What MTD software must do: eight tests and one worked year
MTD for Income Tax software must create, store and correct digital records, send quarterly updates, and take your other income so you can submit your tax return. This page turns those duties into eight tests you can run on a product, then follows one made up taxpayer through a year of updates. It is general information, not advice on your own tax position. To see one product against another, read Octobooks vs Xero. For invoices, there is a free UK invoice template.
What HMRC requires
Per HMRC's software page (updated 13 July 2026, seen 4 November 2026), the software must:
- Create, store and correct digital records of your self-employment and property income and expenses.
- Send quarterly updates, which are summaries and not tax returns.
- Let you report all your other income sources, so you can complete your tax return.
- Support all your MTD income sources.
- Work with your accounting period: standard tax year, calendar update periods or neither.
All listed software has been through HMRC's recognition process. HMRC does not recommend any product.
Eight tests before you commit
Use a trial if the product has one. Run each test with your own figures.
| Test | How to run it | A fail looks like |
|---|---|---|
| 1. Listed for your income | Enter your sources in HMRC's finder | The product covers self-employment, but you also let a flat |
| 2. Your period | Find the setting for standard or calendar update periods | No setting. You must choose before your first update and cannot change it for the rest of that tax year |
| 3. Correcting a record | Change the amount of an entry already included in a sent update | The total in the next update does not move |
| 4. Other income | Look for where PAYE, dividends and interest go | They have no place, so you need a second route for the return |
| 5. The return itself | Find where the return is submitted | The product stops at quarterly updates |
| 6. One product per submission | Decide which product sends what | Two products would send the same property business |
| 7. VAT | If registered, check it covers MTD for VAT or works with what you use | A separate VAT tool that does not fit your records |
| 8. Getting your records out | Export everything to a file | No full export, so leaving later means retyping |
Test 8 is our own advice, not an HMRC rule. If you use a spreadsheet, see bridging software.
One worked year
A sole trader also lets a flat, and starts on 6 April 2027. The figures are made up. Each update is cumulative from 6 April and is sent separately for each business.
| Update | Due | Trading income | Trading expenses | Rent | Property expenses |
|---|---|---|---|---|---|
| 6 April to 5 July 2027 | 7 August 2027 | £6,200 | £1,100 | £2,400 | £300 |
| 6 April to 5 October 2027 | 7 November 2027 | £12,900 | £2,350 | £4,800 | £950 |
| 6 April 2027 to 5 January 2028 | 7 February 2028 | £19,800 | £3,600 | £7,200 | £1,100 |
| 6 April 2027 to 5 April 2028 | 7 May 2028 | £26,500 | £4,900 | £9,600 | £1,400 |
A mistake in the first quarter. Say a £400 invoice from June was missed and only found in September. There is no resend: the corrected record goes into the running total, so the second update's £12,900 already includes it. This is test 3 above.
What HMRC sees. Totals by category, not the invoices. The records stay in your software.
At the end. After the fourth update, any adjustments and your other income go in, and the tax return for 2027 to 2028 is submitted through the software by 31 January 2029.
Where Octobooks stands
Octobooks keeps the books of UK sole traders and landlords in the categories of SA103F and SA105. Its MTD for Income Tax connection is built and runs end to end against HMRC's test service. Octobooks is not on HMRC's list of compatible software yet; we are working towards recognition. Until it is listed, send your updates and your return through a product that is on the list.
Keep going
- Do I need MTD? Check your date and download the deadlines
- The MTD for Income Tax guide
- Which accounting software works for MTD?
- What are MTD quarterly updates?
Sources: GOV.UK: find compatible software, GOV.UK: send quarterly updates.