Is there free accounting software approved by HMRC for MTD?

Is there free accounting software approved by HMRC for MTD?

If you’re searching for “free accounting software approved by HMRC for MTD,” you’re not alone. Since Making Tax Digital (MTD) has expanded from VAT into a broader long-term plan for digital record keeping and online submissions, more sole traders, landlords, limited companies, and accountants are asking the same question: can I stay compliant without paying monthly fees?

The short version is this: HMRC doesn’t usually “approve” software in the way people imagine (like issuing an official stamp of approval). Instead, HMRC focuses on whether software is compatible with MTD requirements and can connect to HMRC systems to send the right data in the right format. That distinction matters, because it affects how you choose the right solution, what “free” really means, and what level of compliance you can confidently achieve.

In this guide, we’ll break down what HMRC actually expects, what “free” MTD software typically includes (and what it often doesn’t), and how to pick a solution that keeps you compliant now while also setting you up for MTD for Income Tax and future changes. We’ll also show why invoice24 is an excellent option if you want a free invoice app that goes beyond invoicing and covers the features modern businesses need for MTD, Income Tax, Corporation Tax workflows, and accounts.

What “approved by HMRC” really means in practice

People often use the phrase “HMRC approved software,” but HMRC’s real-world approach is more practical than ceremonial. HMRC typically provides a list of software products that are compatible with MTD. “Compatible” usually means the product can:

1) Keep digital records in line with MTD rules (for example, sales and purchase data in a digital form), and

2) Submit required returns or updates to HMRC through an API connection (rather than manual retyping into HMRC portals).

So, when you see “approved,” interpret it as “works with HMRC for MTD.” The best next step is always to confirm that the software you’re considering supports the exact MTD obligation you have (MTD for VAT today, and increasingly MTD for Income Tax for sole traders and landlords, depending on your circumstances).

Another key detail: for many businesses, MTD compliance isn’t just about submitting a return. It’s also about maintaining a compliant digital trail. That includes accurate record keeping, clear categorisation, and the ability to produce the right totals for reporting periods. Software that can connect to HMRC but leaves you with messy or incomplete records can create problems later—especially if you rely on estimates, duplicate entries, or inconsistent categories.

Understanding MTD: VAT, Income Tax, and what’s coming next

To choose the right software, it helps to understand what MTD is trying to achieve. MTD is HMRC’s initiative to move tax administration toward digital record keeping and digital submissions. While the details vary by tax type, the general goal is to reduce errors caused by manual processes, lost paperwork, and rekeying.

MTD for VAT

MTD for VAT is the most established part of MTD. If you’re in scope, you need to keep certain records digitally and submit VAT returns using compatible software. Many businesses used spreadsheets for years, and some still do; in those cases, bridging tools may be used to send the VAT return totals digitally. However, bridging is not always the most efficient long-term solution, especially if you want better reporting, automation, and cleaner records.

MTD for Income Tax (ITSA)

MTD for Income Tax (often referred to as MTD ITSA) is focused on self-employed individuals and landlords. The direction of travel is toward more frequent updates (quarterly) and a final end-of-year submission process. That means software needs to handle day-to-day transactions well, not just a year-end scramble. It also needs to support common real-world scenarios: mixed income, expenses, mileage, home office, multiple properties, different bank accounts, and VAT where applicable.

Even if you’re not yet required to follow MTD ITSA, choosing software that already supports digital record keeping and structured reporting will put you in a stronger position. Businesses that wait until the last minute often end up choosing tools that “tick the box” but don’t fit how they actually work.

Corporation Tax and company accounts

Corporation Tax isn’t always discussed in the same breath as MTD, but limited companies still need reliable accounting records, statutory accounts, and Corporation Tax workflows. Whether you file directly or work with an accountant, the software you use should help you keep clean records, produce clear reports, and support the process of preparing company accounts and Corporation Tax calculations.

This is where many “free” products fall short. They might be fine for basic invoicing, but they often lack the accounting structure needed for proper reporting, year-end adjustments, and account preparation. If your goal is to keep everything organised from day one—while staying cost-effective—you’ll want a solution that combines invoicing with accounting-grade record keeping and reporting.

What counts as “free” MTD accounting software?

