How to choose MTD software in the UK (VAT & ITSA)
- Bela El
- Jan 2
- 3 min read
Choosing the right Making Tax Digital (MTD) software is becoming a critical decision for UK sole traders, freelancers, landlords and small businesses. With MTD for VAT already live and MTD for ITSA starting from April 2026, selecting the wrong tool can lead to unnecessary complexity, higher costs, or compliance risks.
This guide explains how to choose MTD software based on your business type, technical needs, and long-term compliance requirements.
What is MTD and why software choice matters
Making Tax Digital (MTD) is HMRC’s initiative to modernise the UK tax system by requiring:
digital record keeping
electronic submissions
compatible software connections to HMRC
HMRC does not allow manual submissions under MTD. That means choosing the right MTD software is not optional — it directly affects compliance, penalties, and day-to-day workflow.
How to choose MTD software based on your business type
When learning how to choose MTD software, the first question should be who is the software for?
Sole traders & freelancers
Often need:
simple invoicing
VAT tracking
minimal setup
mobile access
Landlords
Typically need:
income & expense tracking
MTD ITSA readiness
straightforward reporting
Small businesses
May require:
multi-user access
integrations
more advanced reporting
Choosing software designed for your actual use case avoids paying for features you’ll never use.
Invoicing software vs accounting software for MTD
One of the most common questions is whether full accounting software is required.
Invoicing-focused MTD software
Best for:
tradespeople
on-site work
simple VAT submissions
Pros:
faster setup
easier daily use
mobile-first workflows
Full accounting software
Best for:
complex bookkeeping
payroll & reconciliations
office-based workflows
Cons:
steeper learning curve
often overkill for sole traders
👉 For many users, invoicing software with MTD compatibility is enough.
MTD bridging software – when does it make sense?
MTD bridging software connects spreadsheets to HMRC.
Good for:
businesses already using Excel
short-term compliance
Limitations:
manual upkeep
higher error risk
not ideal long term
If you want automation and simplicity, bridging software is usually a temporary solution.
Key features to look for when choosing MTD software
If you want to know how to choose MTD software properly, make sure it includes:
Direct HMRC connection (VAT & ITSA)
Digital records & audit trail
VAT submission confirmation
Strong security & GDPR compliance
Mobile usability
Transparent pricing
Free trial or flexible plans
Free vs paid MTD software – what’s the difference?
Some users search for free MTD software, but it’s important to understand the trade-offs.
Free tools often:
support limited scenarios
lack automation
offer minimal support
Paid tools usually provide:
ongoing updates
better reliability
long-term compliance support
Choosing the cheapest option can cost more in time and mistakes.
How Invoice Guru fits into MTD workflows
Invoice Guru is designed as a mobile-first MTD-ready invoicing app, focusing on:
fast invoice creation
digital records
MTD-friendly workflows
simplicity for non-accountants
It’s built for users who want compliance without becoming accountants themselves.
Some invoicing-focused tools, such as Invoice Guru, are designed to support MTD workflows without requiring full accounting software.
How to choose MTD software – final checklist
Before deciding, ask yourself:
Do I need full accounting or just invoicing?
Will I submit VAT, ITSA, or both?
Do I want mobile access?
Is long-term compliance important?
Can I scale later if needed?
The right MTD software should fit your workflow — not force you to adapt to it.
Final thoughts
Understanding how to choose MTD software is less about features and more about usability, compliance, and future readiness. With MTD expanding in the UK, choosing the right tool now can save years of friction later.