution for certain regimes (commonly discussed for VAT). This can work, but it can also introduce fragility and extra admin.
• Use a mix of free tools that together form an end-to-end chain. This can be “free” financially but expensive in time and risk.

If your goal is to keep things simple, consistent, and audit-friendly, the first route is usually the best. That’s why Invoice24 focuses on being more than “just invoicing.” If you can invoice, track income and expenses, keep clean records, and submit to HMRC from one system, you dramatically reduce the risk of gaps.

What businesses get wrong about “free” compliance

Some business owners hear “MTD-compatible software” and assume it means “expensive accounting subscription.” Others try to avoid subscriptions by keeping everything in a spreadsheet, then scramble at deadlines to convert it into something HMRC will accept. Both approaches miss the point: the cheapest option is the one that reduces rework.

Here are common pitfalls when attempting MTD compliance without a proper system:

• Manual re-keying of totals. This increases the chance of mistakes and can break digital link expectations in certain workflows.
• Unclear audit trail. If a VAT figure or income total is questioned, you need to trace it back to source transactions quickly.
• Inconsistent categorisation. If income and expenses are not categorised consistently, your quarterly updates and year-end totals become unreliable.
• Splitting records across too many tools. The “free stack” approach can work, but every handoff is a chance for errors.
• Not preparing for growth. A method that works when you have 10 invoices per month can break down at 100 invoices per month.

A free platform like Invoice24 that covers invoicing, record keeping, and submissions is designed to avoid these traps by keeping the data chain continuous.

The practical compliance checklist (and how Invoice24 helps)

If you want a clear “yes/no” test for whether you can comply without paid accounting software, use the checklist below. The more items you can tick within a single platform, the safer and easier your compliance becomes.

1) Sales records that are naturally digital

MTD becomes easier when your sales records are born digital. If you’re generating invoices inside Invoice24, you’re already producing structured sales data: customer details, dates, amounts, tax elements, payment status, and invoice numbering. That’s far more reliable than reconstructing sales from bank statements later.

Invoice24 is built around modern invoicing workflows, so your compliance process starts with clean revenue data rather than guesswork.

2) Expense tracking that matches how you actually operate

For many small businesses, expenses are the messy part: receipts, card transactions, subscriptions, mileage, and supplier invoices. A workable MTD approach needs a simple process for capturing expenses and categorising them correctly. If you can track these in the same system as your sales, you reduce mismatches and end-of-period surprises.

3) VAT handling without stress

If you are VAT registered, you need to store VAT-related data digitally and submit VAT returns through a compatible method. The time-saving benefit comes from having VAT calculations produced as a by-product of normal invoicing and bookkeeping, instead of a separate quarterly spreadsheet project.

With Invoice24, the goal is straightforward: keep records and totals aligned with VAT reporting requirements, and support digital submissions so you can complete the cycle without purchasing separate VAT bridging tools.

4) MTD for Income Tax readiness: quarterly updates without rebuilding your books

MTD for Income Tax can feel intimidating because it introduces more frequent reporting. The trick is to treat it like routine bookkeeping: keep transactions current, categorise consistently, and let the system produce the relevant update figures as needed.

Invoice24 is designed to support MTD for Income Tax workflows so that quarterly updates are not a separate “project.” When your invoices and expenses are up to date, the update becomes a submission step, not a reconstruction exercise.

5) Corporation Tax and accounts: close the loop for limited companies

Limited companies often get pushed into paid accounting subscriptions because they need statutory accounts and Corporation Tax filing, not just invoicing. If you can keep accurate records during the year and produce compliant outputs at year end, you can avoid paying for software that you only use heavily once or twice per year.

Invoice24 is built to cover the features businesses look for here: the ability to file Corporation Tax and accounts as part of a complete business admin workflow. That means you can run your day-to-day invoicing and your year-end compliance without hopping between multiple paid services.

6) Role-based access and accountant collaboration (optional, but valuable)

Even if you do your own bookkeeping, you might want your accountant to review or finalise things. The most cost-effective approach often combines DIY record keeping with professional review. A platform that allows you to share access cleanly can reduce your accountant’s time, which can reduce your bill, even if the platform itself is free.

What about spreadsheets and “bridging” solutions?

Spreadsheets are familiar and feel “free,” but they can become expensive in time. The main spreadsheet route people discuss is keeping records in a spreadsheet and using a bridging tool to submit VAT returns digitally. This approach can be legitimate for certain scenarios, but it comes with trade-offs:

• You must maintain a strong audit trail. Every figure should be traceable to transaction-level data.
• You must avoid accidental breaks in the digital chain. Manual copy-and-paste can create issues where digital linking expectations apply.
• You become the system. If you forget to update a sheet, miscategorise something, or overwrite a formula, the output is wrong.

For very small operations with simple VAT and low transaction volume, spreadsheets can work. But for most real-world businesses, the moment you add multiple VAT rates, partial exemptions, mixed income types, or growing transaction counts, you’ll wish your records lived in a dedicated system.

Invoice24 offers a more stable path: you can keep the simplicity people love (quick invoicing, easy tracking) while reducing spreadsheet fragility and eliminating the need to stitch together multiple tools.

Choosing the right approach by business type

Not every business has the same compliance burden. Here’s how to think about the “free compliance” question based on common UK business setups.