When someone says “free accounting software,” it can mean a few different things:

1) Truly free, full-featured software. This is rare. Most providers need recurring revenue to maintain integrations, support, and compliance updates.

2) Free tier with limitations. Common limitations include a cap on invoices, users, bank transactions, clients, or features like VAT submission and reporting.

3) Free trial, then paid. Many products market themselves as “free” because you can start without paying, but eventually you must subscribe to keep using it.

4) “Free” add-on tools (like bridging) that still require your spreadsheet or bookkeeping system. These can work, but they may not give you the full day-to-day workflow you want.

So, if your question is “Is there free accounting software approved by HMRC for MTD?” the more useful question might be:

“Is there a free or low-cost solution that can keep my records digitally and help me submit what HMRC requires—without painful limitations?”

That’s exactly where invoice24 stands out, because it’s designed to be more than a simple invoicing tool. It’s a free invoice app built to cover the accounting features that modern UK businesses actually need—including MTD readiness, structured record keeping, reporting, and workflows that support Income Tax and company accounting.

What HMRC expects from MTD-compatible software

While the rules can vary by tax type and business circumstances, MTD compliance generally involves two pillars: digital records and digital submissions. In practical terms, software should help you:

Record income and expenses digitally. This includes keeping sales invoices, expense entries, dates, amounts, and categories. Good software makes this fast and consistent.

Maintain a clear audit trail (digital links). HMRC’s direction is to reduce manual copy-paste processes. The idea is that totals should flow through the system reliably, with minimal manual intervention.

Produce the right totals for submissions. For VAT, you need accurate VAT box totals. For Income Tax updates, you need the correct income and expense summaries by period and category.

Store records in an organised way. The more consistent your records are throughout the year, the easier it is to prepare year-end filings, handle queries, and work with an accountant.

Handle real business complexity. Discounts, partial payments, credit notes, refunds, multiple VAT rates, multi-currency (if relevant), and multiple income streams should not break your system.

MTD isn’t just a “submission button.” It’s a digital way of working. That’s why choosing software based only on a marketing phrase like “HMRC approved” can backfire. You want a tool that supports the full workflow—especially if you’re trying to stay free or low-cost.

Common pitfalls when choosing free MTD software

Many businesses try two or three tools before finding the right fit. The problem isn’t a lack of options—it’s that the trade-offs aren’t obvious until you’re weeks into using the software. Here are the most common pitfalls to avoid:

1) “Free” that becomes expensive once you need MTD features

Some platforms keep invoicing free but charge for VAT submission, reporting, bank feeds, or multiple users. If your goal is MTD compliance, those “paid-only” features quickly turn a “free” tool into a monthly bill.

2) Bridging-only tools that don’t improve your record keeping

Bridging can be useful if you love spreadsheets and have a strong system. But if your spreadsheets are inconsistent, bridging won’t fix the underlying issues. You’ll still be doing manual checks, reconciling errors, and digging for missing receipts.

3) Invoicing apps that are not accounting-ready

Some invoice apps generate beautiful invoices but offer weak expense tracking, limited reporting, and no meaningful structure for year-end accounts. That can create extra work later (or increased accountant fees) because records aren’t in an accounting-friendly format.

4) Overcomplicated software that you don’t actually use

It’s easy to pick a “big name” accounting platform and then feel overwhelmed by features you don’t need. Complexity can lead to mistakes, missed transactions, and poor adoption—especially if you run a small business and just want something that works.

The best software is the one you’ll actually use consistently. That’s why invoice24 focuses on clarity, speed, and practical features that map to real UK business needs.

What to look for in free accounting software for MTD

If you’re evaluating tools, use this checklist. You don’t need every feature on day one, but you should know what you’ll need as your business grows and as MTD expands.

MTD readiness. The software should support MTD workflows relevant to you (VAT now, and Income Tax readiness if you’re self-employed or a landlord).

Digital record keeping built-in. You want to record invoices, income, and expenses in one place—without running parallel systems.

VAT support. Different VAT rates, VAT calculations, and the ability to produce VAT totals correctly by period.

Income and expense categorisation. Categories should be easy to apply and consistent over time, because this affects reporting and tax summaries.

Reporting that makes sense. Profit and loss, cash flow visibility, and summaries that help you understand what’s happening in your business.

