HMRC Free MTD Software: Best Free Options for Making Tax Digital

If you are a sole trader, landlord, or small VAT-registered business looking for free MTD software to comply with Making Tax Digital, you have come to the right place. This page covers the best free and low-cost Making Tax Digital software options available right now, what each one does, who it suits, and where the limits are. It also explains when a free version is simply not enough and a paid subscription makes more sense.

The options on this page vary in who they suit. Sage’s free account is designed for sole traders only and is not suitable for limited companies or other business types. FreeAgent, Zoho Books, and Clear Books all support MTD VAT submissions for a wider range of businesses. Where a tool also supports MTD for Income Tax, covering self-employment and property income, as noted in each section. All options listed appear on HMRC’s list of compatible software. Always check GOV.UK and the provider directly for the latest compatibility status before signing up.

At a Glance

• At a Glance
• Making Tax Digital for VAT applies to all VAT-registered businesses, including those voluntarily registered below the £90,000 threshold. This affects businesses right now.
• MTD for Income Tax (MTD ITSA) is being phased in from April 2026 for sole traders and landlords with qualifying property income and self-employment income over £50,000.
• All options on this page are HMRC-recognised software. The free version of each tool has real limitations — they may not cover all income types, payroll, or multiple users.
• The four options covered here are: Sage Accounting (free sole trader account), FreeAgent, Zoho Books, and Clear Books (free sole trader or landlord account). Most support MTD VAT for VAT-registered businesses.
• Good digital record keeping is a core requirement of MTD; all options here help you meet that obligation. Always check GOV.UK for the latest requirements

What Is MTD-Compatible Software?

MTD-compatible software, sometimes called making tax digital software or an accounting app, connects directly to HMRC’s systems so you can keep digital records and submit returns digitally. For VAT, this means you submit your VAT returns through the software rather than the old HMRC portal, which closed for in-scope businesses on 1 November 2022. For MTD for Income Tax, the software must also allow you to submit quarterly returns to HMRC and file the Final Declaration, which combines all income sources and pension contributions, replacing the traditional Self Assessment tax return.

Digital record keeping is at the heart of MTD. You must store your income and expense records digitally, not just at submission time, but throughout the tax year. A good accounting app handles this automatically, meaning your digital records are always up to date and ready to submit.

Not all software that calls itself accounting software is MTD-compatible. Always check the provider’s website and the HMRC list of compatible products before signing up.

💡 Tip: You do not have to use an expensive package to comply with MTD. Free or low-cost options work well for many sole traders, small landlords, and VAT-registered small businesses — but read the limits carefully before committing.

When Does MTD Apply to You?

MTD for VAT — applies now to all VAT-registered businesses

If your business is VAT-registered, MTD for VAT applies to you now, whether you are a sole trader, a partnership, a limited company, or a landlord with a VAT-registered property business. It has applied to all VAT-registered businesses since April 2022, regardless of turnover. Even if you registered for VAT voluntarily below the £90,000 registration threshold, you must still keep digital records and submit your VAT returns through MTD-compatible software.

This is the main reason VAT-registered businesses need MTD-compatible software right now, even if they fall outside the scope of the MTD for Income Tax rules. Your digital records must be maintained in software, not in paper ledgers or unlinked spreadsheets.

MTD for Income Tax (MTD ITSA) — applies to sole traders and landlords only, in phases

MTD ITSA is separate from MTD VAT. It replaces Income Tax Self Assessment for those in scope and applies only to sole traders and landlords — not to partnerships (which have been postponed indefinitely with no confirmed date). Qualifying income includes gross property income from UK property and overseas property, as well as income from self-employment.

The threshold is assessed using the gross income figure from the Self Assessment return due on 31 January before the start of the relevant tax year. Under MTD ITSA, you must keep digital records of all UK property income, expenses, and self-employment transactions throughout the year, not just at filing time. MTD ITSA rolls out in phases:

• From 6 April 2026: qualifying gross income over £50,000 (based on your 2024/25 Self Assessment return).
• From 6 April 2027: qualifying income over £30,000.
• From 6 April 2028: qualifying income over £20,000 (confirmed at the October 2024 Autumn Budget).

