There is exactly one authoritative list of software that works with Making Tax Digital for Income Tax, and it is HMRC's own software finder on GOV.UK, published as Find software that works with Making Tax Digital for Income Tax. HMRC's position on it is unusually blunt: "All software listed has been through HMRC's recognition process. HMRC does not recommend any product or software provider." That single sentence tells you how to read every "best MTD software" article you will find elsewhere. The list is a compatibility register, not a ranking, and the ranking is yours to do.
This guide is written for a specific contractor: someone running a limited company for their main engagements who also has sole trade or rental income on the side. That contractor has a harder software question than a plain sole trader, because two separate accounting worlds have to coexist. It covers how to drive the finder, which capabilities genuinely matter for a mixed income profile, how spreadsheet records fit, and where MTD software stops and the PSC stack begins.
Why the contractor with side income has the awkward case
A contractor working purely through a personal service company is generally outside MTD for Income Tax altogether, because salary and dividends are not qualifying income and company profits are taxed under Corporation Tax. Our guide to MTD for Income Tax for contractors sets out that scope question in full, and it is worth settling before you shop for anything.
The awkward case is the contractor whose company is outside the regime but whose side income is not. Gross sole trade fees plus gross rents are tested on their own against the threshold: over £50,000 for 2026/27, then £30,000 from 6 April 2027 and £20,000 from 6 April 2028. If that side income crosses the line, the side income comes into MTD while the company carries on unchanged. The result is a person who needs both a limited company accounting setup and an MTD for Income Tax product, serving different obligations, possibly from different providers.
That is why a generic product recommendation is close to useless here. The right answer depends on how many income sources you have, whether you already keep records somewhere, and what your accountant can file from.
How the GOV.UK software finder actually works
The finder opens by asking how you want to search, and the three routes are genuinely different tools:
- Answer questions. A short set of questions produces a personalised list of products that match your circumstances. This is the sole trader and landlord route.
- Show everything and filter. You see the full register and apply your own criteria. Agents get this view by default, because they are matching products across a client base rather than one profile.
- Check my current software. You test a product you already use for compatibility, and this route explicitly covers spreadsheets.
The questions themselves are the useful part, because they name the four variables that decide the answer: your income sources within MTD for Income Tax (self-employment, UK property, foreign property), any other income you need to report on your tax return, whether you want to create new digital records or connect to records you already keep, and your accounting period (standard tax year, calendar update periods, or neither).
For our contractor, that third and fourth question do most of the work. Dividends from the PSC are "other income you need to report", so declaring them filters out any product that cannot carry a return containing them. And the record keeping answer splits the market cleanly in two, which is the next section.
Record creating software against bridging software
HMRC's guidance divides compatible products into two families. Record creating software lets you import transactions from bank accounts, scan receipts or enter income and expenses manually, so the software is where your books live. Bridging software connects to records you already keep in spreadsheets or other accounting tools and submits from them.
Neither is superior. A contractor who already runs a well disciplined spreadsheet for two rental properties may be better served by bridging than by migrating years of habit into a new interface. A contractor whose side trade generates a hundred transactions a quarter is usually better served by bank feeds and receipt capture.
The condition on the bridging route is the one people get wrong. The link between spreadsheet and submission has to stay digital. Reading a total off a spreadsheet and typing it into a filing tool breaks the digital link, and that is a compliance failure rather than a preference.
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What to actually compare, capability by capability
Because HMRC will not rank products for you, the useful exercise is a capability checklist run against your own income mix. These are the dimensions that separate products for a contractor with side income.
| Capability | Why it matters with side income | How to test it |
|---|---|---|
| Multiple income types in one product | A sole trade plus a rental property are two businesses. One product covering both means one login and one reconciliation; two products means two of everything. | Select every income source in the finder questions and see what survives the filter. |
| Foreign property support | Listed separately from UK property in the finder, so a product covering UK rents may not cover an overseas let. | Declare it as an income source rather than assuming property is property. |
| Other income on the return | Dividends from your PSC, salary, savings interest and so on have to reach the tax return. Not every product carries every income type. | Answer the "other income sources" question honestly, including company dividends. |
| Calendar update periods | If your records run to month ends, the calendar election avoids awkward 5th of the month cut offs. It must be set per income source before the first update. | Answer the accounting period question, then confirm the setting exists in the product at setup. |
| Bridging or record creating | Decides whether you keep your spreadsheet or move your bookkeeping wholesale. | Choose "connect to existing records" or "create new digital records" in the finder. |
| Agent access | If your accountant files your updates, they need to submit from your product. | Ask your accountant before subscribing, not after. |
| Free tier limits | Free products exist for simple tax affairs but may carry limits on how they can be used, and a mixed income profile is not simple. | Read the stated limits against your full list of income sources. |
Run that grid and the shortlist usually resolves itself without anyone declaring a winner. Two or three products will cover your combination, and the choice between them comes down to price, interface and whether your accountant works in it.
How MTD software coexists with the limited company stack
The most common planning error is assuming one product will serve everything. It will not, because the obligations are separate.
Your PSC keeps its own books, runs payroll, and files a Corporation Tax return. None of that sits within MTD for Income Tax, whatever the company's turnover. The tax layers involved are set out in our guide to PSC and limited company contractor tax. If the company is VAT registered it is already inside MTD for VAT, which has its own separate compatible software list on GOV.UK, and our contractor VAT registration guide covers when that obligation starts.
So the realistic end state for a contractor with side income is two software relationships. One serves the company. One serves the personal sole trade or property business under MTD for Income Tax. Some providers sell both on one platform, which is a genuine convenience, but it is a convenience rather than a requirement, and it should not outrank compatibility with your actual income sources.
Expense recording deserves a word here too, because the two worlds have different rules. Costs incurred by the company follow company rules, covered in our contractor expenses guide, while sole trade and property expenses are personal business expenses reported through the quarterly updates. Keeping them in separate products is not just tidy, it prevents the two sets of rules bleeding into each other.
Getting the timing and the setup right
Digital record keeping starts on the first day of the tax year you are mandated for, not on the first deadline. Choosing software in July for a year that began in April means reconstructing three months of records, which defeats the point.
Once the product is chosen, three setup decisions matter more than the rest. Authorise the software to interact with HMRC before you need it, rather than at 6pm on a deadline day. Set the calendar update period election, if you want it, for each income source before the first quarterly update for that source. And create each business separately, because a quarterly update is required for every self-employment and property business you have. The deadlines under the standard periods are 7 August, 7 November, 7 February and 7 May, and the final declaration then pulls the year together alongside the rest of your income, as covered in our contractor Self Assessment guide.
The short version is that HMRC has already done the hard filtering for you. The software finder tells you what is compatible, HMRC declines to tell you what is good, and the gap between those two things is exactly the capability checklist above: your income sources, your record keeping habit, your accounting period, and your accountant's ability to file from whatever you pick. Get those four right and the product name barely matters. If you would like help mapping your own income mix to a compatible setup and keeping the company and personal sides properly separate, our contractor accountancy services cover MTD reporting alongside your PSC compliance, and you are welcome to get in touch.