MTD Compliant Software: HMRC Requirements Explained
December 3, 2025 • Making Tax Digital
Making Tax Digital (MTD) for Income Tax requires certain types of software to communicate directly with HMRC.
(Important: MTDify is digital bookkeeping software and does not submit data to HMRC.
This article explains HMRC’s rules so you can understand the difference between bookkeeping tools and MTD filing software.)
Most businesses preparing for MTD use two tools:
-
Bookkeeping software — to keep accurate digital records
-
MTD-compliant software — to carry out the quarterly updates and final declaration
MTDify falls into the first category. It helps you maintain clean, organised digital records — the foundation of MTD — but it does not submit directly to HMRC.
This guide explains what MTD-compliant software must do, according to HMRC’s official requirements, so you can understand how it differs from everyday bookkeeping tools.
What Does “MTD-Compliant” Actually Mean?
Under HMRC rules, MTD-compliant software must:
-
connect to HMRC’s MTD system (via a secure API)
-
send quarterly updates in the approved format
-
store digital records
-
maintain digital links (no manual retyping)
-
support final declarations
-
meet HMRC’s technical security standards
Only software that passes HMRC’s technical testing and appears on their official list is allowed to submit quarterly updates.
Bookkeeping-only software (like MTDify) does not need these capabilities — it supports the digital record-keeping part but not the submission step.
How Software Becomes Officially Recognised by HMRC
Before any software can be marketed as MTD-compliant, the vendor must complete HMRC’s formal recognition process:
1. Development
The vendor builds features specifically designed to communicate with HMRC’s MTD systems.
2. Testing
The software is tested in HMRC’s sandbox (test) environment to confirm it sends data correctly.
3. Application
The vendor applies for official recognition and submits documentation.
4. HMRC Review
HMRC checks that the software meets all technical, security, and formatting requirements.
5. Listing on HMRC Website
If approved, the product appears on HMRC’s publicly available list of compatible MTD software.
Only software on this list is authorised to submit quarterly updates and final declarations.
The Core Technical Features HMRC Requires
These are the mandatory capabilities for software that wants to submit data under MTD:
1. Digital Record Keeping
The software must store income and expense data electronically with proper structure.
This includes:
-
dates
-
amounts
-
descriptions
-
categories
2. Digital Links
Data must move digitally throughout the system — no copying, retyping, or manual adjustments outside the software.
3. Quarterly Update Submissions
The software must format and send quarterly updates in the exact structure HMRC requires.
4. Final Declaration Support
After the fourth quarterly update, the software must support the final year-end confirmation.
5. UK Tax Quarter Handling
The software must recognise MTD’s quarter dates (6 April – 5 July, etc.) and allocate transactions correctly.
6. Secure Connection to HMRC
Data exchanged with HMRC must follow security rules (such as OAuth sign-in and encrypted transmission).
These are the features that distinguish MTD filing software from general bookkeeping tools.
Security & Data Protection Requirements
MTD-compliant software must meet strict security standards, including:
-
encryption of data in transit
-
secure authentication
-
appropriate user access controls
-
GDPR compliance
-
ability to retain and recover digital records
These rules apply only to software that interacts with HMRC’s systems.
Local bookkeeping software — which stores data on your own device — has different responsibilities, focused on local privacy and user-controlled backups.
Features That Are Not Required for MTD Compliance
Many people assume MTD software must include advanced accounting features — but HMRC does not require:
-
bank feeds
-
receipt scanning
-
invoice creation
-
mobile apps
-
payroll
-
expense claims
-
VAT submissions
-
budgeting tools
These features may make bookkeeping easier, but they are optional.
MTD compliance is strictly about how software communicates with HMRC — not how many features it offers.
How to Verify Whether Software Is MTD-Compliant
To check whether a product genuinely supports MTD submissions:
1. Visit HMRC’s official list
Search for the product by name.
If it does not appear: it is not recognised.
2. Check the vendor’s documentation
Look for a clear statement such as:
“Recognised by HMRC for Making Tax Digital for Income Tax.”
3. Confirm you can connect to HMRC using your Government Gateway
Submission software must authenticate you through HMRC’s system.
4. Verify quarterly submission functions
The software should show the correct UK quarter dates and submission tools.
MTD-Compliant Software vs Bookkeeping Software (like MTDify)
It’s important to distinguish between these two categories:
MTD-Compliant Software
Used for:
✔ sending quarterly updates
✔ sending the final declaration
✔ communicating with HMRC
Requires HMRC recognition.
Digital Bookkeeping Software (MTDify)
Used for:
✔ recording income
✔ recording expenses
✔ organising categories
✔ digitising receipts (Local Edition)
✔ exporting figures for submission
Does not submit to HMRC.
Both are valuable, but they serve different roles.
The Bottom Line
MTD-compliant software must:
-
meet HMRC’s technical requirements
-
connect directly to HMRC
-
submit quarterly updates
-
maintain digital records and links
Only software appearing on HMRC’s official list is recognised for Making Tax Digital submissions.
MTDify is digital bookkeeping software designed to help UK sole traders keep accurate records.
It does not submit quarterly updates to HMRC and does not appear on HMRC’s recognised software list.
Thanks for sharing:
