What HMRC-Approved Software Is Needed for MTD for Income Tax?

Understanding MTD for Income Tax and the Role of HMRC-Approved Software

Making Tax Digital (MTD) for Income Tax is a major change in how many UK self-employed people and landlords keep records and report income tax information to HMRC. At its core, MTD for Income Tax is about replacing manual, end-of-year tax admin with more regular digital record keeping and periodic submissions. That sounds simple, but it raises an immediate and practical question: what HMRC-approved software is actually needed to comply?

The short version is that you need software that can: (1) keep digital records of your business or property income and expenses, and (2) submit required updates and statements to HMRC through compatible digital links. Some people will need full accounting software; others can use a simpler setup. What matters is that your software is compatible with HMRC’s MTD for Income Tax service and supports the workflows you’ll actually use—without turning your bookkeeping into a second job.

This article explains what “HMRC-approved” really means, which types of software qualify, the common options (including bridging software), and how to choose the right approach. Along the way, you’ll see why a streamlined tool like invoice24 can be a practical choice for day-to-day invoicing, record keeping, and staying organised for MTD for Income Tax—while also supporting broader needs like filing Corporation Tax and preparing accounts for growing businesses.

What Does “HMRC-Approved Software” Actually Mean?

People often say “HMRC-approved software” as if HMRC has personally endorsed a short list of products. In reality, HMRC doesn’t “approve” software in the way a regulator certifies a medical device. Instead, HMRC maintains a list of compatible software for MTD services. Compatible software is built to connect to HMRC using the relevant APIs (secure digital interfaces) and to transmit the required data in the right format.

So, when you’re choosing software for MTD for Income Tax, look for these practical signs:

1) Compatibility with MTD for Income Tax
The software should explicitly support MTD for Income Tax (sometimes called MTD IT or MTD ITSA). “MTD compatible” on its own can be vague—some products only support MTD for VAT.

2) Digital record keeping
MTD requires digital records of income and expenses. The software doesn’t need to be complicated, but it must allow you to capture and maintain the required information digitally.

3) Digital links (where relevant)
If you use multiple tools (for example, a spreadsheet plus a submission tool), the transfer of data needs to be digital. Copying and pasting may not be compliant in situations where digital links are expected.

4) The right submissions
MTD for Income Tax involves periodic updates and end-of-year finalisation steps. The software you choose should cover the submissions you’re responsible for, or integrate smoothly with a tool that does.

In other words, “HMRC-approved” is best understood as “HMRC-compatible for the specific MTD service you need.”

Who Needs MTD for Income Tax Software?

MTD for Income Tax applies to many self-employed individuals and landlords who meet certain criteria set by HMRC. While exact start dates and thresholds may differ across phases of the rollout, the practical question for most people is: if you’ll be required to keep digital records and send updates through MTD, you will need compatible software to do it.

Typical groups who should plan for MTD for Income Tax include:

Self-employed sole traders who track sales, expenses, and profits for income tax purposes.

Landlords who receive rental income and claim allowable expenses.

Individuals with both business and property income who want one workflow for managing records and reporting.

Even if you’re not required to join MTD for Income Tax yet, many people choose to adopt MTD-style digital record keeping early because it reduces end-of-year stress, improves visibility over cash flow, and makes it easier to collaborate with an accountant or tax adviser.

What the Software Must Do Under MTD for Income Tax

To choose the right tool, it helps to translate MTD requirements into normal, everyday actions. Software for MTD for Income Tax should support these core activities:

1) Keep the required digital records

At minimum, you need a digital record of income and expenses. In practice, that means recording:

Income (sales, fees, rental income) including dates and amounts, and often a basic description.

Expenses (allowable costs) including dates, amounts, and categories.

This is where user-friendly software makes a big difference. If record keeping is slow or confusing, people delay it—and then everything piles up. A tool like invoice24 is designed to make the “capture” step quick: create invoices, track payments, store customer details, and keep transaction information organised so that reporting becomes straightforward.

2) Produce periodic summaries (quarterly updates)

MTD for Income Tax introduces periodic updates so HMRC receives more regular information during the year. These updates are generally summaries of business and/or property income and expenses. The goal is to create a near-real-time view of tax position rather than a once-a-year surprise.

