What Features Actually Matter in Making Tax Digital Software?

Quick Answer: The Features That Actually Matter

If you’ve been looking for the best Making Tax Digital software for self-employed professionals, then you’ll have found that there are many different options available. Each of these can be dependent on how your business operates, its size, and what you specifically need for MTD.

As a result, you may encounter several options that offer something similar but also include additional features. Some of the features that are offered can make a huge difference and are arguably worth paying for, as they can save you time and effort. However, there are some features you’ll be paying for that you may never use because you don’t need them. That’s why we recommend finding the best software for your needs.

As a rule of thumb, we consider the following to be the most essential features:

• Digital record keeping
• HMRC submission capability
• Bank feeds
• Expense tracking
• Basic reporting

With these features, the MTD process will be as simple and stress-free as it needs to be. Without them, tax returns can be just as stressful as they may have seemed in the past when this digital process is supposed to simplify things.

If you’re still a little confused about what MTD entails and what you need to do, run through our complete guide to MTD for the self-employed to get a full overview and ensure you’re ready.

The Non-Negotiables for MTD Compliance

When it comes to Making Tax Digital (MTD), there are several non‑negotiable compliance requirements. These are mandatory actions you must take when keeping digital records and submitting reports to HMRC. If you do not meet them, you may face penalties or, in serious cases, further enforcement action.

Digital Record Keeping

When it comes to recording any income that you receive from your business, property, or even side hustles, you must keep digital copies. This can come in the form of spreadsheets, accounting software, or integrated systems.

HMRC expects at least the date, amount, and category of each transaction to be recorded digitally and retained for the required period (usually five to six years).

Digital Links

A “digital link” means data moves from your records to your MTD‑compliant software, or between systems, without you copying, retyping, or pasting it.

Valid digital links include things like file imports/exports (e.g., CSV, XML), APIs, and certain file‑transfer methods, as long as no one manually changes the numbers.

Quarterly Submissions

For MTD for Income Tax, you need to send four quarterly updates each tax year, adding up your business and property income and expenses as you go.

Each update is due by the 7th of the month following the quarter-end, and if you spot a mistake, you can correct it in the next quarter as long as your digital records are up to date.

End of Period Statement

Originally, the End of Period Statement (EOPS) was used to finalise and confirm your figures for each accounting period once the quarterly updates were in.

Now, HMRC has removed the EOPS requirement for MTD for Income Tax, so you no longer have to submit a separate EOPS for each income stream.

Final Declaration

Instead of an EOPS, you now submit a Final Declaration at the end of the tax year, which takes the place of the traditional Self Assessment tax return for income falling under MTD.

This Final Declaration is due by the usual Self Assessment deadline, which is the 31st of January after the tax year, and should be based on your reconciled digital records and any year‑end adjustments you need to make.

With MTD compliance out of the way, how can you save time while providing HMRC with everything required? Thankfully, there are several features and tools that can help with this, some of which are automated thanks to available technologies.

We’ve broken down the key features that will make your life exceptionally easy when completing this once-horrible admin task…

Bank Feeds

One of the most important features you can have is automated bank feeds. If you have more than one income stream, you’ll need to report the figures to HMRC and then combine them to find out what you owe in taxes. You can check out our article on multiple trades if you have more than one business.

Automated bank feeds help you to save time each month by reducing manual entry and improving accuracy. All data is captured using the feature, automatically capturing what is required by HMRC and providing accurate information for reporting.

Expense Tracking and Categorisation

Some of the best and cheapest MTD software available will provide a feature that can help track expenses and categorise them in a way that can save you plenty of time when it comes to reporting back to HMRC.

Records are automatically kept cleaner and organised, which means fewer errors are likely to be made. Once all your expenses have been accounted for and organised correctly, this can help you make your quarterly updates more efficiently.

Receipt Capture

Keeping physical copies of receipts regarding business expenses could always be extremely difficult. Receipts could often go missing, be binned without realising, or simply be too difficult to file properly and keep in an organised order.

With MTD software, you can now avoid losing receipts and keep them digitally. Receipt-capturing technology is now available, allowing you to use the software to take photos of your receipts and upload them directly, importing the data and filing them immediately. This helps to speed up your bookkeeping, and you don’t have to worry about potentially losing a receipt now you have a digital one.

Basic Reporting and Tax Estimates

This is one of the simple but genuinely useful features: your software pulls your income and expenses into clear, easy‑to‑read reports and gives you rough tax estimates as you go.

It helps you plan ahead, see what you might owe, and avoid nasty surprises when the quarterly updates or year‑end deadlines roll around.

Simple User Interface

A simple, clean user interface cannot be underestimated when using accounting or other reporting software. You’re going to use it quarterly, and you’ll need to learn it quickly to avoid mistakes and save time that could be better spent on your business.

