Do I need software for MTD? What “compatible” actually means

Yes. Once you're in MTD scope, you must use commercial software that works with Making Tax Digital for Income Tax. This is one of the real new requirements. The current Self Assessment system lets you file on paper or through HMRC's own online portal. MTD doesn't allow either.

HMRC has also confirmed it isn't building its own free software for this. Every product on the market is third party, which means choosing one is a decision you actually have to make, not a default you fall into.

What the software must do

• Create, store and correct digital records of your self-employment and property income and expenses
• Send your quarterly updates to HMRC
• Confirm end of period statements and submit your Final Declaration by 31 January the following year
• Receive information back from HMRC, such as an estimate of your tax bill

One product, or several

You can use a single product that does everything, or combine more than one. For example, one for keeping records and a different one for sending submissions, as long as they work together to meet every requirement between them.

Bridging software

Want to keep using spreadsheets for your own record-keeping? You can. Connect them to "bridging software" that handles the actual submissions to HMRC. This means you don't have to abandon a spreadsheet system you already trust and understand, but you do still need a compatible product somewhere in the chain.

Authorising your software

Once you've chosen a product, you authorise it by entering your Government Gateway user ID and password into the software itself, the same credentials you used to sign up for Self Assessment or an agent services account. You'll need to repeat this authorisation every 18 months. Most software will remind you when it's due, but it's worth knowing the cycle exists so a lapsed authorisation doesn't blindside you right before a deadline.

Where to check what's available

HMRC publishes and updates a list of recognised software on GOV.UK. Check a provider is on that list, and confirm directly with them that their product actually supports your specific situation (calendar-quarter accounting periods, if you want to use them, or multiple properties) before committing to anything.

What this calendar is, and isn't

To be direct about our own product here: this calendar gives you the dates and reminders. It does not create digital records, and it does not submit anything to HMRC. You'll still need MTD-compatible software separately to actually meet your filing obligations. This just makes sure you don't miss the moment to use it.

Further reading, direct from the source