Always check GOV.UK for your start date.

Free MTD Software Options

Below are four options that offer free or no-cost accounts with MTD compatibility. All four support MTD VAT submissions, making them relevant to any VAT-registered business. They also support MTD ITSA for sole traders and landlords, which is noted in each section. Each has its own strengths and limitations, so read the details before deciding.

1. Sage Accounting — Free Plan for Sole Traders

Sage offers a permanently free accounting account designed specifically for sole traders. It is one of the few genuinely free options from a major cloud accounting provider, and it is HMRC-recognised software. The free account is not suitable for MTD VAT submissions a paid version is required.

What the free account includes:

• Send and track 5 invoices per month
• Record income and expenses
• Digital record keeping for MTD compliance
• Bank reconciliation (connect your bank account)
• Basic profit and loss reporting
• Mobile app access

What it does not include:

• VAT – Sage Start plan required
• Payroll – you need a paid account or separate payroll software
• Multi-currency transactions
• Multiple users (the free account is single-user)
• Stock management
• Advanced reporting

Who it suits:

Sage’s free account works well for straightforward sole traders who invoice clients and track expenses. If you are VAT-registered, employ staff, deal in foreign currencies, need more than one person to access your accounts, or run a limited company, you will need to upgrade to a paid subscription.

💡Tip: Sage’s free sole trader account is a strong starting point if you are new to MTD and want an established, HMRC-recognised software platform without paying a monthly fee. Sage also offers discounted paid subscriptions

2. FreeAgent — Free with Certain Bank Accounts

FreeAgent is a well-regarded accounting platform that is free if you bank with NatWest, Royal Bank of Scotland, or Mettle (NatWest’s business bank account). It is also available as a standalone paid subscription if you do not use those banks. Importantly, FreeAgent covers sole traders, freelancers, and limited companies — making it one of the few free options that works for VAT-registered businesses beyond just sole traders.

What FreeAgent includes (with eligible bank account):

• Full invoicing and expense tracking
• Digital records of income and expenses for MTD compliance
• MTD VAT submissions to HMRC
• Ability to submit quarterly updates for MTD ITSA (check provider for current status)
• Self Assessment tax return preparation (for sole traders)
• Payroll (basic payroll included)
• Time tracking
• Project management tools
• Bank feeds and reconciliation
• Corporation Tax tools (for limited companies)

What it does not include:

• Multi-currency support on the standard plan
• Stock management
• Advanced custom reporting

Who it suits:

FreeAgent suits freelancers, sole traders, and limited companies — including VAT-registered businesses — who already bank (or are willing to bank) with NatWest, RBS, or Mettle. It is the most feature-complete free option on this page and handles MTD VAT, Self Assessment, and basic payroll in a single platform. If you do not bank with an eligible provider, the monthly subscription cost makes it less competitive against the other free alternatives on this list.

3. Zoho Books — Free Plan for Very Small Businesses

Zoho Books offers a free version for businesses with an annual turnover below £35,000. It is MTD-compatible for VAT, which means it can suit very small VAT-registered businesses — not just sole traders — provided they stay within the turnover cap. For businesses voluntarily registered for VAT with low turnover, Zoho Books is worth considering.

What the free version includes:

• Up to 1,000 invoices per year
• Expense recording and digital records of income
• Bank reconciliation (one bank account)
• MTD VAT submissions
• Basic reporting
• Client portal
• One user only

What it does not include:

• Payroll
• Multiple users
• Advanced inventory management
• Automated bank feeds (available on paid plans)
• More than one bank account on the free tier

Who it suits:

Zoho Books’ free version suits very small sole traders, micro-businesses, and VAT-registered businesses with simple invoicing needs and turnover below £35,000. Note that the VAT registration threshold is currently £90,000 — so most businesses that are mandatorily VAT-registered will already be above Zoho Books’ £35,000 limit. The free tier is most useful for businesses voluntarily registered for VAT below the registration threshold. Once your turnover grows above £35,000, you must upgrade to a paid subscription. The one-user limit and invoice cap also mean it is not suitable for businesses that are growing quickly.

