An honest, non-affiliated comparison of the main HMRC-recognised MTD software options for 2026/27.
Since Making Tax Digital for Income Tax became mandatory for sole traders earning over £50,000 from April 2026 (dropping to £30,000 in 2027 and £20,000 in 2028), choosing MTD-compatible software has become a real decision for a lot of sole traders. Here's an honest comparison of the main options as of August 2026, based on published pricing and HMRC's recognised software list.
| Software | Approx. price | MTD ITSA ready | Best for |
|---|---|---|---|
| Sage Sole Trader Free | £0/month (5 invoice cap) | Yes | Very simple, low-transaction businesses wanting a genuinely free option |
| QuickBooks Self-Employed | ≈ £10/month | Yes | Simplest paid route to full compliance, minimal setup |
| FreeAgent | £19/month (free for most NatWest/RBS business account holders) | Yes | Sole traders who bank with NatWest/RBS, or want a polished all-in-one tool |
| Xero | ≈ £16–£33/month | Yes | Sole traders expecting to scale, register for VAT, or work closely with an accountant |
All four are on HMRC's list of recognised MTD software and can be used for quarterly updates and your Final Declaration. The right choice usually comes down to your transaction volume and whether you want built-in bank feeds (Xero, FreeAgent, QuickBooks) or are happy entering things manually to keep costs at zero (Sage's free tier).
If your bookkeeping is genuinely simple, a spreadsheet paired with low-cost bridging software remains a valid, often cheaper route to MTD compliance — see our full breakdown on Spreadsheet vs Accounting Software for MTD.
PayToolkit isn't accounting software and doesn't submit MTD quarterly updates on your behalf — but our free Expense Tracker and Tax Dashboard are useful alongside any of the above for keeping a running total of income, expenses and your likely tax bill throughout the year, and our MTD Income Threshold Checker tells you exactly when you'll need to act.
We're not affiliated with Sage, QuickBooks, FreeAgent or Xero. Pricing checked August 2026 and may have changed — always confirm current pricing directly with the provider. Sources: provider websites, GOV.UK MTD recognised software list.
Yes, if your bookkeeping is simple — Sage's free tier is HMRC-recognised for MTD ITSA, though the 5-invoice cap may not suit busier sole traders.
No, but starting digital record-keeping before you're mandated makes the transition smoother — check your position with the MTD Income Threshold Checker.
Yes, there's no rule against changing providers, though you'll want to ensure your historical records for the current tax year transfer across accurately.
No — PayToolkit's tools help you track income, expenses and estimated tax, but you'll need HMRC-recognised software (like the options above) to actually submit quarterly updates.