How to Choose MTD Software in the UK: VAT and ITSA Guide
A practical guide to choosing the right MTD software for UK businesses. Covers MTD for VAT and MTD for ITSA, with key questions to ask before you decide.
How to Choose MTD Software in the UK: VAT and ITSA
Choosing the right Making Tax Digital software is one of the most important financial decisions a UK small business will make in 2026. The wrong choice means frustration, wasted money, and potentially a compliance headache. The right choice means smoother admin, accurate records, and the confidence that your submissions are reaching HMRC correctly.
This guide walks you through everything you need to consider when selecting MTD software, covering both MTD for VAT and MTD for Income Tax Self Assessment (ITSA).
Step 1: Understand Which MTD Programme Applies to You
Before evaluating software, be clear on what you need it to do.
MTD for VAT applies to all VAT-registered businesses. If you are VAT-registered, you are already required to use MTD-compatible software for your VAT returns.
MTD for ITSA applies to self-employed individuals and landlords based on qualifying income thresholds:
- Over £50,000: mandatory from April 2026
- Over £30,000: mandatory from April 2027
- Over £20,000: proposed for April 2028
You may need software that handles VAT only, ITSA only, or both. This significantly narrows your options.
Step 2: Check the HMRC Recognition List
Only software that appears on HMRC’s list of recognised MTD-compatible products is approved for making submissions. This list is maintained on the GOV.UK website and is the definitive reference.
Do not assume that because a product mentions MTD in its marketing it is actually approved. Check the list directly. Software that is not on the list cannot legally be used for MTD submissions, regardless of what the vendor claims.
Step 3: Assess Your Business Complexity
The right software depends on the complexity of your business. Ask yourself:
How many transactions do you have per month? A sole trader with 20 invoices a month has very different needs from a limited company with hundreds of transactions.
Are you VAT-registered? If so, does the software support MTD for VAT in addition to ITSA?
Do you have multiple income sources? MTD for ITSA requires separate reporting for each source of income (e.g., self-employment and property rental as separate streams).
Do you use a CIS (Construction Industry Scheme)? If you work in construction, you need software that handles CIS deductions correctly.
Do you have an accountant? If so, does the software support accountant access or agent authorisation?
Step 4: Evaluate Usability for Your Working Style
Tax software is only effective if you actually use it consistently. The most feature-rich platform in the world is useless if it is so complicated you avoid opening it.
Consider:
- Mobile vs. desktop: If you work on the go, mobile-first software is essential. If you work from an office, a desktop platform may suit better.
- Learning curve: Some platforms are built for accountants and require significant training. Others are designed for non-accountants and are genuinely intuitive.
- Time to raise an invoice: For tradespeople, being able to create and send an invoice in under a minute from a phone is a key requirement.
- Receipt capture: Does the app include camera-based receipt scanning, or do you need to type everything manually?
Step 5: Compare Costs Carefully
MTD software pricing varies enormously. Watch out for:
- Introductory offers that increase significantly after the first few months
- Per-feature pricing where basic MTD functionality requires multiple add-ons
- Annual vs. monthly billing — annual plans are usually cheaper but require upfront commitment
- User limits — some platforms charge per user; others are single-user by default
For most UK sole traders and small businesses, a straightforward monthly or annual subscription to a well-regarded mobile app represents the best value.
Step 6: Consider Long-Term Support
Tax software is not a one-off purchase. You will depend on it for ongoing submissions, and HMRC’s requirements evolve over time. Look for:
- A provider with a track record of keeping their software updated for HMRC changes
- UK-based customer support (helpful for tax-specific questions)
- Regular software updates and security patches
- A clear product roadmap
Key Questions to Ask Any MTD Software Provider
Before committing, ask:
- Are you on HMRC’s recognised list for MTD for ITSA and/or MTD for VAT?
- How do I submit quarterly updates — is the process guided within the app?
- Can I authorise my accountant to access my records?
- What happens to my data if I cancel my subscription?
- Is there offline functionality for when I have no internet connection?
- How is my data backed up and secured?
A Summary Comparison Framework
| Factor | What to Look For |
|---|---|
| HMRC recognition | Confirmed on GOV.UK list |
| VAT support | Required if VAT-registered |
| ITSA support | Required if self-employed above threshold |
| Mobile app | Essential for tradespeople and mobile workers |
| Ease of use | Non-accountant friendly |
| Receipt capture | Camera-based OCR |
| Cost | Transparent, all-in pricing |
| Support | UK-based, responsive |
Making Your Decision
The ideal MTD software for most UK sole traders and small businesses is one that combines intuitive mobile invoicing, automatic expense capture, and full MTD submission capability in a single affordable package. Avoid overcomplicated platforms designed for large accountancy firms — they carry unnecessary cost and complexity for a one-person trade business.
InvoiceGuru combines intuitive mobile invoicing, expense tracking, and full MTD compliance in a single affordable app — designed specifically for UK sole traders and small businesses.
Take advantage of free trials to test the real-world experience before committing. Pay attention to how long it takes to raise your first invoice and capture your first receipt — if it feels cumbersome in the trial, it will feel worse after six months of daily use.