MTD Software for Self-Employed: Simple Guide

If you are self-employed in the UK, Making Tax Digital for Income Tax affects you — either now or very soon. From April 2026, self-employed individuals with gross income above £50,000 must use compatible software to keep digital records and submit quarterly updates to HMRC. From April 2027, the threshold drops to £30,000.

This guide is written specifically for self-employed people. Not accountants, not bookkeepers, not business owners with 50 employees. If you work for yourself — whether you are a plumber, a freelance designer, a personal trainer, or a consultant — this is what you need to know about choosing MTD software.

What MTD Software Actually Does

Let's strip away the jargon. MTD software does three things for you:

1. Stores Your Income and Expenses Digitally

Every time you earn money or spend money on your business, you record it in the software. Date, amount, what it was for. That is your digital record.

2. Sends Summaries to HMRC Every Quarter

Four times a year, the software takes your records and sends HMRC a summary: how much you earned, how much you spent. These are your quarterly updates.

3. Handles Your End-of-Year Declaration

After the tax year ends (5 April), the software helps you finalise your figures and submit your Final Declaration — which replaces the old Self Assessment tax return.

That is it. At its core, MTD software is a record-keeping and submission tool. Some products bolt on dozens of extra features (invoicing, payroll, project tracking), but the MTD requirement itself is straightforward.

What Self-Employed People Actually Need

Here is what matters when you are choosing software:

Easy to Use

You did not become self-employed to learn accounting software. Your MTD tool should be something you can pick up in minutes, not hours. If it requires watching tutorial videos or reading a manual before you can record your first transaction, it is too complicated.

Quick to Submit

A quarterly submission should take minutes, not hours. If your records are up to date, submitting should be: review the summary, confirm it looks right, click submit.

Affordable

You are self-employed. Every pound spent on software is a pound not in your pocket. MTD compliance should not cost £30+ per month, especially when all you need is record keeping and quarterly submissions.

HMRC-Recognised

This is non-negotiable. Your software must be on HMRC's list of recognised MTD for Income Tax products and must connect to HMRC's API to submit your updates. Check before you commit.

Works on Your Terms

Whether you want to record transactions daily on your phone, weekly on your laptop, or monthly in a batch — your software should accommodate your working style.

Your Main Options

ClearMTD — Purpose-Built for MTD

ClearMTD is designed specifically for self-employed individuals and landlords who need MTD compliance without the complexity of a full accounting platform.

What it does well: - Focused on MTD requirements — no unnecessary features - Simple interface that does not assume accounting knowledge - Quick setup — recording transactions within minutes - Affordable pricing with a free tier to get started

What it does not do: - Invoicing, payroll, or project management — if you need these, you will need additional tools

Best for: Self-employed people with straightforward finances who want the simplest path to compliance.

Try ClearMTD for free

Xero — Full Accounting Platform

What it does well: - Comprehensive accounting with invoicing, bank reconciliation, and reporting - Large ecosystem of integrations - Handles complex financial situations

What it does not do: - Keep things simple — there is a significant learning curve - Come cheap — plans start from ~£15/month, with useful features on higher tiers

Best for: Self-employed people who also need invoicing and have complex finances.

QuickBooks — Established Brand

What it does well: - Recognised brand with a good mobile app - Bank feed integration - Solid reporting

What it does not do: - Stay affordable — pricing has crept up over the years - Stay focused — lots of features means lots of menus

Best for: Self-employed people who want a mainstream brand and a good mobile experience.

FreeAgent — UK-Focused

What it does well: - Built around UK tax rules - Free for NatWest/RBS business banking customers - Tax timeline showing estimated liability

What it does not do: - Stay cheap without NatWest — ~£20-30/month otherwise - Keep things minimal — more features than most self-employed people need

Best for: Self-employed people who bank with NatWest or RBS.

HMRC Free Tool

What it does well: - Completely free - Guaranteed HMRC compatibility

What it does not do: - Offer automation — everything is manual - Provide a good user experience - Handle anything beyond very basic self-employment

Best for: Self-employed people with extremely simple finances and no budget for software.

