Best MTD Software for Sole Traders UK: What to Pick in 2026/27 

Right now, the UK tax system is going through its biggest shake-up in a generation. 

You have probably heard the phrase floating around quite a bit recently, but what is the actual MTD meaning? Well, it stands for Making Tax Digital. 

Essentially, HMRC is phasing out the old way of doing your annual self assessment tax return.  Because of this, finding the best MTD software for sole traders has suddenly become a major priority for thousands of self-employed people across the UK. 

And if you’d rather skip the software comparison and get straight on with your tax affairs, our specialist accountants at Cheap Tax Returns can help you choose the best MTD software for sole traders UK. Our accountants can also deal with the relevant tax and MTD work for you.  

Summary of Best MTD Software for Sole Traders

Best MTD Software for Sole Traders UK

Some traders want the cheapest option possible. Others want software that will grow with their business. That’s why there isn’t a single winner for everyone.

Below are the best MTD software options for sole traders in the UK for the 2026/27 tax year.

1. Xero Simple 

Xero Simple is built explicitly to handle full Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) submissions at its entry-level price point.

It has a huge range of bank connections and add-on apps, so it can grow as you do. The sole trader entry plan covers MTD for Income Tax, and it can handle more than one income source in one place. 

Check whether its features cover your current needs, especially if your VAT status or business activities change. 

Best for:

• Sole traders planning to grow
• Freelancers with multiple clients
• Businesses wanting detailed reporting

You May Want To Avoid It If:

• You only need very basic bookkeeping
• Keeping software costs as low as possible is your priority

Check current Xero prices → 

2. FreeAgent 

FreeAgent is built specifically for freelancers, contractors, and small UK businesses.

It is a strong option for sole traders who want more than just basic MTD reporting. You can use it to record income and expenses, manage invoices, connect your bank account and deal with Self Assessment and MTD for Income Tax.

One of its biggest advantages is that some sole traders can use it without paying a software subscription. Eligible customers with certain NatWest Group business accounts, including NatWest, Royal Bank of Scotland, Ulster Bank and Mettle, can get FreeAgent free while they meet the relevant conditions.

Best for:

• Freelancers banking with NatWest, RBS, or Mettle who want free accounting software. 
• Sole traders who want a clear, visual dashboard without heavy clutter. 

You May Want To Avoid It If:

• You are a complex retail business needing advanced multi-location stock management. 
• Companies with large inventory warehousing needs.

Check current FreeAgent prices → 

3. QuickBooks Sole Trader 

QuickBooks Sole Trader is the cloud accounting software platform designed specifically for self-employed individuals in the UK.

It provides automated bookkeeping tools and AI-driven transaction categorisation.

QuickBooks is also engineered to comply with HMRC’s Making Tax Digital (MTD) for Income Tax regulations. 

Best for:

• Sole traders who want automated mileage and receipt tracking. 

You May Want To Avoid It If:

• You are a complete beginner who wants an incredibly simple, zero-learning-curve system.

Check current QuickBooks Sole Trader prices → 

4. Sage Sole Trader 

Sage Sole Trader is designed with simplicity in mind. It is aimed at people who want to keep track of their income and expenses without getting into a complicated accounting system. 

There is a free option for non-VAT-registered sole traders.

So, Sage Sole Trader Free is definitely the one of the best MTD software for sole traders if they are non-VAT registered and want to comply with the 2026/27 MTD rules without paying a monthly software subscription.

However, it is only “worth considering” if your business fits into a very specific, low-volume box.

Best For:

• Traditional sole traders with basic finances who want basic, fluff-free bookkeeping.
• Tracking rental income and simple maintenance costs without complex property portfolios. 

You May Want To Avoid It If:

• You are a tech-forward freelancer wanting heavy third-party app automations or advanced project tracking. 

Check current Sage prices → 

What to Look for in the Best Accounting Software for a Sole Trader?

When picking your best accounting software for sole trader tasks, look for features that save actual admin time:

• HMRC recognised. Check the official HMRC list to find the right software for Making Tax Digital for Income Tax.
• Income Tax covered. Some tools only handle VAT.
• Bank feeds. They save hours.
• Receipt capture. A phone app that snaps receipts is a lifesaver.
• Easy sharing. Your accountant should be able to see your books.
• Final declaration included. This replaces your usual tax return.

At Cheap Tax Returns, we can also help you pick the right digital setup, ensuring every allowable business expense is claimed properly. 

What Is the Cheapest MTD Software Option?

If you want to keep costs as low as possible, you have a few practical choices for cheapest MTD software:

1. Free via Bank Account: If you use Mettle, NatWest, or Royal Bank of Scotland for your business banking, FreeAgent is often completely free. Banking apps like Tide and Monzo also feature free built-in MTD filing tools.
2. Bridging Software: Tools like MyTaxDigital allow you to maintain records on Microsoft Excel or Google Sheets and bridge that data straight to HMRC for a low fee or even free.
3. Entry Plans: Starter packages from Sage or Xero offer scaled-back invoicing features at lower prices.

Can You Still Use Spreadsheets for Self Assessment Tax Return Software Requirements?

Yes, but with a rule. You cannot copy-paste numbers manually into HMRC’s old online portal once you fall under MTD rules.

If you love your Excel spreadsheet, you must connect it to HMRC via approved self assessment tax return software known as bridging software. The digital links must remain unbroken. It means formula transfers, not manual re-typing.

Let Cheap Tax Returns Help You Stay MTD Ready

Picking software is only half the job. You still have to set it up, keep it tidy and send the right numbers on time. At Cheap Tax Returns, we help sole traders get going with MTD.

We can suggest the right tool for your trade, set it up with you and handle your quarterly updates if you’d rather not. 

Our fees stay low and clear, so there are no nasty surprises at year end. 

Not sure if you’re in MTD this year or next? Book a free meeting with us today and we will let you know.

The Bottom Line

There is no magic winner when comparing the best MTD software for sole traders.

If you want something simple and cheap, Sage or an eligible free option such as FreeAgent may be enough. If you want more accounting features and room to grow, Xero or QuickBooks may be a better fit.

The main thing is not to choose software just because it has a low monthly price. 

Make sure it can handle the MTD requirements that apply to you, your income sources and the way you actually run your business.