Making Tax Digital for Income Tax

[redworldtoysandmodels]

With the MTD for IT becoming mandatory from April 2026 what low cost accounting software do other Ebayers use that will make this possible.  With profit margins squeezed and postage costs forever increasing turnover can be high enough to make MTD mandatory from next April but actual profits are quite low.  Costs of accounting software will add to this burden as well as extra time reporting every quarter.  

[simplyessential_uk]

SoO Ive asked AI to go through all the 9 "FREE" softwares available to a sole proprietor 

Find software that works with Making Tax Digital for Income Tax - GOV.UK

• Clear Books Free: This is a genuinely free option with a strong feature set for sole traders and landlords. Its key limit is that it's designed for simple businesses and may not support complex accounting needs or multiple income sources within one account.

• FreeAgent: This software isn't free for everyone. It's a key benefit of having a business bank account with NatWest, Royal Bank of Scotland, or Ulster Bank. If you don't have an account with one of these banks, you'll need to pay for a subscription.

• Kletta: This is a new, simplified app that seems to be genuinely free for MTD compliance. The main limitation is that it's a more basic platform compared to a full accounting suite like QuickFile or Clear Books, focusing on core MTD requirements rather than advanced bookkeeping tools.

• QuickFile: This is a very generous "free" option, but its biggest limitation is the transaction limit. It's free only for businesses with less than 1,000 transactions per year. If your business grows beyond this, you will need to upgrade to a paid "Power User" subscription.

• Sage Individual (Free): This version is free and compliant with MTD, but it has significant feature limitations. It does not include automated bank feeds, which means you have to manually enter your transactions. It's a very basic tool designed for manual input.

• @Coconut: While advertised as free, some sources suggest it requires a subscription after a limited-time trial. You should verify the specific terms on their website to see if a perpetually free version is available or if it's part of a promotional offer.

• Nomi: Similar to Coconut, Nomi appears to offer a free trial, after which a paid subscription is required to continue using the service. It is not a perpetually free option.
• Self Assessment Direct (Sage): The "Accounting Individual Free" version has significant limitations. For instance, it does not include features like bank account connections or automatic expense categorization, which are available in their paid tiers.
• TaxNav: This software is genuinely free during the HMRC pilot program, but the company has stated that a paid subscription will be introduced in April 2026. This means the free version will have a time limit, and you will need to pay to continue using it in the future.

Came back with a clear books free as the only true "free" software and a link for You tube - so watched this is looks very simple 

https://www.youtube.com/watch?v=79DkiKXRH7k

[gracemount.antiques]

Thank you very much for the information!

[gracemount.antiques]

<meta http-equiv="Content-Type" content="text/html; charset=utf-8" />

Thank you very much for the information!

[simplyessential_uk]

Ive spent the last 3 days trying to understand the Clear books software - Im not number literate, but never had a problem doing my tax returns as basic revenue/expenses but to navigate the software has taken me 3 days to understand "accounting" terms and bank feeds - After resetting it 3 times I think Ive got it now, "explaining transactions"  - problem is also the new quarterly tax dates arent monthly and eg 6th April to 5th July so even getting reports from Ebay to custom date and only available in CSV version (when the summary they send monthly in PDF that I used to use) is tedious.  Also with money coming in from Ebay / Amazon as withdrawls isnt a reflection of "sales revenue" so having to work out "transfers" on the software - The alternative is manually inputting every expense - So glad Im trying to get to grips now rather than next year.  Anyone not used to accountancy software is going to struggle if they leave it til last minute but overall the Clear books software is easy to use (once you understand the accountancing processes) 

[eastern-lights]

---

@simplyessential_uk wrote:

Ive spent the last 3 days trying to understand the Clear books software - Im not number literate, but never had a problem doing my tax returns as basic revenue/expenses but to navigate the software has taken me 3 days to understand "accounting" terms and bank feeds - After resetting it 3 times I think Ive got it now, "explaining transactions"  - problem is also the new quarterly tax dates arent monthly and eg 6th April to 5th July so even getting reports from Ebay to custom date and only available in CSV version (when the summary they send monthly in PDF that I used to use) is tedious.  Also with money coming in from Ebay / Amazon as withdrawls isnt a reflection of "sales revenue" so having to work out "transfers" on the software - The alternative is manually inputting every expense - So glad Im trying to get to grips now rather than next year.  Anyone not used to accountancy software is going to struggle if they leave it til last minute but overall the Clear books software is easy to use (once you understand the accountancing processes) 

---

Thank you for that post. I am in the same position as a lot of people, wondering which way is the best to go regarding MTD, I have sort of settled on Clearbooks but not taken any actual action yet.

Clearbooks have a lot of videos on their website to look at. Too many if I'm honest, but I did view this one that I found useful:

https://www.youtube.com/watch?v=79DkiKXRH7k

One thing you mentioned was the standard HMRC reporting periods ending on the fifth of the month. One thing this video mentions (about 5½ minutes in) is that you can change that and use calendar months which I think maybe useful.

[redworldtoysandmodels]

I have had to get a bookkeeper to set me up on Xero (at a cost of course) - she knew about the ebay income being net of fees so set it up so I can put in gross sales less ebay selling fees (this involves printing off the weekly sales report and working that out!).  I also have other income to report so she helped with this as well.  It is going well so far but no doubt will need to pay her again to help me actually get to grips MTD and with reporting this information every quarter next year.  Small business expenses just keep going up and up!😑

[simplyessential_uk]

I did see that on the presentation and wondered if an option to select - I saw it on part to connect to HMRc and asked which I wanted to select - Im asking Gemini AI alot of Questions (especially how to use clear book as it will just reply to my specific question rather than me having to trawl through CB Help pages) and its confirmed even in we have reported 6th April - 5th April we can change to monthly on MTD so think thats my route as getting Ebay figures exported is not easy on a spread sheet then extrapolate the figures I need 
Id definitely recommend you get familiar with it, I think once I know It all tallies Ill feel happier - Its just so new 

Ive just asked Gemini how this works as the final assesments stil run from 6th - to the 5th  so think it works it out 

Your final Self-Assessment Tax Return will still cover the full tax year, from 6th April to 5th April.

Here’s how it works:

• Your MTD quarterly reports will be submitted for your chosen dates (e.g., April 1st to June 30th).

• Your final Self-Assessment Tax Return will still need to include the full tax year. It will include all the data from your MTD reports, plus the data from the remaining days (in your case, the 1st to 5th of April, and the 1st to 5th of July).

Clear Books is designed to handle this. When it's time to submit your final tax return, the software will automatically combine all your quarterly reports and the remaining days to produce a final report for the entire tax year.

You can be confident that your final tax return will be complete and correct, and you won't be paying tax on the same income twice.

The Process

1. Connecting to HMRC: You will first need to go through a setup process in Clear Books to connect your account to your HMRC Government Gateway login. This authorizes the software to submit information on your behalf.

2. Selecting Reporting Periods: During this setup process, or in a specific MTD settings area, you will be given the option to choose your reporting periods. This is where you will select the calendar quarters (e.g., April 1st to June 30th) instead of the standard 6th-to-5th dates.

3. The Software Does the Work: Once you have selected your preference, Clear Books will automatically prepare your quarterly reports based on the transactions you have explained. It will use the transactions that fall within those date ranges you selected.

[simplyessential_uk]

yes Ive managed to work out reports and exporting the Excel and getting the gross income of the order (the fees invoice they send us is correct).  Accountancy software has been driving me mad for the last 3 days - I have reset about 5 times - Im FINALLY understanding it and opening pots for transfers and when Ive bought things myself and got receipts - None of which is on the help menu but Gemini AI has been very helpful - 

but if you use the software as a manual process and not connect to your bank records just recording incoming sales and expenses is easy enough