MTD-Ready Accounting Software: FreeAgent vs Xero vs QuickBooks
Making Tax Digital is the deadline that finally forces the shoebox of receipts into software. From April 2026, sole traders earning over £50,000 keep digital records and send HMRC quarterly updates through recognised software, with the threshold dropping to £30,000 in 2027 and £20,000 in 2028. That's most full-time vendors within three years. This guide compares the three packages UK sole traders actually shortlist, including the route where the software costs nothing at all.
What MTD Actually Requires
Three things change. Your records must be digital (a spreadsheet counts, a carrier bag doesn't). Every quarter a summary of income and expenses goes to HMRC through MTD-compatible software. After year end, a final declaration replaces the old self assessment return. None of it changes what tax you pay. All of it changes how often you have to be organised.
The quarterly rhythm is the real shift for vendors. The trader who reconciles in one heroic January weekend stops being viable, because the software needs feeding through the year. Pick a package whose feeding you'll actually tolerate, since the best software is the one that's up to date in October.
FreeAgent
FreeAgent was built for UK freelancers and micro-businesses rather than adapted down from accountancy-firm software. It shows. The tax timeline tells you what you owe and when in plain English, self assessment filing is built in, the whole thing assumes you don't have a bookkeeper.
The pricing is the headline. Standalone, the sole trader plan is £19 a month plus VAT. Through a Mettle or NatWest-group business account, it's free, full product, no catch beyond holding the account. We covered that pairing in our business bank accounts guide, and for a sole trader facing MTD it's the strongest free lunch in UK small-business admin right now.
Limits worth knowing: it's less customisable than the other two, integrations are thinner, accountants raised on Xero sometimes grumble. For a one-person food business, none of that tends to matter.
Xero
Xero is the accountant's favourite, with plans from around £16 a month rising past £30 as you add payroll and headroom. The bank feeds are excellent, the app ecosystem is the biggest (EPOS integrations included, which matters if your card reader should feed your books automatically) and it scales from a burger van to a chain of units without changing software.
The cost of that power is that Xero assumes a little bookkeeping literacy. It's not hard. It's a system to learn rather than a form to fill in, though. If an accountant does your year end, ask what they work in first, because "already on Xero" makes their life (and sometimes their bill) smaller.
QuickBooks
QuickBooks undercuts everyone at the entry point: the Sole Trader plan runs about £10 a month, with Simple Start around £14 and frequent half-price promotional periods. The mobile app is genuinely good at the vendor-shaped jobs (photograph the receipt at the cash and carry, swipe trips as business mileage) and MTD coverage is solid across the range.
The pattern to watch is the upsell ladder. The cheap tiers are cheap because features sit behind the next tier. The promo pricing resets to full rate too. Price the plan you'll need in year two, not the one on the banner.
Side by Side
| Software | Sole trader price | MTD ready | Strongest at | Watch for |
|---|---|---|---|---|
| FreeAgent | £19/month + VAT, or free via Mettle/NatWest banking | Yes | Plain-English tax, built-in filing | Fewer integrations |
| Xero | From about £16/month | Yes | Bank feeds, integrations, scaling up | Costs climb, slight learning curve |
| QuickBooks | From about £10/month | Yes | Cheapest entry, receipt capture app | Upsell ladder, promo pricing resets |
The Free and Nearly-Free Routes
Two legitimate ways to do MTD without a software subscription. The first is the FreeAgent-via-banking route above, which is full software for the price of opening a free account. The second is staying on spreadsheets with bridging software: HMRC's recognised-software list includes low-cost tools that file your quarterly updates straight from a spreadsheet, provided the digital links are maintained (no retyping numbers between files, the data has to flow).
Bridging suits the trader whose spreadsheet system genuinely works. Be honest about whether yours does. If the spreadsheet is really a shoebox with columns, the quarterly deadlines will find you out, and proper software with a bank feed is less work, not more.
Which One for Which Vendor
Sole trader, first accounting software, wants it handled. FreeAgent, ideally free through the banking route. The tax timeline alone prevents more panic than any feature on this page.
Growing operation, staff on the horizon, accountant involved. Xero. You'll grow into what you're paying for. Your accountant almost certainly speaks it fluently as well.
Cost-first, phone-first, happy to DIY. QuickBooks Sole Trader at £10. Photograph everything, let the app do the sorting, upgrade only when a real limit bites.
Spreadsheet loyalist under the threshold for now. Keep the spreadsheet honest, bookmark a bridging tool, diary a proper decision for the tax year before your income crosses the line. Voluntary early sign-up exists if you want a practice run.
Questions Vendors Actually Ask
When does this actually hit me?
Count your gross self-employment income (turnover, not profit). Over £50,000 in the 2024-25 return means MTD from April 2026. Over £30,000, April 2027. Over £20,000, April 2028. Below that, standard self assessment carries on for now, though the direction of travel is one-way.
Can I really stay on Excel?
Yes, provided you use bridging software and keep discipline about digital links. The record-keeping still has to be digital and the quarterly flow still applies. What ends is the version where the spreadsheet gets reconstructed from bank statements every January.
Do the quarterly updates mean paying tax quarterly?
No. The updates are summaries, not bills. Payment dates stay as they are. What the quarterly rhythm gives you is an honest running picture of the year, which for seasonal businesses like events is genuinely useful: you'll see the winter cash-flow question coming in September rather than meeting it in January.
What about VAT?
VAT-registered businesses have been under MTD for VAT for years. All three packages handle it. If you're approaching the VAT threshold, that's another argument for proper software now, since the two regimes run happily out of the same records.
Should I just give it all to an accountant?
An accountant plus software beats either alone. The quarterly submissions are designed to be self-serve, and paying professional rates for data entry is the expensive way round. The useful split: you keep the software fed through the year while they check the position and handle the final declaration.
The Bottom Line
All three do MTD properly, so the choice is temperament and price. FreeAgent for plain English and the free banking route. Xero for the ecosystem and the accountant relationship. QuickBooks for the cheapest competent start. The real deadline isn't April 2026, it's the quarter before: whichever you pick, run it in parallel for a few months first, so the first mandatory submission is boring.
Get the records habit early
Our free Annual Expense Tracker builds the categories MTD software expects, and the Mileage & Travel Log captures the deduction vendors forget most.
Browse All TemplatesLast updated: August 2026. Prices checked at publication; software pricing and MTD guidance both move, so confirm against gov.uk and the providers before committing.