What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's plan to move the UK tax system entirely online. Instead of filing one Self Assessment return a year, you'll submit income and expense updates quarterly through MTD-compatible software.

For most side hustlers and sole traders, the key dates are:

  • April 2026 — MTD for Income Tax is mandatory for sole traders and landlords earning over £50,000/year
  • April 2027 — threshold drops to £30,000/year
  • April 2028 — threshold drops further to £20,000/year

If your side hustle income plus your main employment income adds up to over these thresholds, you'll need to comply. The good news is the software that handles this is straightforward, affordable and often saves you money at tax time.

QuickBooks is fully MTD-compatible Automatically submits your quarterly updates to HMRC. Try free for 30 days.
Try free →

Best MTD-compatible software for UK side hustlers

All of the options below are on HMRC's approved list for MTD for Income Tax. We've ranked them based on ease of use for people who aren't accountants.

QuickBooks 🏆 Best for beginners

QuickBooks is the easiest MTD-compatible option for side hustlers with no accounting background. Connect your bank, categorise transactions, and QuickBooks handles the quarterly HMRC submissions automatically.

Fully MTD-compatible Bank feed auto-import HMRC direct submission Mileage tracking Receipt capture app Self Assessment ready

From £10/month · 30-day free trial · No credit card required

Try QuickBooks Free →
Xero Best for growing businesses

Xero is the most popular accounting software among UK accountants and bookkeepers. It's slightly more complex than QuickBooks but offers more powerful features as your side hustle scales.

Fully MTD-compatible Unlimited users Strong integrations Accountant-friendly Bank reconciliation Invoicing tools

From £15/month · 30-day free trial

Try Xero Free →
FreeAgent Best for freelancers

FreeAgent was built specifically for freelancers and contractors. It's particularly good for people who invoice clients and need to track time. Available free with NatWest and Royal Bank of Scotland business accounts.

Fully MTD-compatible Built for freelancers Time tracking Free with NatWest Project management Tax timeline view

£19/month standalone · Free with NatWest/RBS business account

Visit FreeAgent →
HMRC's Free MTD Tools Free option

HMRC maintains a list of free MTD-compatible software on their website. These are basic tools — good enough for very simple tax situations but lacking the automation and time-saving features of paid options.

Completely free HMRC approved Basic functionality Manual data entry

Free

View HMRC list →

Which software is right for you?

Our recommendation

For most UK side hustlers — especially those new to self-employment — QuickBooks is the easiest starting point. The mobile app is excellent, setup takes under 30 minutes, and the 30-day free trial means you can try it before committing.

Choose QuickBooks if:

  • You're new to bookkeeping and want something straightforward
  • You want a great mobile app for capturing receipts on the go
  • You're earning from multiple side hustles and need to track everything in one place
  • You want the cheapest starting price

Choose Xero if:

  • Your accountant already uses Xero
  • You have a growing business with employees
  • You need to give multiple people access to your accounts
  • You use lots of third-party tools that need to integrate

Choose FreeAgent if:

  • You have a NatWest or RBS business account — it's free
  • You invoice clients and need to track time on projects
  • You're a contractor or consultant
Start with QuickBooks — 30 days free No credit card required. Cancel any time. Fully MTD-compatible.
Try free →

Frequently asked questions

Not yet — but the threshold drops to £30,000 in April 2027 and £20,000 in April 2028. If your side hustle income is growing it's worth getting set up now so you're not scrambling later. Good bookkeeping software also saves you money at tax time regardless of MTD.
Yes — HMRC looks at your total self-employment income. If you earn £35,000 from your job and £20,000 from side hustles, your total self-employment income from the side hustle alone determines your MTD obligation, not your combined income. However if you have multiple self-employment sources they are added together.
Most paid options start at £10–£20/month. Free options exist but require more manual work. The time saved and tax efficiency gained from good software usually far outweighs the monthly cost.
You can use spreadsheets to track your records, but you'll still need MTD-compatible software (called bridging software) to submit your quarterly updates to HMRC. It's simpler to use an all-in-one solution like QuickBooks or Xero.