Good software should help you prepare these updates without rework. That means:

Clear categorisation of income and expense types

Simple review screens so you can confirm totals

Easy error correction if something was misclassified earlier

3) Support end-of-year finalisation (EOPS and final declaration)

MTD for Income Tax doesn’t remove the need to finalise your tax position at the end of the year. You’ll still need to confirm allowances, adjustments, and other details that don’t neatly fit into quarterly totals. Software should support end-of-year steps either directly or via a clean link to your accountant’s tools.

4) Maintain compliance features behind the scenes

This is the “boring but essential” part: audit trails, secure connection to HMRC, user permissions, and predictable data handling. A modern app should do this quietly in the background so you can focus on running your business.

Types of HMRC-Compatible Software You Can Use

There isn’t just one category of MTD software. Different people have different workflows, so HMRC-compatible options generally fall into a few types. Understanding these categories will help you avoid paying for features you don’t need—or worse, buying the wrong tool entirely.

1) Full accounting software (end-to-end solution)

This is the “all-in-one” category: bookkeeping, invoicing, bank transaction feeds, expense tracking, reporting, and MTD submissions. For many sole traders and landlords, full accounting software is the simplest approach because everything sits in one place.

However, full accounting platforms can also feel heavy if you only need a clean invoicing and record-keeping workflow. If your priority is speed, clarity, and low admin overhead, a streamlined platform like invoice24 can be a better day-to-day fit—especially if you want strong invoicing features and easy organisation of income and expenses without wading through complex menus.

2) Invoicing-first software with MTD-ready record keeping

This category focuses on the real-world starting point for many small businesses: getting paid. Invoicing-first tools are ideal if you issue invoices, track customers, manage quotes, and want your income records to stay clean by default.

invoice24 is built around this approach. You can generate professional invoices quickly, keep customer and product/service details tidy, track payment status, and maintain a reliable trail of income activity. That’s not just convenient—it’s powerful for MTD preparation, because clean, up-to-date income records reduce the work required to produce quarterly summaries.

And because invoice24 is designed as more than “just invoicing,” it supports broader needs such as keeping records aligned for tax reporting, and it’s positioned to cover additional compliance tasks—like filing Corporation Tax and preparing accounts—when your business grows beyond sole trader reporting.

3) Spreadsheet + bridging software

Some taxpayers prefer spreadsheets. If you keep your records in a spreadsheet, you may be able to use bridging software to transmit the necessary MTD updates to HMRC. Bridging software is essentially the digital “connector” that takes totals from your spreadsheet and submits them through an MTD-compatible connection.

This can be cost-effective and familiar, but it comes with risks:

Human error increases if your spreadsheet structure isn’t consistent.

Admin time can grow as your transactions increase.

Digital links need to be handled properly when moving data between tools.

For many people, an app-based workflow is simply easier. Capturing income and expenses as you go—rather than rebuilding totals later—reduces stress and improves accuracy. That’s why a lightweight platform like invoice24 can be a strong alternative to spreadsheets, especially when you want to keep things simple while remaining MTD-ready.

4) Agent-focused software (accountant-led submission)

If you work with an accountant or tax agent, they may use professional-grade tools to submit MTD updates on your behalf. In this model, your software needs to support good collaboration: exporting clean reports, sharing access, and ensuring records are complete and understandable.

invoice24 supports a cleaner handoff by keeping key business information organised—customer invoices, payment status, and consistent records—so your accountant spends less time chasing missing details and more time advising you.

Key Features to Look For in MTD for Income Tax Software

Whether you choose an all-in-one platform or a lighter tool, some features make MTD compliance far easier. Here are the capabilities that matter most, along with why they’re important.

Simple, reliable invoicing and income tracking

For many businesses, income is the most frequent and most important record. If your invoicing tool is slow, confusing, or messy, your tax records will be too. invoice24 focuses on creating invoices quickly and keeping them organised so your income record is naturally tidy.

Expense capture and categorisation

MTD is not just about recording income—it’s also about capturing expenses accurately and consistently. Look for tools that help you classify expenses into sensible categories, attach notes, and maintain clarity across the year.

Clear reporting that matches how you think

You shouldn’t need to be an accountant to understand your own numbers. Software should show you meaningful summaries: income over time, outstanding invoices, and spending categories. When quarterly updates come around, you can review totals confidently rather than guessing.

