Sole traders must keep digital records and send HMRC quarterly updates once Making Tax Digital for Income Tax applies to them. You do not need to become an accountant to comply — the right software makes the quarterly chore genuinely painless. Here is how to pick yours.
Answer 5 questions, get your shortlist
The MTD Software Finder asks how your business actually works — your bank, how busy you are, what matters most — then recommends three tools with honest reasons and limitations.
What sole traders actually struggle with
- Sending quarterly updates to HMRC without a spreadsheet nightmare
- Tracking invoices, expenses, and mileage on the move
- Paying a fair price — many tools are aimed at VAT-registered businesses with big budgets
- Keeping records digital so you stay compliant with MTD rules
- Working out whether you still need a separate Self Assessment return
Three MTD software picks for sole traders
Each pick below is HMRC-recognised for MTD Income Tax — with one honest exception pointed out where relevant.
FreeAgent is an HMRC-recognised accounting package for UK freelancers, sole traders, and micro limited companies. It bundles bookkeeping, invoicing, time tracking, and mileage into one simple dashboard.
- Best for
- UK sole traders & micro limited companies who want a simple all-in-one package
- Not ideal for
- Not ideal if you need a wide app ecosystem or bespoke workflows — third-party integrations and reporting customisation are more limited than Xero or Sage.
Key features
- MTD Income Tax submissions
- Built-in time tracking, mileage and CIS
- Self Assessment and corporation tax support
- Invoicing
Worth knowing: The free tier only applies if you hold a qualifying NatWest, RBS, Mettle, or Ulster Bank business current account — everyone else pays the monthly subscription.
Price: Free with a NatWest, RBS, Mettle, or Ulster Bank business current account, otherwise from £19/month + VAT
Sage Sole Trader is genuinely free accounting software built for non-VAT registered sole traders and is HMRC-recognised for MTD Income Tax. No trial or billing card required.
- Best for
- Non-VAT registered sole traders who want free, MTD-ready accounting from a trusted UK brand
- Not ideal for
- Not suitable for VAT-registered businesses, and not a fit if you want payroll, deep integrations, or direct Self Assessment filing.
Key features
- MTD Income Tax submissions
- Income and expense tracking
- Sales invoicing
- Bank feeds and mobile app
Worth knowing: The free plan has tight limits (5 invoices and 25 auto-categorised transactions per month) and cannot submit your final Self Assessment return directly to HMRC.
Price: Free (paid plan £7/month + VAT)
Affiliate link — see our disclosure.
Xero is a mature cloud accounting platform, HMRC-recognised for MTD Income Tax since the pilot phase. It offers the largest UK app ecosystem and very reliable bank feeds.
- Best for
- Sole traders & landlords who want a mature ecosystem and lots of integrations
- Not ideal for
- Not ideal if you only need a simple, opinionated package — FreeAgent is often cheaper and easier for that.
Key features
- MTD Income Tax submissions
- Largest UK app marketplace (1,000+ add-ons)
- Strong, reliable bank feeds
- Multi-currency, projects and inventory on higher tiers
Worth knowing: The entry Xero Simple plan (£7/month) is fairly limited, pricing is per company so it adds up with multiple entities, and UK phone support is reserved for higher tiers.
Price: From £7/month (Xero Simple) — £33/month (Grow)
Affiliate link — see our disclosure.
Selection criteria for sole traders
These are the features that matter most when choosing MTD software for sole traders.
- Recognised on the official HMRC list of MTD-compatible software
- A plan that suits your turnover — including a genuinely free tier if you qualify
- MTD Income Tax submissions handled automatically each quarter
- A usable mobile app for logging income and expenses on the go
- Bank feeds so you do not type transactions in by hand
- No lock-in — you should be able to export your data and switch later
Your MTD prep checklist
- Confirm whether MTD applies to you yet (check the HMRC deadlines for your income level)
- Gather your income and expenses into one place so switching is easy
- Shortlist 2-3 MTD-recognised tools that fit your budget
- Try each one free — test an invoice, a bank feed, and a quarterly update
- Set a 7th-of-the-month reminder for your quarterly HMRC updates
- Back up your spreadsheets or old records before you move
Tools made for sole traders
MTD Software Finder
Answer 5 questions and get a shortlist of the tools that fit your situation.
Open tool →Am I in scope?
A 2-minute check of whether MTD Income Tax applies to you and when.
Open tool →MTD savings calculator
See what free or cheaper MTD options could save you over a year.
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