4. Clear Books — Free Sole Trader or Landlord Account

Clear Books offers a free account for sole traders and landlords. It is HMRC recognised software and supports MTD VAT submissions, which means it is also relevant to sole traders and landlords who are VAT-registered.

What the free account includes:

• Income and expense recording with digital records for MTD
• Basic invoicing
• MTD VAT submissions
• Simple profit and loss view
• Single user

What it does not include:

• Payroll
• Bank feeds or automated reconciliation (manual entry on the free account
• Multi-user access
• Advanced reporting
• Project tracking

Who it suits:

Clear Books’ free sole trader or landlord account suits sole traders and landlords with very simple finances who mainly need somewhere to keep digital records of income and expenses, and to submit VAT returns. It covers UK property income as well as self-employment income for landlords who also trade. It is a good option if you want a straightforward, UK-based platform without a monthly fee. The lack of automated bank feeds means more manual entry than the other options on this page, which can become time-consuming as your business grows.

Comparison: Free MTD Software at a Glance

* FreeAgent is free only with an active eligible NatWest, RBS, or Mettle business bank account. Standard subscription charges apply otherwise.

When a Free Account Is Not Enough

Free software covers the basics well, but there are situations where you will quickly hit the limits. This applies whether you are a sole trader, a landlord, or a VAT-registered business. You should consider a paid subscription if any of the following apply.

Your turnover is above £35,000 and you want a free version

Zoho Books’ free tier cuts off at £35,000 turnover. Most businesses that are mandatorily VAT-registered have turnover above £90,000 — well above that cap. If your business is above the VAT registration threshold, the only genuinely unlimited free options here are Sage’s free sole trader account and Clear Books’ free sole trader or landlord account (though both have other limits). FreeAgent is free only with an eligible bank account. Growing businesses will almost always reach the point where a paid subscription is the more sensible choice.

You employ staff

Free accounts — with the exception of FreeAgent — do not include payroll. If you pay even one employee, you need payroll software that handles PAYE, National Insurance, and RTI submissions to HMRC. Most paid accounting packages include payroll, or you can use standalone payroll software alongside a free bookkeeping tool.

Your turnover is growing

Some free tiers come with a turnover cap (Zoho Books applies from £35,000) or invoice limits. If your business is growing, you may outgrow the free version within a tax year — and switching software mid-year creates extra work. It can be more efficient to start on a paid subscription from the outset.

You have complex VAT needs

Free accounts typically handle standard VAT returns. If you operate under the flat rate scheme, the Cash Accounting Scheme, or deal with partial exemption, you need software that supports those arrangements. Check that your chosen software handles your specific VAT scheme before committing.

You need multiple users

If you want your bookkeeper, accountant, or a business partner to access your accounts, free accounts will not work. Most restrict access to a single user. Paid subscriptions from Xero, QuickBooks, and Sage all support multiple users and different permission levels.

You run a limited company

Free accounts are generally designed for sole traders. Limited companies have additional reporting requirements — including statutory accounts, Corporation Tax, and Companies House filing. Most free tools do not support these. FreeAgent handles limited companies, but you will need to verify whether the free bank-linked access covers everything you need.

You deal in foreign currencies or have foreign property income

If you invoice clients abroad, pay international suppliers, or receive property income from foreign property, you need software that handles multi-currency transactions. This is generally a paid feature. Xero, QuickBooks, and Sage all offer multi-currency on their higher-tier subscriptions. Note that foreign property income counts as qualifying income for MTD ITSA in the same way as UK property income.

