Making Tax Digital: which business accounts actually help?

The timetable, and the number that catches people out

Making Tax Digital for Income Tax replaces the annual Self Assessment return with digital record-keeping and four quarterly updates, plus a final declaration. It is being phased in by income:

• 6 April 2026 — qualifying income above £50,000
• 6 April 2027 — above £30,000
• 6 April 2028 — above £20,000

If you were caught in the first wave, the first quarterly submission deadline was 7 August 2026, with the next falling three months later.

The number that catches people out is what “qualifying income” means. It is gross turnover, not profit — your self-employment revenue plus gross UK rental income, before expenses and before the trading and property allowances. A freelancer turning over £38,000 with a £15,000 buy-to-let has qualifying income of £53,000 and was in scope from April 2026, however modest the profit.

MTD for VAT is separate and already applies to every VAT-registered business. If you are VAT registered you have been doing this for years; MTD for Income Tax is an additional obligation, not a replacement.

Three kinds of “MTD ready”

The phrase is doing an enormous amount of work in bank marketing. There are really three tiers, and the difference is worth hundreds of pounds a year.

1. The bank gives you full accounting software

Mettle and NatWest include a complete FreeAgent subscription. That is a recognised MTD package handling digital records, quarterly updates, the final declaration and VAT — not a bank’s simplified tool. At Mettle it comes attached to a permanently free account, which makes it the best value in the market by a distance.

2. The bank builds its own MTD tool

Monzo includes HMRC-recognised MTD software, built on Sage technology, on every tier including free Lite — unusual, since most providers reserve tax features for paid plans. Monzo states three limits plainly, and they matter: the tool does not support accruals basis accounting, does not file VAT, and does not allow accountant collaboration. It is also for sole traders and landlords only, not limited companies. Starling’s Accounting Essentials is also free and covers MTD record-keeping, with Accounting Plus at £7 a month adding VAT calculation and filing. ANNA offers tax tools and filing support, though its everyday balance is safeguarded rather than FSCS-protected.

These are genuinely useful for a straightforward sole trader on the cash basis with no accountant. They are not a substitute for full accounting software once you have stock, payroll, VAT, an accountant or a limited company.

Monzo has a route around its own limits. Pro customers get a free 6-month Xero subscription and Team customers 8 months, worth up to £520, for new Xero customers until 31 May 2027. Xero handles VAT, accruals and accountant collaboration — everything Monzo’s own tool does not. It is an introductory offer rather than a permanent inclusion, so price year two at Xero’s normal rate.

3. The bank connects to software you buy

Virgin Money sits between the second and third groups: it bundles Xero free for six months, which is a recognised MTD package handling VAT and accountant collaboration — but it is an introductory offer rather than an ongoing inclusion, so price year two.

Everyone else. Tide has the longest integration list on a free plan — Sage, Xero, QuickBooks and FreeAgent — but provides no MTD tool itself. The high-street banks and Revolut are the same, and Revolut puts integrations behind its £30-a-month Grow plan.

Nothing wrong with this, provided you understand you are paying for software separately. A Xero or FreeAgent subscription is a real annual cost, which is exactly what Mettle removes.

So what should you actually do?

1. Check whether you are in scope. Add gross self-employment turnover to gross rental income and compare against the threshold for your year. Use the figure from your most recently filed return.
2. Check whether you already pay for software. If you spend money on Xero or FreeAgent each year, Mettle or NatWest eliminate that cost outright.
3. Check the account suits you first. Mettle takes no cheques, supports no international payments and offers no overdraft. Free software is a poor trade for an account that cannot do what your business needs.
4. Verify against HMRC’s recognised list before relying on any bank’s claim to be MTD compatible. Marketing language is not certification.
5. Talk to an accountant if you have anything beyond simple sole-trade income. Quarterly filing multiplies the cost of getting your setup wrong.

Our verdict

Mettle wins outright if you qualify. A full FreeAgent subscription free, on a free account paying 1.46% on savings, is not something anyone else offers. Check the eligibility rules before getting attached to it — sole traders and small limited companies only, UK residents, no cheques.

Monzo is the best bank-built option, because HMRC-recognised software on the free tier means you can be compliant without any subscription at all — provided you are a sole trader or landlord on the cash basis, are not VAT registered, and do your own books. If any of those does not apply, Pro or Team plus the free Xero subscription covers you for six to eight months, after which you pay Xero’s normal price. Mettle’s FreeAgent has no expiry. Starling is the choice if VAT filing matters and you want it handled in the account — though price it at the April 2027 rate, not today’s.

And if you already run Xero or Sage happily, MTD should not drive your account choice at all. Pick on cost, service and protection, and let your existing software do the filing. Start with the true cost calculator.