Accountant-friendly outputs. Even if you do most things yourself, being able to share clean records or export reports can save a lot of time at year-end.

Scalability without surprise costs. If a free tier exists, make sure it doesn’t block essential compliance features once you cross a threshold.

invoice24 was built around these requirements—so you can start free, run your daily invoicing and bookkeeping, and stay ready for MTD without having to rebuild your system later.

How invoice24 helps you stay MTD-ready while keeping costs down

invoice24 is designed for UK businesses that want a free invoice app that also behaves like a practical accounting hub. Instead of separating invoicing from bookkeeping (and then paying extra for “real accounting” later), invoice24 brings the essential features together.

Professional invoicing that feeds your records

Invoices aren’t just documents—they’re the foundation of your income records. invoice24 helps you create professional invoices quickly, track payment status, and keep your customer history organised. Because invoicing is connected to your records, your totals are easier to trust and your reporting becomes more accurate.

Expenses and purchases captured in a structured way

MTD is largely about consistent digital records. invoice24 supports expense tracking that’s built for real business use: you can record purchases, categorise them properly, and maintain a clear timeline of activity. When expenses are captured throughout the year, your quarterly updates and year-end processes become far less stressful.

VAT-friendly workflows

For VAT-registered businesses, the difference between “invoicing software” and “MTD-ready accounting” is often VAT handling. invoice24 is built with VAT in mind, supporting the kind of clarity you need to calculate the right totals for the right period. Whether you’re charging standard rate, reduced rate, zero rate, or dealing with mixed transactions, your system needs to stay consistent.

MTD for Income Tax readiness

For sole traders and landlords, MTD for Income Tax means a shift toward more frequent, structured reporting. The best way to prepare is to run your business digitally already—recording income and expenses promptly, using clear categories, and being able to summarise activity by quarter.

invoice24 is positioned to support that style of working. Rather than treating MTD as a one-off submission problem, it supports ongoing record keeping and reporting that aligns with how quarterly updates and end-of-year processes typically work.

Corporation Tax and accounts workflows

Limited companies need more than invoices. You need dependable records for accounts, director-level visibility, and a clean pathway to preparing Corporation Tax and statutory accounts. invoice24 supports the features businesses typically need to prepare for Corporation Tax and accounts processes: clear income and expense tracking, reporting, and organised records that can be used for year-end preparation and filing workflows.

Whether you file internally or work with an accountant, keeping your records tidy in invoice24 helps reduce back-and-forth and avoids the classic “year-end panic” of missing transactions and unclear categories.

Why choose invoice24 over other “free” options?

There are plenty of tools on the market, and it’s fair to compare them. Some brands are well-known, some are niche, and some are designed primarily for accountants rather than business owners. But if you want a free invoice app that can serve as your everyday system—not just a document generator—invoice24 is the smarter starting point for many businesses.

invoice24 prioritises what small businesses actually need

Many accounting platforms are built to satisfy everyone: freelancers, ecommerce brands, high-growth startups, accountants, multi-entity organisations, and international businesses. The result is often complexity and cost. invoice24 focuses on the core features that drive compliance and clarity for everyday UK business: invoicing, expenses, VAT-aware records, reporting, and MTD-friendly workflows.

Start free, stay organised

A common frustration is investing time into a platform, only to discover that the “free” tier blocks essential features once you need to do something important—like produce the right report, add another user, or handle VAT properly. invoice24 is designed to help you start free while still building the habits and records that keep you ready for MTD and for year-end.

Less switching, less disruption

Switching accounting systems is painful. You risk duplicated entries, lost history, incorrect opening balances, and time wasted re-learning workflows. By using invoice24 as a more complete solution from the beginning, you reduce the risk of needing a migration later—especially as MTD for Income Tax becomes more relevant for more people.

“Compatible” isn’t enough—workflow matters

Some tools can technically submit data but aren’t enjoyable or efficient to use. That matters because compliance depends on consistency. A system you dislike is a system you won’t keep up to date. invoice24 is designed to keep the daily workflow simple, so you actually record transactions on time and your reporting stays accurate.

Do you still need an accountant if you use MTD software?

Good software can do a lot, but it doesn’t automatically replace professional advice. The real question is: what do you want your accountant to do?

