9 Features to Look for When Choosing MTD Software [+Steps]

Making Tax Digital (MTD) is changing how UK freelancers, sole traders, landlords, and small businesses manage their taxes. Instead of submitting a single annual Self Assessment return, many taxpayers will soon need to keep digital records and send regular updates to HMRC using compatible software.

From April 2026, self-employed individuals and landlords earning over £50,000 will be required to follow the new system, with lower income thresholds rolling out in later years.

For many people, picking the right MTD software will be the most important step as they prepare to transition to MTD. So, if you’re currently weighing up your options, we’ll cover the most important features to look for when choosing MTD software.

Key takeaways

• MTD is about reducing admin, not adding complications
  Choosing software that just meets compliance requirements isn’t enough. The best platforms automate record-keeping, reporting, and tax calculations so you can focus on running your business instead of managing spreadsheets.
• Real-time tax estimates help with financial planning
  Platforms that calculate your tax bill as you earn allow you to set aside the right amounts and avoid surprises.
• Easy reporting and integration are key features of good MTD software
  Software options that automatically prepare quarterly updates, connect directly to HMRC, and integrate easily with invoicing and banking tools make compliance much easier.
• Choose tools that are user-friendly, scalable, and supported
  Usability, customer support, and long-term scalability matter. Platforms that are intuitive, offer helpful guidance, and grow with your business will save you time and headaches.

The real goal of MTD: Less admin, not more software

For many freelancers and small business owners, the biggest concern is whether the new rules will create more admin.

Technically, any HMRC-compatible software that allows you to keep digital records and submit quarterly updates meets the basic requirements of MTD. The core functions involve maintaining digital records, submitting quarterly updates, and filing the final declaration directly to HMRC.

However, compliance shouldn’t be the only factor when choosing software. The real question is whether the tool actually makes managing your finances easier.

Many traditional accounting tools were built primarily for accountants. They often require manual bookkeeping, complicated setup, and ongoing maintenance. For freelancers and small business owners who just want to stay compliant and understand their taxes, these systems can feel unnecessarily complex.

MTD can help business owners rethink how business finances are managed.

Instead of juggling spreadsheets, invoicing tools, accounting software, and banking apps, modern platforms combine these functions into one system. When everything is connected, financial data flows automatically between tools, making record-keeping, tax calculations, and reporting far simpler.

Choosing MTD software: 9 features to look for

Here are nine features any top-of-the-line MTD software must have:

1. Full HMRC compatibility

The first and most important requirement is simple: the software must be compatible with HMRC’s system. Under MTD rules, manual submissions through the HMRC website or paper records are no longer acceptable.

Under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), taxpayers must also submit quarterly updates to HMRC. These updates replace the traditional ‘once-a-year’ reporting model.

Because of this change, the best MTD software should make quarterly reporting as easy as possible.

Compatible software should allow you to:

• Maintain digital records of income and expenses
• Submit quarterly updates to HMRC
• File your final declaration at the end of the tax year
• Maintain secure digital links between your financial data and HMRC systems

Some tools only offer ‘bridging’ functionality, meaning they connect spreadsheets to HMRC for submission. Others offer complete accounting systems that manage your records, tax calculations, and filings all in one place.

When choosing software, make sure it supports the full MTD workflow, not just one part of the process.

2. Built-in reminders and compliance alerts

One of the risks with quarterly tax reporting is missing deadlines. Under MTD, failing to submit updates on time may lead to penalty points and fines. That’s why many modern MTD platforms include compliance reminders.

Look for features like:

• Automated deadline notifications
• Reminders for quarterly submissions
• Alerts for missing records
• Guidance on compliance requirements

For busy business owners juggling multiple responsibilities, these automated alerts can be invaluable.

3. Easy invoicing

For many freelancers and small businesses, invoicing is closely connected to tax reporting.

Modern MTD software often includes integrated invoicing tools that allow you to:

• Create and send professional invoices
• Track payments and overdue invoices

So there’s no need for separate invoicing and accounting systems. When your invoicing and bookkeeping are connected, your financial data stays organised automatically, making quarterly reporting far easier.

4. Real-time tax estimates

One of the biggest benefits of digital tax systems is the ability to see your tax position throughout the year.

Instead of waiting until the end of the tax year to discover how much you owe, good MTD software provides real-time tax estimates based on your current income and expenses.

This feature allows you to:

• Understand your expected tax bill
• Set money aside for future payments
• Avoid unexpected fines and penalties

For freelancers and sole traders with fluctuating income, this visibility can make a huge difference to financial planning. Real-time tax calculations also help ensure quarterly submissions stay accurate and up to date.

5. Automatic record-keeping

MTD requires taxpayers to maintain digital records of their income and expenses throughout the tax year.

For many freelancers and small business owners, this requirement can feel exhausting if their bookkeeping currently relies on manual spreadsheets or receipts stored in a drawer.

The best MTD software simplifies this process through automated record-keeping. Look for tools that can:

• Automatically categorise transactions
• Import bank transactions
• Capture receipts digitally
• Organise income and expenses in real time

Automation removes a huge amount of manual admin and helps ensure your records stay compliant with MTD rules. It also significantly reduces the risk of errors during tax reporting.

6. Secure cloud-based access

Security and accessibility are also essential considerations when choosing MTD software. Most modern solutions operate as cloud-based platforms, meaning you can access your financial data from anywhere with an internet connection.

