Making Tax Digital: Choosing the Right HMRC-Compliant Software

The shift towards Making Tax Digital (MTD) represents one of the most significant changes to the UK tax system in recent history. Its goal is clear: to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. As MTD continues to be rolled out across different taxpayer groups, choosing the right digital software is not just a matter of convenience – it’s a legal necessity.

HMRC mandates the use of MTD-compliant software to maintain digital records and submit tax data. For landlords, sole traders, and limited companies alike, getting ahead of this requirement is essential to remain compliant, efficient, and financially organised.

Below, we outline four of the most powerful and trusted MTD-compatible software options (and our favourites) – each offering distinct benefits depending on your needs and structure.

Xero: Seamless, Scalable, and Strong on Automation

Best for: Limited companies, growing businesses, and those requiring robust reporting.

Xero has become a staple in the accounting software space, known for its intuitive interface and powerful integrations. It enables businesses to manage invoices, bank reconciliation, VAT submissions, and payroll in one centralised system. Crucially, Xero is fully compliant with MTD for VAT and is well positioned to support Income Tax Self-Assessment (ITSA) when it becomes mandatory.

Key benefits:

• Real-time collaboration with your accountant.
• Automatic bank feeds and reconciliation.
• Wide range of third-party app integrations.
• Scalable for start-ups through to multi-entity organisations.

For those who value automation, efficiency, and accuracy, Xero stands out as a market leader.

FreeAgent: Tailored for Freelancers and Contractors

Best for: Freelancers, contractors, and micro-businesses.

Now owned by NatWest Group, FreeAgent is particularly appealing to sole traders and small partnerships, especially those banking with NatWest, RBS or Ulster Bank – where it may even be offered for free. It’s fully MTD-ready and designed with the self-employed in mind, making it ideal for straightforward tax management without unnecessary complexity.

Key benefits:

• Clear dashboard showing tax deadlines and amounts owed.
• Built-in time tracking and expense management.
• HMRC-recognised for both VAT and Income Tax MTD submissions.
• Ideal for those who want clarity and simplicity over customisation.

FreeAgent is a practical, efficient choice for those with uncomplicated accounting needs.

Hammock: Property Finance Made Simple

Best for: Landlords and property investors.

Hammock offers something unique in this space – a property-focused bookkeeping tool that streamlines financial management specifically for landlords. It brings together property finances, rent collection, expenses, and tax calculations in one dedicated platform. Crucially, Hammock is HMRC-recognised for MTD for ITSA.

Key benefits:

• Automated rent tracking and property income reports.
• Expense categorisation tailored to landlords.
• Real-time cash flow and yield tracking by property.
• Seamless MTD for Income Tax submissions.

For landlords managing one or more rental properties, Hammock provides exceptional visibility and control.

QuickBooks: User-Friendly with Strong Support

Best for: Sole traders, small business owners, and service-based businesses.

QuickBooks, offered by Intuit, provides a strong balance between ease of use and powerful financial management tools. It’s one of the most widely recognised names in small business accounting, and it’s fully compliant with MTD for VAT and evolving ITSA requirements.

Key benefits:

• Customisable dashboard and insightful financial reporting.
• Simplified VAT tracking and MTD submissions.
• Mileage tracking and mobile-friendly features for business owners on the go.
• Comprehensive customer support and learning resources.

Its intuitive design makes QuickBooks a go-to choice for those new to digital accounting.

Final Thoughts

Making Tax Digital isn’t just about meeting HMRC’s legal requirements – it’s about futureproofing your finances with systems that save time, reduce errors, and enhance clarity. Whether you’re a landlord, freelancer, sole trader or director of a growing business, there is a tailored software solution that can meet your needs and support you through the transition to digital tax reporting. These aren’t the only HMRC-compliant software out there, but they’re our favourites!

At RiverView Portfolio, we work closely with our clients to help them select, implement, and manage the most suitable MTD-compliant software. If you’re unsure which platform is right for you, or you’d like to ensure you’re MTD-ready, don’t hesitate to get in touch.