UK · Tax & MTD · 6 min read · Updated 29 October 2026

Making Tax Digital (UK): what AI bookkeeping tools can help

Who needs Making Tax Digital for Income Tax and when, according to HMRC, and the bookkeeping tools that can make digital records easier.

Making Tax Digital (MTD) means keeping digital records and sending updates to HMRC using compatible software. Here's what HMRC says about the timetable, and which tools can help. This is general information, not tax advice. Speak to an accountant about your own situation.

MTD for Income Tax: who and when

According to GOV.UK, you need to use MTD for Income Tax if you're a sole trader or landlord registered for Self Assessment, and your qualifying income from self-employment and/or property is over the threshold:

  • Over £50,000 in 2024 to 2025, from 6 April 2026
  • Over £30,000 in 2025 to 2026, from 6 April 2027
  • Over £20,000 in 2026 to 2027, from 6 April 2028

HMRC says it will write to people who need to sign up, but it's still your responsibility to check. GOV.UK has an online checker, and some people are exempt. Partnerships will follow later.

MTD for VAT

HMRC says all VAT-registered businesses should now be signed up for MTD for VAT.

Tools that can help

Always check that your chosen product appears on HMRC's list of compatible software for the MTD service you need. We list tools here; we don't certify them.

  • Xero: cloud accounting with bank feeds and VAT returns. From Ignite £18/month (excl. VAT).
  • QuickBooks Online: cloud accounting with receipt capture; price: Simple Start $38/month (intro discount shown) (USD). 30-day free trial.
  • FreeAgent: built for UK sole traders, freelancers and small companies. From From £33/month (limited company); free with some business bank accounts.
  • Powered Now: trades app with MTD features built in. Business £28/month (or £280/year), plus VAT.
  • Dext: captures receipts and bills and sends the data to your accounts software. Price: check the official site.

Where AI genuinely helps

  • Getting data in: receipt and invoice capture reads supplier, date and amount for you. Check it before you approve it.
  • Categorising: bank-feed rules and suggestions cut down repetitive coding.
  • Understanding: a general AI assistant can explain a term in plain English. Confirm anything important with GOV.UK or your accountant.
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Sources

Prices checked on 29 October 2026; they change often, so confirm on the official site. We are not affiliated with any company mentioned. Affiliate disclosure.