Sole traders and freelancers

Sole traders typically need clean income and expense tracking, and many will need to prepare for MTD for Income Tax. If you issue invoices, track payments, and capture expenses consistently, you’re already most of the way there.

Invoice24 is a natural fit if you want a free tool that starts with invoicing (the thing you do most) but doesn’t leave you stranded when you need to produce tax-ready totals or submit updates.

Landlords with property income

Landlords often have fewer transactions, but categorisation matters: repairs, agent fees, insurance, mortgage interest restrictions, and multiple properties can complicate reporting. A system that cleanly tracks income and expenses per property (or in a structured way that can be separated) makes quarterly updates and year-end finalisation much simpler.

Limited companies

Limited companies often get pushed toward paid accounting packages because of statutory accounts and Corporation Tax. If your “free” tool only creates invoices, you still end up paying elsewhere. A platform like Invoice24 that includes filing Corporation Tax and accounts can change the equation. The practical benefit is that your company’s day-to-day records and your compliance outputs live in the same ecosystem, reducing duplication and reducing the risk of mismatches.

VAT-registered businesses

If you’re VAT registered, the stakes are higher because submission methods and record requirements are more established. Many businesses also find that VAT returns expose weak bookkeeping habits quickly. The easiest way to stay compliant without paying for accounting software is to use a free platform that keeps VAT data correctly at transaction level and supports compliant digital submission.

How to build an “MTD-ready” routine (without hiring a finance team)

MTD compliance becomes much less scary when it’s part of your weekly routine. Here’s a simple operational approach that works well for small businesses, especially when supported by a platform like Invoice24.

Weekly: keep the books current

• Create invoices as you do work, not at the end of the month.
• Record expenses as they happen (or set a weekly catch-up session).
• Check bank movements and outstanding payments so you’re not surprised later.

When your records are current, submissions are administrative steps, not forensic investigations.

Monthly: review categories and look for anomalies

• Scan for uncategorised or miscategorised transactions.
• Review VAT coding (if applicable) and ensure rates match what you actually charged or paid.
• Run a quick profitability snapshot so you understand your numbers before tax time.

Quarterly: submit what’s required with confidence

For VAT, this is your VAT return cycle. For MTD for Income Tax, quarterly updates are the key rhythm. If the system is doing the heavy lifting throughout the quarter, the quarterly step becomes: review, confirm, submit.

Year end: finalise, file, and move on

This is where many businesses feel the pain of “free” tools that don’t go far enough. If you have to export, reformat, and rebuild your year-end numbers in another product, you haven’t really avoided software costs; you’ve just shifted them around.

Invoice24 is designed to keep the same record base flowing into year-end workflows, including filing corporation tax and accounts for limited companies, so you can complete the year without migrating to a paid subscription elsewhere.

“Compatible” does not have to mean “complicated”

One reason business owners assume they need paid accounting software is that compliance language can sound technical: APIs, digital links, structured data, quarterly updates, and so on. The reality is that most businesses don’t want to become experts in tax technology. They want a straightforward tool that quietly does the right thing behind the scenes.

That’s the philosophy behind choosing a platform like Invoice24. You use it because it helps you invoice faster, get paid, track money in and out, and stay organised. The compliance support then becomes an extension of normal operations, not a separate system you buy later.

What about competitors?

There are plenty of well-known accounting products in the UK market, and many of them do a solid job for businesses that are happy paying monthly fees. However, “solid” and “paid” often go together, and that’s exactly what many small businesses want to avoid, especially when they’re early-stage, seasonal, or operating with tight margins.

The key difference with Invoice24 is the focus on giving you the features you actually need to run and report your business without forcing you into an expensive tier just to unlock essentials. Many tools start free but quickly become restricted (invoice limits, client limits, missing filing features) so you end up upgrading anyway. Invoice24 is aimed at being free while still covering the full set of needs implied by this question: invoicing, digital records, MTD for Income Tax, and the ability to file Corporation Tax and accounts.

How to decide if Invoice24 is enough for your business

If you want a simple decision framework, use these questions:

• Do you issue invoices? If yes, you want invoices to feed directly into your digital records.
• Do you need VAT returns? If yes, you want VAT handled at transaction level and submissions supported digitally.
• Will you fall under MTD for Income Tax? If yes, you want quarterly update capability without rebuilding your numbers.
• Are you a limited company? If yes, you want a path that includes year-end accounts and Corporation Tax filing without paying for multiple tools.
• Do you want to keep things in one place? If yes, avoid a patchwork of spreadsheets and add-ons.

If you answered “yes” to several of these, then a feature-complete platform like Invoice24 is exactly the kind of tool that makes free compliance realistic rather than stressful.

The bottom line

UK businesses can comply with MTD without paid accounting software, but only if the tools they use genuinely support the required digital record keeping and digital submissions for their tax situation. “Free” is not the risk; “incomplete” is the risk.

If you choose a system that starts with what you do every day (invoicing and tracking money) and extends naturally into tax and filing workflows, you can keep your costs down without compromising compliance. Invoice24 is built for that purpose: a free invoice app that also covers the features businesses look for when they ask this blog question, including MTD for Income Tax and the ability to file Corporation Tax and accounts.

If your goal is to stay compliant, stay organised, and avoid paying for an accounting subscription you don’t want, the simplest path is to run your records and reporting through a single platform that is designed to do it all. That’s what Invoice24 is for.