For most VAT-registered small businesses, Xero is the default pick, starting with Ignite at £18 a month excluding VAT, while FreeAgent at £19 a month is the simplest choice for sole traders. Clear Books and Sage both offer a free MTD route for sole traders, and Clear Books states that its free Sole Trader and Property plans include quarterly updates and year-end filing with no transaction limits. The cheapest starting price is not always the cheapest route to filing, because Xero Simple at £7 a month is for non-VAT businesses only, and QuickBooks Sole Trader Plus at £10 a month does not cover VAT.
HMRC-recognised MTD software must keep digital records and send VAT returns or Income Tax quarterly updates to HMRC. The eight tools below all appear on HMRC lists for MTD, but some charge by business type, some by user count, and some keep VAT filing or multi-currency on a higher plan. Prices below are list prices checked on 12 November 2026, excluding VAT unless stated, and before introductory discounts.
On this page
Best hmrc-recognised mtd software: comparison table
Swipe the table sideways on a phone to see every column.
| # | Name | Best for | Starting price | Free plan / trial | Link |
|---|---|---|---|---|---|
| 1 | Xero | VAT-registered small businesses | £7 per month | Free trial (30 days) | Visit |
| 2 | QuickBooks Online | Sole traders moving to MTD for Income Tax | £10 per month | Free trial (30 days) | Visit |
| 3 | Sage Accounting | Non-VAT sole traders who want a free start | £7 per month | Yes | Visit |
| 4 | FreeAgent | Freelancers and sole traders | £19 per month | Yes (eligible bank account) | Visit |
| 5 | Zoho Books | Small teams who want a free start and low cost | £12 per month | Yes | Visit |
| 6 | KashFlow | UK sole traders who want simple invoicing | £13.50 per month | Free trial (14 days) | Visit |
| 7 | Clear Books | Sole traders and landlords who want free MTD filing | £5 per month | Yes | Visit |
| 8 | Capium 365 | Sole traders and accountants who want MTD in one place | £11.99 per month | No | Visit |
The 8 best best hmrc-recognised mtd software tools, in detail
Xero
Best for: VAT-registered small businesses
Xero lists five UK plans. Simple costs £7 a month excluding VAT for sole traders and landlords who are not VAT registered, with MTD for Income Tax ready. Ignite costs £18 a month excluding VAT and is the first plan for VAT-registered businesses, with VAT returns, 20 invoices a month and 10 bills a month.
- Grow costs £39 a month excluding VAT, with unlimited invoices and payroll for 1 person.
- Comprehensive costs £55 a month excluding VAT and adds multi-currency, payroll for 5 people and expense claims for 5 users, while Ultimate costs £70 a
- Choose Ignite rather than Simple if you are VAT registered, because Simple does not cover VAT filing.
Pros
- MTD for VAT and MTD for Income Tax ready
- Ignite allows 20 invoices and 10 bills a month
- Grow adds payroll for 1 person
Cons
- Multi-currency only on Comprehensive at £55 a month
- Ignite caps invoices at 20 a month
- Simple at £7 a month is for non-VAT businesses only
QuickBooks Online
Best for: Sole traders moving to MTD for Income Tax
QuickBooks Online lists Sole Trader Plus at £10 a month excluding VAT for non-VAT sole traders, with MTD for Income Tax, mileage tracking and invoicing for 1 user plus an accountant. Simple Start costs £16 a month excluding VAT and adds VAT returns for 1 user. Essentials costs £38 a month excluding VAT, with 3 users, bill management, recurring invoices and multi-currency.
- Plus costs £56 a month excluding VAT, with 5 users, projects, inventory and budgeting, and Advanced costs £123 a month excluding VAT, with 25 users.
- A fourth user forces a move from Essentials to Plus.
- Payroll is not in the base subscription, so add that cost if you have staff.
Pros
- Sole Trader Plus covers MTD for Income Tax
- Simple Start at £16 a month adds VAT returns
- Essentials at £38 a month adds multi-currency and 3 users
Cons
- Simple Start allows only 1 user
- VAT returns need Simple Start at £16 a month, not Sole Trader Plus
- payroll is a separate subscription
Sage Accounting
Best for: Non-VAT sole traders who want a free start
Sage lists Sole Trader Free at £0 a month for non-VAT sole traders, with digital records and MTD for Income Tax. Sage Sole Trader costs £7 a month and adds unlimited sales invoices and receipt capture. Accounting Start costs £20 a month excluding VAT, with invoicing, VAT calculation and bank reconciliation.
- Standard costs £43 a month excluding VAT, with custom reporting, cash flow forecasting and CIS management for 3 users, and Plus costs £59 a month excl
- Payroll is included on the Accounting plans, unlike QuickBooks, where payroll is separate.