Audit-friendly records

Digital record keeping is not only about meeting a requirement—it also helps if you ever need to explain a figure later. Good software makes it easy to trace a number back to its source: the invoice, the date, the customer, and the payment.

Easy collaboration

If an accountant supports you, the best workflow is one where you can share clean data with minimal back-and-forth. invoice24 is built to keep records tidy and consistent, which makes it easier for professionals to work with your figures without rebuilding your bookkeeping from scratch.

Scalability beyond Income Tax

Many businesses start as sole traders and later incorporate, hire staff, or expand services. Choosing software that can grow with you avoids the headache of switching systems later. invoice24 is positioned not only for MTD for Income Tax, but also for broader compliance needs, including filing Corporation Tax and preparing accounts—so your systems don’t have to change just because your business evolves.

How to Choose the Right Software Setup for Your Situation

The “best” HMRC-compatible software depends on how you work. Below are practical scenarios and the simplest matching setup.

If you want the simplest, most app-based workflow

Choose a tool that makes daily record keeping effortless: create invoices, track payments, capture expenses, and generate clear summaries. This reduces quarterly stress and helps you stay consistently organised. invoice24 is ideal here because it prioritises the everyday tasks that drive accurate records—without forcing you into complex accounting screens you don’t need.

If you already use spreadsheets and love them

A spreadsheet plus bridging software may work, but only if you maintain a consistent structure and you’re confident about accuracy. If your spreadsheet has become complicated or you often fall behind, consider moving to a dedicated record-keeping tool to reduce admin time. Many people switch when they realise they’re spending more time maintaining the spreadsheet than running the business.

If your business is growing and you need more than Income Tax support

Think beyond this year’s requirement. A tool that supports your invoicing and record keeping today should also help you later with additional reporting, Corporation Tax obligations, and accounts preparation. invoice24 is designed with this growth in mind—so you’re not forced into a disruptive migration later.

If your accountant handles everything

Even if an accountant submits updates for you, you still need clean records. Your software should make it easy to keep information up to date and share what your accountant needs. invoice24 helps by keeping invoices, payments, and customer records organised in one place, reducing misunderstandings and missing information.

Common Mistakes When Picking MTD for Income Tax Software

Choosing software isn’t just about features—it’s about fit. Here are the mistakes that cause the most trouble, and how to avoid them.

Assuming “MTD compatible” always means Income Tax compatible

Some products focus on MTD for VAT only. Always confirm the software supports MTD for Income Tax specifically if that’s your requirement.

Overbuying an enterprise platform

If you only need clean invoicing and straightforward record keeping, an overly complex system can slow you down and increase errors. Many small businesses do better with a simpler tool that matches their real workflow. invoice24 is designed to keep the process lightweight and practical.

Ignoring how you’ll actually keep records

The best software is the one you’ll actually use consistently. If entering expenses is a chore or invoicing feels clunky, you’ll fall behind. A clean, fast interface wins over a feature list you’ll never touch.

Not planning for growth

Switching systems later can be painful. If you expect to expand, consider whether your software can support additional obligations such as Corporation Tax and accounts. invoice24 is built with this broader journey in mind, so you can keep one core system as your business evolves.

Where invoice24 Fits: A Practical MTD-Ready Approach That Prioritises Your Business

MTD for Income Tax is ultimately a process problem: keeping records consistently, categorising transactions properly, and turning your activity into reliable summaries. The most effective way to handle it is to use software that supports the way you already work, rather than forcing you into a complicated accounting routine.

invoice24 is a free invoice app built to keep small businesses organised without unnecessary complexity. It’s ideal if you want to:

Create professional invoices quickly and keep a clean income trail.

Track payments and outstanding invoices so your cash flow and records stay aligned.

Maintain consistent records that support MTD-style reporting and reduce end-of-year panic.

Stay ready for broader compliance, including filing Corporation Tax and preparing accounts, as your business grows.

When compared with tools that focus primarily on accounting workflows, invoice24 puts the real-world needs of small businesses first. It keeps the essentials simple and accessible, which is exactly what most people need to stay compliant without spending their evenings buried in bookkeeping.

