Last checked 19 October 2026
Quick answer
Every sole trader must keep records from the day they start trading, but GOV.UK doesn’t require a particular tool until Making Tax Digital (MTD) for Income Tax applies to you. Then you’ll need compatible software that keeps digital records, sends quarterly updates and submits your tax return. Choosing software that can do that from the start can save switching later. HMRC has a free software finder, and GOV.UK says HMRC doesn’t recommend any product.
This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation. We don’t recommend any software product. Why we say this.
This is our starting point for new sole traders choosing bookkeeping software. It explains what you need now, what MTD will ask of your software later, and how to shortlist using HMRC’s own tools. It doesn’t rank products.
What you need on day one
GOV.UK’s Business records if you’re self-employed guide says you must keep records of all sales and income and all business expenses, and keep proof such as receipts, bank statements and sales invoices. Records must be accurate and let you identify business transactions.
You’ll also choose an accounting method. GOV.UK says that from the 2024 to 2025 tax year, the cash basis is the default: you record income and expenses when money comes in or goes out. You must opt out if you want to use traditional accounting.
Before MTD applies to you, GOV.UK doesn’t require any particular tool. Paper, a spreadsheet or software can all work, as long as the records are accurate and complete.
When MTD will apply to you
GOV.UK says you need to use MTD for Income Tax if you’re a sole trader or landlord registered for Self Assessment and your qualifying income (turnover from self-employment and property, before expenses) is over the threshold:
| Qualifying income on your return for | Over | Use MTD from |
|---|---|---|
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
If you started trading during the 2026 to 2027 tax year, the table shows the threshold for that year’s return is £20,000. Our £30,000 threshold guide explains what counts as qualifying income, and the MTD hub covers who’s in.
GOV.UK also says that to sign up for MTD you must be registered for Self Assessment and have submitted a tax return in the last 2 years. You can sign up voluntarily before you need to, for the current tax year or the next one.
What MTD software has to do
GOV.UK’s Choose the right software guidance says you, or an agent for you, will use software to:
- create, store and correct digital records of your self-employment and property income and expenses
- send quarterly updates, which are summaries and not tax returns
- add any other income and submit your tax return by 31 January after the tax year
It describes two types:
- software that creates digital records, by linking to your business bank account, scanning receipts and invoices, or manual entry. GOV.UK says these usually let you send quarterly updates and submit your tax return
- software that connects to your records, sometimes called bridging software, for example linking spreadsheets to HMRC
You can use more than one product, for example one for records and quarterly updates and another for the tax return, but GOV.UK says you can use only one product for each separate submission, and they need to work together. If spreadsheets suit you, see our guide to spreadsheets and bridging software.
Features to check
GOV.UK says the software you choose will need to:
- support all your income sources for MTD
- send quarterly updates and submit your tax return
- let you report your other income sources on your tax return
- work with your accounting period (standard tax year, calendar update periods or neither)
It also suggests considering whether the software:
- allows multiple agents, if you have more than one
- has HMRC Assist built in, which gives feedback and highlights errors in your tax return
- has pricing that suits your budget
If you think your income sources might change, for example adding property income, GOV.UK says to check the software will support that in future. If you’re VAT registered, it says to check whether your VAT software also works for MTD for Income Tax, or whether your new software meets your VAT needs. See our VAT registration guide.
Free software
GOV.UK says free products are available for people with simple tax affairs, but there may be limits on how they can be used, for example a limited number of transactions. Check a free product’s limits against your own volume of sales and expenses, and what happens to the price or features if you go over.
Using HMRC’s software finder
GOV.UK’s software finder asks a few questions and gives you a personalised list. You’ll need to know:
- your income sources covered by MTD (self-employment, UK property, foreign property)
- any other income you report on your tax return
- whether you want to create new digital records or connect to existing ones
- your accounting period
GOV.UK says all software listed has been through HMRC’s recognition process, and HMRC doesn’t recommend any product or provider. If you use an accountant or bookkeeper, GOV.UK suggests asking them about your choice so they can support you. Our guide to using an accountant or doing it yourself covers that decision.
Changing your mind later
GOV.UK’s If your circumstances change page says you can change MTD software at any time, but you may find it easier at the end of the tax year. If you change after the end of a tax year, you don’t need to import earlier years’ records into the new software, but you must still keep your digital records for at least 5 years from the submission deadline for each tax year.
A shortlisting checklist
- Note your income sources, now and likely in the next 2 years.
- Decide whether you want to create records in software or keep a spreadsheet and connect it.
- Run HMRC’s software finder with those answers.
- Check each shortlisted product’s price, limits and bank connection on its own website, and note the date you checked.
- Ask your accountant, if you have one, which products they support.
- Try a product with your real transactions before you need to use MTD.
Frequently asked questions
Do I need accounting software as a new sole trader?
GOV.UK requires accurate records from when you start trading. It requires compatible software once MTD for Income Tax applies to you, which depends on your qualifying income.
Is there free MTD software?
GOV.UK says free products are available for people with simple tax affairs, but they may have limits, such as a limited number of transactions.
Does HMRC recommend a product?
No. GOV.UK says HMRC doesn’t recommend any product or software provider. Listed software has been through HMRC’s recognition process.
Can I keep using a spreadsheet?
Yes, with bridging software that connects it to HMRC once MTD applies. See our spreadsheets guide.
Can I sign up for MTD early to get used to it?
GOV.UK says you can sign up voluntarily for the current or next tax year, but you must be registered for Self Assessment and have submitted a tax return in the last 2 years.
Can I switch software later?
GOV.UK says you can change at any time, though it may be easier at the end of the tax year.
Sources
All checked on GOV.UK on 19 October 2026.
- Choose the right software for Making Tax Digital for Income Tax (updated 13 July 2026)
- Find software that works with Making Tax Digital for Income Tax (updated 31 July 2025)
- Find out if and when you need to use Making Tax Digital for Income Tax (updated 26 March 2026)
- Sign up for Making Tax Digital for Income Tax (updated 13 October 2026)
- If your circumstances change (updated 7 September 2026)
- Business records if you’re self-employed