Pros
- Sole Trader Free covers MTD for Income Tax at £0 a month
- Accounting Start at £20 a month adds VAT
- payroll is included on Accounting plans
Cons
- Accounting Start allows only 1 user
- multi-currency only on Plus at £59 a month
- Standard at £43 a month is needed for CIS and custom reporting
FreeAgent
Best for: Freelancers and sole traders
FreeAgent prices by business type rather than by feature tier. A sole trader pays £19 a month excluding VAT, or £190 a year on annual billing. A partnership or LLP pays £27 a month excluding VAT, or £270 a year, and a limited company pays £33 a month excluding VAT, or £330 a year.
- A landlord plan costs £10 a month excluding VAT, or £100 a year.
- The same subscription covers MTD VAT returns, MTD Income Tax quarterly updates, Self Assessment filing, payroll, projects and time tracking.
- Smart Capture Unlimited at £5 a month excluding VAT removes the 10-file monthly cap on receipt and bill capture.
- FreeAgent is free for as long as you hold a NatWest, Royal Bank of Scotland, Ulster Bank or Mettle business account.
Pros
- One price covers MTD VAT, MTD Income Tax and Self Assessment
- annual billing is £190 a year for sole traders
- free with an eligible NatWest Group or Mettle account
Cons
- Receipt capture is capped at 10 a month unless you add Smart Capture Unlimited at £5 a month
- no lower tier if £19 a month is too high without a bank deal
- partnership at £27 a month and limited company at £33 a month cost more
Zoho Books
Best for: Small teams who want a free start and low cost
Zoho Books lists a free plan at £0 for 1 user plus 1 accountant, with 1,000 invoices a year, 1,000 expenses a year, VAT returns and MTD VAT filing. Standard costs £12 a month billed monthly, or £10 a month billed annually, excluding local taxes, with 3 users, 5,000 invoices a year, bank feeds and API access. Professional costs £24 a month billed monthly, or £20 a month billed annually, with 5 users, 10,000 invoices a year, multi-currency and inventory.
- Premium costs £30 a month billed monthly, or £25 a month billed annually, with 10 users and 25,000 invoices a year, while Elite costs £99 a month bill
- Watch the annual invoice cap if you choose Zoho Books.
Pros
- Free plan allows 1,000 invoices a year and 1 user plus an accountant
- Standard at £12 a month adds bank feeds and 3 users
- Professional at £24 a month adds multi-currency and inventory
Cons
- Free plan allows only 1 user
- Standard caps invoices at 5,000 a year
- multi-currency needs Professional at £24 a month
KashFlow
Best for: UK sole traders who want simple invoicing
KashFlow, now IRIS KashFlow, lists Starter at £13.50 a month, with unlimited quotes, 10 invoices a month, reconciliation of up to 25 bank transactions, 1 user, bank feeds and mileage tracking. Business costs £27.50 a month, with unlimited quotes and invoices, unlimited bank reconciliation, multi-user access and multi-currency. Annual billing costs £97 a year plus VAT for Starter, against a recommended retail price of £162, and £178 a year plus VAT for Business, against a recommended retail price of £291.50.
- Move to Business if you send more than 10 invoices a month.
Pros
- Starter at £13.50 a month includes bank feeds
- Business at £27.50 a month adds unlimited invoices and multi-currency
- annual Starter is £97 a year plus VAT
Cons
- Starter caps invoices at 10 a month and bank reconciliation at 25 transactions
- Starter allows only 1 user
- multi-currency needs Business at £27.50 a month
Clear Books
Best for: Sole traders and landlords who want free MTD filing
Clear Books states that its free plans are free for good, with no time limit and no upgrade needed to file. Sole Trader Free and Property Free both include MTD quarterly updates, year-end filing, income and expense recording, no transaction limits and the option to invite your accountant. Property Free covers one property or a group of UK properties.
- The subscription Sole Trader and Property plans start at £5 a month plus VAT, with email support, bank feeds, bill and receipt scanning and invoicing.
- VAT-registered sole traders can move to Sole Trader Plus at £15 a month plus VAT, which adds MTD VAT reporting.
- For businesses, Small costs £16 a month plus VAT, Medium costs £34 a month plus VAT and adds MTD VAT and CIS, and Large costs £44 a month plus VAT and
Pros
- Sole Trader Free and Property Free include quarterly updates and year-end filing with no transaction limits
- HMRC recognised for MTD for Income Tax since 14 February 2025, under reference 4TLCTU
- Small at £16 a month covers limited companies
Cons
- Bank feeds and invoicing need the £5 a month plan, not the free plan
- MTD VAT needs Sole Trader Plus at £15 a month or Medium at £34 a month
- multi-currency only on Large at £44 a month
Capium 365
Best for: Sole traders and accountants who want MTD in one place
Capium 365 is a cloud accounting product for UK businesses and accountants, with MTD for Income Tax, MTD VAT and CIS compliance, sales and purchase management, automatic bank reconciliation and a mobile app. A sole trader pays £11.99 a month plus VAT, and a limited company pays £15.99 a month plus VAT. It allows unlimited invoice and receipt uploads, plus unlimited bank feeds, user licences and document storage.