How to Choose: Three Questions

1. How complex are your finances?

If you have one income source (your self-employment), standard expenses, and no employees — a dedicated MTD tool is all you need. If you have multiple income streams, VAT registration, employees, or international clients — a full accounting platform makes more sense.

2. What is your budget?

If you want to keep costs minimal, ClearMTD's free tier or HMRC's free tool are your starting points. If you are willing to pay £15-30/month for a comprehensive platform, Xero, QuickBooks, or FreeAgent are solid options.

3. Do you already use accounting software?

If you are already on Xero, QuickBooks, or FreeAgent and happy with it, check whether your plan supports MTD for Income Tax (not just MTD for VAT — they are different). If it does, you may not need to switch. If you are starting from scratch, consider what you actually need before committing to a premium platform.

For a more detailed comparison of all the options, see our full guide on the best MTD software for sole traders.

Getting Set Up: A Simple Checklist

Here is what you need to do, in order:

  1. Check if you are affected — is your gross self-employment income above £50,000 (from April 2026) or £30,000 (from April 2027)? Not sure? See our guide on whether you need MTD software.

  2. Register for MTD with HMRC — log in to your Government Gateway account and sign up for MTD for Income Tax. This is separate from Self Assessment registration.

  3. Choose your software — pick an option that matches your needs and budget.

  4. Start recording — enter your income and expenses as they happen. The sooner you start, the easier your first submission will be.

  5. Submit your first quarterly update — your software will guide you through this. Review the summary, confirm, submit.

  6. Repeat — four quarterly updates per year, plus your End of Period Statement and Final Declaration.

Common Worries From Self-Employed People

"I am not good with technology"

MTD software is designed to be used by non-accountants and non-techies. If you can use a smartphone or online banking, you can use MTD software. The interface is not rocket science — it is a form with fields for date, amount, and category.

"I do not have time for this every quarter"

If you record transactions as they happen (a few minutes per week), each quarterly submission takes less than five minutes. The people who run out of time are those who let everything pile up. Little and often is the key.

"My accountant handles everything"

Your accountant can manage MTD submissions for you, but someone still needs to keep digital records throughout the year. You either record your transactions yourself (and your accountant submits), or you send your information to your accountant regularly so they can record and submit. Either way, the days of handing over a bag of receipts in January are numbered.

"I cannot afford another subscription"

There are free options — HMRC's own tool and free tiers from commercial providers. MTD compliance does not have to cost anything beyond your time.

Ready to Get Started?

ClearMTD makes MTD compliance simple for self-employed people. No accounting jargon, no feature overload, no steep monthly cost. Record your income and expenses, submit your quarterly updates, and get back to running your business.

Create your free account and see how easy MTD can be.

For more on how quarterly reporting works in practice, read our guide on HMRC quarterly reporting.

Frequently Asked Questions

What expenses can I claim as self-employed?

You can claim business expenses that are incurred "wholly and exclusively" for your trade. Common examples include office supplies, business travel, professional subscriptions, marketing costs, phone and internet (business portion), and tools or equipment. Your MTD software will have standard categories for these.

Do I need separate software for personal and business finances?

MTD software is for your business income and expenses only. You do not need to record personal spending. However, keeping your business and personal finances separate (ideally with separate bank accounts) makes record keeping much simpler.

Can I use my phone to record expenses?

Yes. Most MTD software works in a mobile browser or has a mobile app. Recording an expense on your phone immediately after paying for something is one of the best habits you can build — it takes seconds and prevents things from being forgotten.

What if I have both self-employment and employment income?

Your self-employment income is what determines whether you need MTD software. Your employment income is handled separately through PAYE. However, your Final Declaration at the end of the year will bring all income sources together to calculate your total tax liability.

Is there a penalty for starting MTD late?

There is no specific penalty for registering late, but if late registration causes you to miss quarterly submission deadlines, you will accumulate penalty points under the new penalty system. Each missed deadline earns a point, and at four points you face a £200 fine. Register and set up your software as early as possible to avoid this.