You are a landlord with a property portfolio

Landlords with multiple properties or a mix of UK property and foreign property income may find the free accounts on this page too basic. Dedicated property management software such as Landlord Vision offers features designed around rental income, tenancy management, and property expenses that general accounting software does not cover. If you also need MTD compliance, check whether your chosen property management tool integrates with MTD-compatible cloud based accounting software or handles submissions directly.

You want full MTD ITSA readiness

MTD for Income Tax Self Assessment requires your software to handle digital record keeping, send quarterly updates to HMRC, and file the Final Declaration. As MTD ITSA rolls out from April 2026, not all free accounts will be confirmed as fully compatible for income tax submissions. Check your provider’s ITSA roadmap well before your mandatory start date arrives.

Accounting Software Best Deals — When You Are Ready to Upgrade

If you have outgrown the free options, or you want the full feature set from day one, the three most popular paid cloud based accounting software platforms for UK businesses are Xero, QuickBooks, and Sage. All three are HMRC recognised software and MTD-compatible for VAT. Check each provider’s website for current MTD ITSA compatibility details.

• Xero — 95% discount for 6 months. Full MTD-compatible accounting with automatic bank feeds, invoicing, VAT returns, payroll (add-on), and multi-user access. Strong for growing businesses and those working with an accountant.
• QuickBooks — 90% discount for 7 months. MTD-compatible accounting with Self Assessment tools built in, making it popular with sole traders and freelancers. Includes payroll on higher-tier subscriptions.
• Sage Accounting (paid subscriptions) — 90% discount for 6 months. Sage also offers a free sole trader account (see above). Paid subscriptions add payroll, multi-currency, and more advanced reporting. HMRC recognised software with a strong track record with UK businesses.
• Landlord Vision — dedicated property management software for landlords with multiple properties. Covers rental income, tenancy management, property expenses, and financial reporting. Useful if your UK property or foreign property portfolio has grown beyond what a standard accounting app handles. Check current MTD compatibility with the provider directly.

Summary

• Making Tax Digital for VAT applies to all VAT-registered businesses since April 2022 — sole traders, landlords, partnerships, and limited companies alike. You must use HMRC recognised software to submit your VAT returns.
• MTD for Income Tax Self Assessment rolls out from April 2026 for sole traders and landlords with qualifying income over £50,000, then £30,000 from April 2027, and £20,000 from April 2028. Qualifying income includes property income from UK property and foreign property, as well as self-employment income. It does not apply to limited companies.
• Good digital record keeping is a core MTD requirement — all options on this page support digital records of income and expenses.
• All four free options on this page are HMRC recognised software and support MTD VAT submissions, making them relevant to VAT-registered businesses as well as sole traders and landlords.
• Free accounts work well for sole traders, landlords, and very small VAT-registered businesses with straightforward finances. They are generally not suitable if you employ staff, need multiple users, have significant turnover, or have complex VAT arrangements.
• Zoho Books’ £35,000 turnover cap means its free version is mainly useful for micro-businesses and voluntary VAT registrants — most mandatorily VAT-registered businesses will already be above this limit.
• Landlords with larger portfolios may benefit from dedicated property management software such as Landlord Vision alongside or instead of a general accounting package.
• When you outgrow a free account, Xero, QuickBooks, and Sage offer paid subscriptions with significant introductory discounts.
• Excel alone is not sufficient for MTD submissions — you need HMRC recognised software or bridging software digitally linked to your spreadsheet.
• Always check GOV.UK for the latest MTD requirements and your software provider’s website for current features and MTD compatibility.

Related Pages on Business Accounting Basics

• Making Tax Digital for VAT — full guide to MTD VAT requirements
• Making Tax Digital for Income Tax — what sole traders and landlords need to know
• Self-Employed Bookkeeping — how to keep records as a sole trader
• Accounting Software Reviews — detailed comparisons of Xero, QuickBooks, Sage, and FreeAgent
• Free Excel Bookkeeping Templates — if you want to use spreadsheets (with MTD bridging guidance)

Last updated: March 2026

📌 MTD rules and thresholds can change. Always check GOV.UK for the latest position before making decisions.