If you have software with a complex layout or that is too difficult to understand and use, it can lead to errors. It can also cause you to spend an unnecessary amount of time focusing on something you can avoid.

Features That Are Useful but Not Essential

Some software features make life easier, but they don’t actually affect whether you’re MTD‑compliant. Think of them as “nice to have” rather than “must have”.

Invoicing tools, payment reminders, mobile apps, and integrations with other programs fall into this category. They can save you time, keep clients paying faster, and let you check your numbers on the go, but HMRC doesn’t require any of them for basic compliance.

MTD‑compliance involves keeping digital records, using compatible software, and submitting accurate quarterly updates and a Final Declaration when required. Extra features are useful if you run a busy business and want everything in one place, but they’re not critical for staying on the right side of the rules.

If you find a solution that you can afford to pay for that offers each of these features, that’s a bonus! If you find software that doesn’t but offers everything in Section 3, then you can still use it to remain compliant.

Features Most Self-Employed People Do Not Need

Now that we’ve explained the features you need and those that are nice to have, you might be wondering what other features accounting software offers and why they’re included.

As we noted earlier, not all self-employed professionals will need the same level of MTD software. Some will need software that has all the “bells and whistles”, while others will need “no-frills” solutions to help them remain compliant.

For example, there are solutions available that can assist with payroll and inventory tracking, offer multi-user permissions, and provide advanced financial modelling. Taking each of these at face value, you may not need the following because:

• Payroll – it’s a small business with one employee (you) or a couple of others that you can track easily.
• Inventory tracking – you may not deal with a physical product or need to keep track of quantities/stock.
• Multi-user permissions – it may only be you who needs access to the software.
• Advanced financial modelling – your business might only be small, and growth isn’t quite on your to-do list.

When it comes to these features, they are often labelled as free, but this is because they are usually available in tiers you pay a premium for. You’re paying for the luxury of having them available, even if you don’t need them. They can also add a level of complexity to MTD reporting; additional stress you don’t need, especially when they aren’t relevant to you or your business.

Choosing Features Based on Your Business Type

So, what features do I need for my business? It can depend on the type of business you have and what you must report to HMRC when submitting your returns.

We’ve broken down the most common scenarios below and matched them to the key MTD‑relevant features you actually need.

Low‑transaction Sole Trader

Needs:

• Basic digital records (income, expenses, and dates)
• Submission capability to send quarterly updates and the Final Declaration to HMRC

This setup covers the core MTD rules without over‑complicating things for a simple, low‑volume business.

Freelancer or Consultant

Needs:

• Invoicing tools to raise bills and track what you’re owed
• Bank feeds to pull transactions straight into your records
• Expense tracking to capture mileage, subscriptions, travel, and home‑office costs

These features cut manual data entry and help keep your digital records accurate and up to date.

Multiple Income Streams

Needs:

• Strong categorisation if you have multiple income streams (e.g., separate sections for self‑employment, property, savings, platforms)
• Clear reporting to see each stream’s profit and what it might mean for tax

Good categorisation and reporting make it easier to submit correct quarterly updates and a Final Declaration when you’re juggling several types of income.

Spreadsheet Users

Needs:

• Bridging software
• Clean, well‑structured records

If you’re already using spreadsheets, you can still stay MTD‑compliant as long as you run your data through bridging software that creates a digital link between your spreadsheet and HMRC. Make sure to check out our MTD Spreadsheet Guide.

Your spreadsheet records should be neat and consistent (separate tabs for income, expenses, and key totals) with formulas performing the calculations rather than manual entry, so the digital links stay intact.

Common Mistakes When Choosing Based on Features

A number of common mistakes can be made when selecting MTD software, especially regarding the features offered.

Many can often be drawn in by the number of features offered, meaning they are paying for tools they will never use. The additional knock-on effect of this is that they end up with a software platform that becomes too complex to use. This can see errors being made and time being wasted.

At the other end of the scale, some might pick an MTD software to use that cannot cope with potential future growth. While you can change solutions at any time, most will require you to pay for an annual plan. If your business grows midway through that plan, it may no longer be suitable.

Focus on Simplicity, Not Features

We hope you have a better understanding of how selecting the best Making Tax Digital software for self-employed professionals can come down to the features you need.

It can be very easy to be drawn into those that offer you all of the features you can imagine under the sun, but they aren’t always going to be the ones you need. More often than not, you’ll be paying for the privilege of having them, but never using them.

Simplicity is key, and it will always beat complexity. Keep this in mind when choosing the tools you need, as this should help you reduce the time you spend reporting your earnings to HMRC rather than adding to it.

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