Free MTD Software from HMRC: What You Get (and Don't)
When Making Tax Digital was announced, one of the loudest complaints was that the government was forcing people to buy software. In response, HMRC committed to providing free tools for those with the simplest affairs. Those tools now exist — but they come with significant limitations.
This article explains what HMRC's free MTD software actually offers, where it falls short, and whether it is enough for your situation.
What HMRC Provides
HMRC offers a basic, free service for Making Tax Digital for Income Tax through the Government Gateway. This allows taxpayers to:
- Record income and expenses in a basic digital format
- Submit quarterly updates to HMRC
- File the End of Period Statement at the end of the tax year
- Submit the Final Declaration to confirm their overall tax position
On paper, this covers the legal requirements. You can technically comply with MTD using only HMRC's free tools without spending a penny on third-party software.
What You Get
Basic Transaction Entry
HMRC's tool allows you to enter income and expense transactions manually. You type in the date, amount, and category for each item. It is functional but basic — think of it as a government-built web form rather than a piece of polished software.
Standard Expense Categories
The tool provides HMRC's standard expense categories for self-employment and property income. You select from a predefined list when entering expenses. This ensures your records align with what HMRC expects, which is helpful.
Quarterly Submission
You can submit your quarterly summaries directly through the tool. Since it is HMRC's own system, there is no API connection to worry about — the data is already within HMRC's infrastructure.
It's Free
The most obvious advantage. If your only concern is meeting the legal minimum at zero cost, HMRC's tool achieves that.
What You Don't Get
No Bank Feeds
There is no automatic import of transactions from your bank account. Every transaction must be entered manually. For a sole trader with dozens of transactions per month, this is time-consuming and increases the risk of missed entries or data-entry errors.
Limited Record-Keeping Features
The tool is designed for submission, not for comprehensive record keeping. It lacks features that make ongoing record maintenance easier:
- No receipt storage or attachment
- No recurring transaction templates
- No automatic categorisation
- No reporting or analytics beyond basic summaries
No Guided Workflow
Third-party MTD software typically guides you through the process — prompting you to review your figures, flagging potential issues, and walking you through each submission step. HMRC's tool assumes you know what you are doing. If you are new to MTD and unfamiliar with quarterly reporting, there is no hand-holding.
Minimal Support
Support for HMRC's free tool comes through HMRC's general helpline. If you have a technical issue with the software at 8pm on a Tuesday, you are unlikely to get help quickly. Third-party providers typically offer email support, help documentation, and sometimes live chat — all focused on their specific software.
Limited Property Income Support
For landlords with multiple properties, HMRC's basic tool may not handle the complexity of tracking income and expenses across a portfolio. It is designed for the simplest cases — a single income source with straightforward expenses.
No Integration
HMRC's tool is a standalone web application. It does not connect to your bank, your spreadsheets, or any other tools you use. Everything is manual, and there is no way to export data for use elsewhere (beyond what HMRC provides in your tax account).
Who the Free Tool Works For
HMRC's free option is genuinely suitable for a narrow group of people:
- Very simple affairs — a single income source (one self-employment business or one rental property) with a small number of transactions per month
- Comfortable with manual data entry — willing to type every transaction individually without bank feeds or import tools
- Not seeking guidance — confident enough with MTD requirements that you do not need the software to guide you through the process
- Cost is the primary concern — if spending any money on software is genuinely not an option, the free tool meets the legal minimum
Who Should Consider Paid Alternatives
If any of the following apply, a third-party tool is likely worth the investment:
- You have more than a handful of transactions per month — manual entry becomes tedious and error-prone
- You are a landlord with multiple properties — tracking income and expenses across properties needs better organisation than a basic form provides
- You want to save time — features like bank feeds, automatic categorisation, and guided workflows pay for themselves in time saved
- You are new to MTD — software that guides you through each step reduces the risk of errors and missed deadlines
- You value support — having someone to contact when things go wrong provides peace of mind
For a detailed comparison of affordable alternatives, see our guide to MTD software under £10 per month.
The Hidden Cost of "Free"
Free software has a cost — your time. If HMRC's tool takes you 45 minutes per quarter to enter transactions and submit, while a paid tool takes 15 minutes, you are spending an extra two hours per year on the free option. What is your time worth?
There is also the risk cost. A tool with minimal guidance and no error-checking increases the chance of mistakes in your submissions. While minor errors can be corrected, submitting incorrect figures to HMRC is something you want to avoid.
And there is the stress cost. Using a tool that is basic, unsupported, and occasionally frustrating adds to the mental load of compliance — which is already an unwelcome obligation for most sole traders.
ClearMTD: Affordable Without the Limitations
ClearMTD offers a middle path — significantly more capable than HMRC's free tool, but far less expensive and complex than full accounting platforms like Xero or Sage.
With ClearMTD, you get: - A guided workflow that walks you through each quarterly submission - Simple transaction entry with standard HMRC categories - Support when you need help - Full MTD compliance including quarterly updates, End of Period Statements, and Final Declarations - An interface designed for people who are not accountants
The small monthly investment removes the frustrations of the free tool without the feature overload and cost of a comprehensive accounting platform. For most sole traders and landlords, this is the sweet spot.
Start your free ClearMTD trial and see the difference a purpose-built tool makes.
A Practical Approach
If you are unsure, there is no harm in trying HMRC's free tool first. It costs nothing, and you will quickly discover whether it meets your needs. If you find yourself frustrated by the limitations — the manual entry, the lack of guidance, the basic interface — you can switch to a paid tool at any point without losing your submission history.
Many people start with the free tool, realise its limitations during their first or second quarterly submission, and then move to something more capable. There is nothing wrong with this approach. For more on the overall landscape, see our MTD ITSA explained guide.
Frequently Asked Questions
Is HMRC's free MTD tool really free forever?
HMRC has committed to providing free tools for those with the simplest affairs. There is no indication that charges will be introduced, but the feature set may remain basic indefinitely.
Can I switch from HMRC's free tool to paid software mid-year?
Yes. Your submission history is held within HMRC's systems. If you switch to third-party software, it can submit your subsequent quarterly updates without any issues. You will need to enter your current quarter's transactions in the new tool.
Does the free tool support both self-employment and property income?
Yes, but in a basic way. If you have both income types, you can record them separately. However, the level of detail and organisation available for property income (particularly multiple properties) is limited compared to dedicated software.
Is the free tool available on mobile?
HMRC's Government Gateway is accessible via mobile browsers, but the experience is not optimised for mobile devices. If you want to enter transactions on your phone, a dedicated MTD app will provide a better experience.
What if HMRC's free tool has a technical error during submission?
You would need to contact HMRC's helpline for assistance. Response times vary, and support is only available during HMRC's standard working hours. This is a practical limitation compared to third-party providers who often offer more accessible support channels.