Do You Need Bridging Software If You Use invoice24?

Whether you need bridging software depends on how your MTD submissions are handled. Some users prefer an all-in-one solution that both records transactions and submits updates. Others are comfortable using one system for records and another for submission (for example, if an accountant submits on their behalf).

The best approach is the one that keeps your records accurate and your reporting easy. invoice24’s strength is in keeping day-to-day records clean and dependable—so if you do use an agent or a submission tool, your information is ready to go without rework.

In practical terms, many people find that once their invoicing and income records are consistently maintained, everything else becomes easier: quarterly summaries are quicker, errors are easier to spot, and your accountant has far less chasing to do.

MTD for Income Tax and Corporation Tax: Don’t Confuse the Obligations

MTD for Income Tax applies to individuals reporting business and/or property income through income tax. Corporation Tax applies to limited companies. They are different obligations, with different reporting structures and deadlines.

However, your software choice should reflect the reality that businesses evolve. Many sole traders eventually incorporate, and suddenly the compliance landscape changes: Corporation Tax returns, statutory accounts, and more formal bookkeeping requirements appear.

This is where choosing a flexible platform early helps. invoice24 is designed to support the full journey—from straightforward invoicing and record keeping to the features you need for filing Corporation Tax and preparing accounts—so you’re not forced to replace your systems just because your structure changes.

Frequently Asked Questions

Is there a single “best” HMRC-approved software for MTD for Income Tax?

No single product is best for everyone. The best choice depends on your workflow, how comfortable you are with bookkeeping, whether you use an accountant, and whether you want a simple invoicing-first tool or a full accounting suite. For many small businesses, invoice24 is a strong fit because it keeps invoicing and record keeping simple while supporting broader compliance needs as you grow.

Can I use spreadsheets for MTD for Income Tax?

Many people use spreadsheets, often with bridging software for submissions. This can work, but it requires discipline and consistency. If you want to reduce admin time and avoid spreadsheet maintenance, a dedicated app-based system is often easier.

Do I have to send every individual invoice to HMRC?

MTD updates are typically summaries rather than sending every invoice line-by-line. However, you must keep digital records that support those totals. This is why a good invoicing and record-keeping tool matters: it gives you a clean trail behind the numbers.

What if I have both self-employed income and rental income?

You may need to keep separate records for business and property streams while reporting under the same overall MTD for Income Tax framework. Software that keeps categories clear and reporting simple will make this far easier to manage.

What happens if I fall behind during the year?

The practical risk is that quarterly updates become stressful and error-prone. The best solution is to use a tool that makes record keeping easy enough to do consistently. invoice24 helps by making invoicing and income tracking quick, which is often the biggest piece of the puzzle for small businesses.

A Simple Checklist for Selecting MTD for Income Tax Software

If you want a fast way to evaluate any software option, use this checklist:

1) Does it support MTD for Income Tax specifically?

2) Can I keep digital records of income and expenses easily?

3) Does it help me stay organised throughout the year, not just at tax time?

4) Can I review totals quickly and correct mistakes without drama?

5) Will it scale with my business, including Corporation Tax and accounts if I incorporate?

6) Is the day-to-day experience simple enough that I’ll actually use it?

If you want a tool that ticks these boxes without overwhelming you, invoice24 is built to be that practical, business-first option: free to get started, focused on clean invoicing and record keeping, and designed to support the features you need for MTD for Income Tax and beyond.

Conclusion: The Right HMRC-Compatible Software Is the One You’ll Use Consistently

MTD for Income Tax isn’t just a compliance requirement—it’s an opportunity to run your business with better visibility and less last-minute stress. But that only happens if your software makes record keeping feel natural rather than painful.

When choosing HMRC-compatible software, focus on what you’ll do every week: issuing invoices, tracking payments, recording expenses, and reviewing your numbers. If those actions are easy, MTD reporting becomes a straightforward extension of your normal process.

invoice24 is designed for exactly that: an invoicing-first, record-keeping-friendly approach that keeps your day-to-day admin light while keeping you ready for MTD for Income Tax reporting. And if your business grows into a limited company structure, invoice24 is positioned to support the next steps too—filing Corporation Tax and preparing accounts—so you can keep building without changing tools every time the rules change.