- Capium states that SA103, SA105 and SA106 forms are automatically pre-populated, with separate reporting for different income streams.
- That matters for a sole trader with more than one income source, because each source needs its own record.
- Check the limited company price first if you are incorporated, because it is £4 a month higher than the sole trader price.
Pros
- £11.99 a month for sole traders and £15.99 a month for limited companies
- unlimited invoice and receipt uploads
- MTD for Income Tax ready with SA103, SA105 and SA106 pre-populated
Cons
- Limited company price rises to £15.99 a month
- practice pricing is per client, so costs grow with client numbers
- no free plan listed
How we chose
We chose tools that appear on HMRC lists for MTD for VAT or MTD for Income Tax, with a published UK price. We checked prices on the vendor pricing pages on 12 November 2026, and we used list prices before introductory discounts, excluding VAT where the vendor states that basis. We did not test any tool hands-on. We used plan limits, user caps and VAT filing coverage to separate the picks.
Which tool fits your budget and business type
| Situation | Pick | Price to budget for |
|---|---|---|
| Non-VAT sole trader, free start | Sage Sole Trader Free or Clear Books Sole Trader Free | £0 a month |
| Non-VAT sole trader, lowest subscription price | Xero Simple | £7 a month (excl. VAT) |
| VAT-registered sole trader, lowest MTD VAT price | QuickBooks Simple Start | £16 a month (excl. VAT) |
| Freelancer who wants tax filing in one place | FreeAgent sole trader | £19 a month (excl. VAT) |
| Small team, 3 users, low cost | Zoho Books Standard | £12 a month (excl. VAT) |
| Sole trader, 10 invoices a month or fewer | KashFlow Starter | £13.50 a month |
| Landlord, free MTD filing | Clear Books Property Free | £0 a month |
| Limited company, full ledger | FreeAgent limited company or Xero Grow | £33 a month or £39 a month (excl. VAT) |
Frequently asked questions
What is the cheapest HMRC-recognised MTD software?
Sage Sole Trader Free and Clear Books Sole Trader Free both cost £0 a month for non-VAT sole traders, and Clear Books states that its free plan includes quarterly updates and year-end filing with no transaction limits. Xero Simple is the cheapest subscription plan here at £7 a month excluding VAT.
Which is best for a VAT-registered small business?
Xero is the best default pick for a VAT-registered small business, starting with Ignite at £18 a month excluding VAT, with VAT returns, 20 invoices a month and 10 bills a month. QuickBooks Simple Start at £16 a month excluding VAT is the lower-priced VAT route, with 1 user, while Sage Accounting Start at £20 a month adds payroll.
Which is best for a sole trader who is not VAT registered?
FreeAgent is the simplest choice if you want MTD for Income Tax, Self Assessment and payroll in one place at £19 a month excluding VAT, or free with an eligible bank account. Sage Sole Trader Free and Clear Books Sole Trader Free are the best free choices, and Xero Simple at £7 a month excluding VAT is the cheapest subscription route.
Do I need separate software for MTD for VAT and MTD for Income Tax?
No, if you choose a tool that covers both duties on the same plan. Xero Ignite, QuickBooks Simple Start, FreeAgent, Zoho Books Standard and Capium 365 all cover MTD VAT and MTD Income Tax, subject to the plan limits in this article. Some entry plans cover only one duty, such as Xero Simple and QuickBooks Sole Trader Plus, which cover Income Tax but not VAT.
What happens if my income passes the MTD threshold later?
MTD for Income Tax applied from 6 April 2026 to sole traders and landlords with qualifying income over £50,000, and the threshold drops to £30,000 from April 2027 and to £20,000 from April 2028. If your income crosses a threshold, you need MTD software before the next quarterly update period.
Can I use free MTD software for the whole tax year?
Yes, if the free plan covers digital records, four quarterly updates and the year-end tax return. Clear Books states that its free Sole Trader and Property plans do all three, with no transaction limits and no time limit. A free trial is different, because it ends after 14 or 30 days, so check whether the offer is a free plan or a trial.
Sources
- https://www.xero.com/uk/accounting-software/
- https://www.xero.com/uk/campaign/join/
- https://quickbooks.intuit.com/uk/business-type/limited-companies/
- https://www.sage.com/en-gb/pricing/
- https://www.freeagent.com/pricing/
- https://www.zoho.com/uk/books/pricing/
- https://www.kashflow.com/
- https://www.clearbooks.co.uk/
- https://www.clearbooks.co.uk/blog/free-mtd-software-guide/
- https://www.capium.com/
- https://www.capium.com/products/capium365/?utm_source=Aweb+blog&utm_medium=blog&utm_campaign=Capium+aweb+blog&utm_id=aWEB+BLOG
Prices and features were read on each company’s own website in November 2026. They change often, so confirm the current offer on the official site before you sign up or buy.