Since Making Tax Digital for Income Tax Self Assessment (MTD ITSA) came into effect on 6 April 2026, many sole traders, freelancers, and landlords are now required to keep digital records and submit updates using compatible software once they reach the qualifying income threshold. Selecting the right software can help save time, reduce errors, and improve the quarterly submission process. This guide compares bridging software and full accounting software to help you identify the best solution for your needs.
Understanding MTD ITSA Requirements
MTD ITSA applies to sole traders and landlords with qualifying income above the HMRC thresholds. From April 2026, it applies first to those with total income over £50,000, with the threshold dropping to £30,000 from April 2027. These businesses must submit quarterly income and expense updates to HMRC, followed by an annual final declaration.
The software must record income and expenses digitally, submit quarterly updates and the final declaration, and report other income types like dividends, pensions, or interest. Software meeting these requirements allows submissions to go directly to HMRC without manual data entry.
What is Bridging Software?
Bridging software connects your existing spreadsheets or basic bookkeeping systems to HMRC, enabling you to submit income and expense data digitally without replacing your current records. It is cost-effective, with many free or low-cost options, and works with Excel and other common spreadsheet programs, making setup quick and easy.
However, manual entry is still needed, and there is no automation for bank feeds or expense tracking. Bridging software suits businesses with few transactions that want to keep their existing system.
What is Full Accounting Software?
Full accounting software offers a complete bookkeeping system with integrated MTD ITSA submissions. Platforms like Xero, QuickBooks, FreeAgent, and Sage handle invoices, bank feeds, expense categorisation, and tax reporting in one system. It automates data entry, provides real-time financial insights, and manages multiple income streams, making it suitable for businesses with higher transaction volumes.
However, it costs more and requires learning a new system, including migrating existing records. Full accounting software suits businesses with many transactions or those seeking a single, streamlined system for all financial activity.
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Bridging Software vs Full Accounting Software: Quick Comparison
Feature | Bridging Software | Full Accounting Software |
Cost | Low | High |
Automation | Minimal | Full |
Ease of Use | Easy | Moderate |
Scalability | Low | High |
Best For | Small traders / landlords | Growing businesses / multiple income streams |
Cost: Bridging software is a cost-effective option, ideal for those who only need to submit digital tax updates. In contrast, full accounting platforms come with a higher price tag but include comprehensive tools for bookkeeping, invoicing, and financial management.
Automation: With bridging tools, most data must be entered manually, which can be time-consuming. Full accounting software, on the other hand, offers automation features such as bank feeds, expense categorisation, and real-time reporting to reduce manual work and improve accuracy.
Ease of Use: Bridging software tends to be straightforward and easy to integrate with existing spreadsheets, making it familiar for those used to manual record-keeping. Full accounting systems have a steeper learning curve but provide powerful features once you’re comfortable using them.
Scalability: Bridging software works well for small operations with limited transactions. Full accounting software is more scalable, supporting growing businesses that deal with higher transaction volumes or need advanced financial insights.
Best Fit: Bridging software is best suited to sole traders and landlords who want a simple way to comply with MTD requirements. Full accounting software is a better choice for businesses managing multiple income streams or more complex financial activities.
Which Software Should Landlords Use?
Landlords with few properties and simple income records may use bridging software to submit quarterly updates without switching systems. Landlords managing multiple properties, tenants, or higher transaction volumes benefit from full accounting software, which automatically tracks income and expenses and provides accurate quarterly updates to HMRC.
Which Software Should Sole Traders Use?
Sole traders with low-volume sales or freelance income may find bridging software sufficient. It lets them use existing spreadsheets while meeting MTD requirements.
Sole traders with multiple clients, higher transaction volumes, or seeking automated reporting should consider full accounting software. These platforms reduce manual work, provide financial insights, and handle quarterly submissions efficiently.
Free MTD ITSA Software Options for Sole Traders & Landlords
For Sole Traders
Sole traders who need to comply with MTD ITSA have several free or low-cost options for reporting basic income and staying compliant. HMRC does not usually provide its own full MTD ITSA software, but it does publish a list of recognised software providers, some of which offer free or entry-level plans for simple needs. Platforms like GoFile offer free filing for certain basic income types, while paid plans cover self-employment income, allowing sole traders to submit quarterly updates and the annual Final Declaration without moving to more expensive full accounting software. For those who prefer working in spreadsheets, bridging tools such as 123 Sheets and VitalTax provide affordable ways to send MTD-compliant data from spreadsheets directly to HMRC.
For Landlords
Landlords managing a small number of properties can also take advantage of free or low-cost software to meet MTD ITSA requirements. HMRC provides guidance and a list of recognised MTD-compatible solutions, and some providers offer free tiers for small portfolios. Platforms like Landlord Studio offer landlord-focused tools, including a free tier for small portfolios, to help track rental income and expenses and prepare data for digital reporting. Bridging solutions such as 123 Sheets or VitalTax allow landlords who maintain spreadsheet-based records to submit their figures digitally, making them ideal for smaller portfolios or landlords new to digital tax reporting.
Choosing between bridging software and full accounting software depends on transaction volume, the number of income streams, and how automated you want your system to be. Small landlords and low-volume sole traders may use bridging software effectively, while growing businesses or high-volume sole traders benefit from full accounting software. At Cartwheel International, we provide advice and support for MTD ITSA submissions, helping businesses select the right software and manage quarterly updates efficiently. Book your free consultation today.