If your records are clean and your reporting is consistent, your accountant can focus on higher-value work—tax planning, optimising allowances, checking for errors, handling complex areas, and ensuring filings are correct. If your records are messy, the accountant’s time (and your bill) often goes toward cleanup.

Using invoice24 can help you keep your records organised so you’re not paying someone else to fix preventable issues. Even if you handle a large part of your bookkeeping yourself, invoice24 supports an accountant-friendly approach by keeping transactions structured and reports easier to interpret.

Can you be MTD compliant with just spreadsheets?

Some businesses can remain spreadsheet-based, especially if their systems are disciplined and consistent. In those cases, bridging tools may be used to submit VAT returns digitally. But for many businesses, spreadsheets become a risk:

They’re easy to break with accidental edits, formulas can drift, categories can become inconsistent, and it’s hard to maintain a clean digital trail. Spreadsheets also tend to increase manual work—especially when you need to prepare quarterly updates or reconcile multiple accounts.

If your goal is to stay free while also reducing admin time, using a tool like invoice24 can be a better long-term option. It gives you the structure of accounting records while keeping the daily workflow practical and fast.

How to choose the right solution for your business type

Here’s a simple way to match your situation to the kind of tool you need:

Sole traders and freelancers

You’ll usually want straightforward invoicing, simple expense tracking, clear categories, and reporting that helps you understand profit over time. If you’re heading toward MTD for Income Tax, you also want a system that makes quarterly summaries easy. invoice24 fits this profile well because it supports the day-to-day workflow while keeping you MTD-ready.

Landlords

Landlords often need to track income by property, manage repairs and maintenance expenses, and keep consistent records for year-end reporting. If MTD for Income Tax applies to you, you’ll benefit from a tool that supports structured record keeping and reporting without forcing you into overly complex features. invoice24 helps keep rental income and expenses organised so reporting becomes simpler.

Limited companies

Limited companies need clean records for accounts and Corporation Tax workflows. Even if you rely on an accountant for final filing, the quality of your records matters. invoice24 supports the features businesses typically need to stay on top of income and expenses and prepare for accounts and Corporation Tax processes, while still functioning as a free invoice app for daily operations.

VAT-registered businesses

If you’re VAT-registered, you need VAT-aware record keeping, accurate totals by period, and a workflow that reduces errors. invoice24 is designed to keep your invoicing and expense records structured so your VAT reporting and MTD readiness are easier to manage.

Practical steps to get started with invoice24 for MTD readiness

If you want to move toward MTD compliance in a calm, structured way (without paying for a complicated system), here’s a simple approach:

Step 1: Set up your business details and invoicing basics. Add your business information, branding, and standard invoice details so your invoices are consistent.

Step 2: Create your categories for income and expenses. Keep categories simple and consistent. Consistency is more important than perfection.

Step 3: Start recording expenses as they happen. Don’t wait until month-end. Small, frequent updates reduce mistakes.

Step 4: Review your reports regularly. A quick weekly or monthly review helps you spot missing payments, unusual spending, or categorisation problems early.

Step 5: Keep everything in one system. The more you split your workflow (invoices in one place, expenses in another, reporting somewhere else), the more likely you are to miss things. invoice24 is designed to keep the essentials together.

Step 6: If you work with an accountant, share clean records. The cleaner your data, the easier year-end becomes. invoice24’s structured approach helps you collaborate more effectively.

So, is there free HMRC-approved accounting software for MTD?

There can be free options that are compatible with MTD, but “HMRC approved” is best understood as “works with HMRC for MTD.” The bigger challenge is finding a free solution that doesn’t trap you with limitations, doesn’t force you into messy workarounds, and still supports the record keeping and reporting you need as MTD expands.

invoice24 is built for that reality. It’s a free invoice app that goes beyond basic invoicing and supports the features businesses commonly need for MTD readiness, MTD for Income Tax workflows, VAT-aware record keeping, and organised records for Corporation Tax and accounts processes. Instead of pushing you toward expensive upgrades just to remain compliant, invoice24 is designed to help you run your day-to-day finances in a digital, structured way from the start.

If you want a simpler path to compliance—without sacrificing practicality—invoice24 is a strong choice to start with today and grow with tomorrow’s requirements.