MTD for Income Tax: Choose the Right Software and Avoid Errors

Who Needs MTD for Income Tax Right Now?

As of April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) applies to sole traders and landlords with combined qualifying income above £50,000. From April 2027, the threshold drops to £30,000, and from April 2028 it falls further to £20,000. If you are a freelancer or sole trader currently above the £50,000 threshold and not yet compliant, you need to act immediately. MTD for ITSA requires you to keep digital records and submit quarterly updates to HMRC using compatible third-party software.

What HMRC-Compatible Software Actually Means

Not every accounting app on the market is MTD for ITSA compatible. HMRC maintains a published list of software that has passed its recognition process. You must use software from this list — spreadsheets alone are not sufficient unless they are connected to a recognised bridging software tool. When evaluating your options, look for software that supports all three core MTD for ITSA functions:

• Digital record keeping for income and expenses across each business or property income source
• Quarterly update submissions to HMRC at the end of each of the four quarterly periods
• End of Period Statements (EOPS) and a Final Declaration to replace your traditional Self Assessment return

Key Features to Look for When Choosing Software

The right software depends heavily on how your freelance business operates. Consider the following before committing to a subscription:

• Bank feed integration: Automatic bank feeds reduce manual data entry errors. Confirm your bank is supported before signing up.
• Multiple income sources: If you have both self-employment income and rental income, ensure the software handles multiple income streams under a single MTD account.
• Mobile access: Logging expenses on the go matters for freelancers. Check whether the mobile app supports receipt capture and categorisation.
• VAT bridging: If you are already MTD for VAT compliant, confirm the software handles both obligations without duplication of effort.
• Accountant access: If you work with a bookkeeper or accountant, check the software allows multi-user access or accountant portal login.

Common Integration Errors and How to Avoid Them

Many sole traders run into trouble not from choosing bad software, but from setting it up incorrectly. Here are the most frequent errors seen on the EasyTax platform:

• Incorrect business start date: Your software must reflect the correct accounting period start date. Getting this wrong causes your quarterly submission periods to misalign with HMRC's records, triggering penalty notices.
• Duplicate bank transactions: When you connect a bank feed after already entering transactions manually, duplicates occur. Always reconcile thoroughly before activating a live feed.
• Wrong income category mapping: MTD for ITSA requires income to be reported under specific categories such as self-employment or property. Mapping all income to a single catch-all category will cause EOPS errors.
• Not authorising HMRC API access: Your software must be formally authorised to connect to HMRC's systems via the Government Gateway. Skipping this step means your quarterly submissions are never actually received by HMRC, even if the software shows them as sent.
• Submitting nil returns without checking: If a quarter looks unusually low, verify your bank feed has not dropped out. A missed feed can make a busy quarter look empty.

Practical Next Steps

Start by checking the HMRC MTD for ITSA software supplier list at gov.uk to shortlist recognised tools. Run a free trial during a quiet period so you can test bank feeds and submission flows without deadline pressure. If you are unsure whether your current accounting period aligns with MTD requirements, speak to your accountant before your first quarterly deadline. Getting the foundation right now means far fewer headaches when the thresholds drop and MTD becomes relevant to even more freelancers in the years ahead.