Cloud-based software typically offers:

• Encrypted data storage
• Secure logins and authentication
• Automatic backups
• Regular software updates

Many platforms also run on secure cloud infrastructure and are available around the clock. For business owners who work remotely or travel frequently, cloud access can be invaluable.

7. Integration with banks and other tools

Another feature worth prioritising is integration. Good MTD software should connect easily with other financial tools you already use.

Common integrations include:

• Business bank accounts
• Payment processors
• Accounting tools

Strong integrations help create a ‘digital link’ between systems, which is also a key requirement under MTD rules.

8. Clear pricing and transparent costs

Cost is always a factor when choosing software. MTD tools are usually available via monthly or annual subscriptions, and pricing can vary significantly depending on the features included.

Before committing to a platform, check whether the pricing includes:

• Quarterly submissions
• Final declarations
• Invoicing features
• Bank integrations
• Customer support

Some solutions charge extra for certain functions, while others bundle everything into a single subscription. Transparent pricing helps you understand the true cost of the software before making a decision.

9. Reliable customer support

Even with the smartest software, you’ll sometimes need support. Whether you have questions about compliance rules, technical issues, or submitting updates to HMRC, having access to reliable support can make a huge difference.

Look for platforms that provide:

• Live chat or email support
• Help guides and tutorials
• Onboarding assistance
• Responsive customer service

Good support can save hours of frustration, especially during busy tax periods.

Choosing MTD software: How to compare your options

Once you understand the key features to look for, the next challenge is deciding which software actually delivers them in a practical way. Many platforms advertise MTD compatibility, but the experience of using them can vary significantly.

Before committing to a tool, it’s worth spending some time working out how well it fits your specific needs. A few small differences in usability, automation, or support can have a major impact on how much time you spend managing your finances throughout the year.

Here are a few practical steps that can help you choose the best MTD software for your business:

Step 1: Consider your current workflow

Start by thinking about how you currently manage your finances. Do you rely on spreadsheets, send invoices through separate tools, or track expenses manually? Understanding how you already work helps you identify which features will save you time.

The right MTD software should simplify your accounting workflow rather than forcing you to rebuild it from scratch.

For example, if you regularly send invoices to clients, choosing a platform with built-in invoicing will reduce the need for additional tools. If most of your transactions happen through a business bank account, software that automatically imports those transactions will make record-keeping much easier.

Step 2: Check how much manual work is required

Not all MTD software is equally automated. Some systems still rely heavily on manual bookkeeping, which can defeat the purpose of switching to digital tax tools in the first place.

When lining up your options, look closely at how transactions are recorded and categorised. Ask questions like:

• Does the software automatically import transactions from your bank?
• Are expenses categorised automatically, or do you need to assign categories manually?
• Can receipts be easily uploaded and attached to transactions?

Step 3: Look at how reporting works

Quarterly reporting is one of the biggest changes introduced by MTD for ITSA. Because you will need to send updates to HMRC throughout the year, reporting should be quick and straightforward.

When comparing software, check whether the system:

• Prepares quarterly summaries automatically
• Allows you to review the information before submitting it
• Submits updates directly to HMRC

Ideally, the reporting process should take only a few minutes once your records are up to date.

Step 4: Consider your experience

Many traditional accounting tools were originally designed for professional accountants, which can make them difficult for freelancers or sole traders to navigate. Complicated dashboards, unfamiliar terminology, and features built for large accounting workflows can make simple tasks feel confusing.

Modern MTD platforms, however, are increasingly designed with small business owners in mind, combining accounting, invoicing, and tax reporting into simpler, more intuitive systems.

If possible, try a free trial or demo of the software before committing. This allows you to see how intuitive the interface is. A well-designed platform should make tasks like sending invoices, reviewing expenses, or checking your tax estimate feel straightforward.

Step 5: Think about long-term scalability

Finally, consider whether the software will continue to support your needs as your business grows.

If you expect your income to increase or plan to hire employees in the future, you may need additional financial tools later on. Choosing software that can adapt to changing requirements can prevent the need to switch systems again later.

Scalable platforms often include additional features such as expanded reporting, integrations with other business tools, or support for multiple income streams.

A different kind of MTD solution – that’s FREE

Choosing MTD software ultimately comes down to one question: how much time do you want to spend managing your finances? Some platforms just provide the basic tools, while others are designed to automate as much of the work as possible.

This is what ANNA offers – and it’s free.

With ANNA, not only is MTD free, but we’ll file your 2025/26 Self Assessment for free, too. Already filed with a different software? We’ll also refund that when you open an ANNA account.

With ANNA, you can:

• Prepare and file your 2025/26 Self Assessment for free: Handle your year-end return without additional cost, just connect to HMRC to unlock this.
• Have your MTD updates prepared automatically: Keep quarterly submissions ready to file.
• Let Auto Accountant handle your bookkeeping: Keep records accurate without manual effort.
• Calculate and file VAT automatically: Stay fully MTD-compliant without extra work.
• Create and send invoices with card payments: Get paid faster and track everything in one place.
• Stay organised with a personalised tax calendar: Never miss a deadline.
• Run simple payroll for one employee: Automate PAYE and NICs calculations and submissions.

Try ANNA today and get MTD-ready with ease. And if you have any questions about MTD software options, or just need some tax advice, we’re available 24/7 in the ANNA app.