Free MTD software, with the books built in
IQ Books by ReconcileIQ is a full double-entry ledger that files your MTD VAT returns and your MTD for Income Tax quarterly updates to HMRC. Both are on the free plan, alongside invoicing, bank feeds and receipts.
On HMRC’s list of software for MTD for Income Tax. HMRC approved IQ Books for live VAT filing in September 2026.
How IQ Books does it
The records and the filing, in one ledger
Keep the books in IQ Books and the VAT return and the quarterly updates come out of them, ready to send to HMRC. Both are free on every plan.
01
MTD for VAT, built as you trade
VAT is set on each bank line, invoice and bill as it is recorded, including reverse charge and postponed import VAT, so the return builds itself as the quarter runs. When you are ready, you submit it to HMRC from the app. HMRC approved IQ Books for live VAT filing in September 2026.
- Every box drills down to the transactions behind it
- Standard, cash accounting and flat rate schemes
- A filed period locks, so the return you sent always ties back to the books
- Filing is free on every plan, the free one included
02
Income Tax quarterly updates, straight from the books
For sole traders, IQ Books sends your quarterly updates for self-employment income from the same ledger, cumulative for the tax year to date, as HMRC requires. IQ Books is on HMRC’s list of software for MTD for Income Tax.
- Quarterly updates for self-employment income, free on every plan
- Your income and expenses mapped to HMRC’s categories
- Cumulative updates, with no adjustments needed before you send
- The year-end final declaration goes through other MTD software or your accountant, for now
03
The digital records, kept for you
MTD is only as good as the records it is built from, so the ledger does the heavy lifting. Bank accounts connect by open banking or import from CSV statements, receipts are read from a photo, and CodeIQ, our AI coding engine, codes each bank line with the account and VAT as it arrives, for you to confirm.
- Open banking feeds, or CSV statements that remember each bank’s layout
- Each line coded with an account and VAT code, ready to confirm
- Receipts read from a photo and attached to the record
- Coding a line yourself is always free; AI coding draws on credits, with 1,000 free to start
04
Invoices in the same ledger
Sales invoices are digital records too. Raise them in IQ Books and the income and the VAT land in the books on the day, ready for the VAT return and the quarterly update, with nothing copied across.
- Seven invoice designs, pay links and scan-to-pay QR codes
- Payments matched to the bank line they arrive on
- Quotes, credit notes and recurring invoices
Need one now? Try the free invoice template.
The rules
What Making Tax Digital asks of your software
Making Tax Digital moves VAT and, for more people every April, Income Tax onto software. HMRC’s requirements come down to four things.
Four requirements
- Digital records. Your sales and purchases, with the date, the value and the VAT on each, kept in software rather than on paper (VAT Notice 700/22, section 3.3).
- Digital links. Where figures move between programs, they move electronically. HMRC does not count copying and pasting, or typing a figure from one place into another, as a digital link (section 3.2.1).
- VAT returns submitted to HMRC from that software. All VAT-registered businesses should now be signed up for MTD for VAT.
- Income Tax quarterly updates, if MTD for Income Tax applies to you. Each update is cumulative, covering the tax year to date, and HMRC says you do not need to make accounting or tax adjustments before sending one. You send one even in a quarter with no income.
Who MTD for Income Tax applies to
Sole traders and landlords registered for Self Assessment, once their qualifying income passes the threshold. Qualifying income is your total income from self-employment and property before expenses, so it is turnover, not profit. HMRC checks it from the tax return you sent for the year shown.
| Qualifying income over | In the tax year | You start from |
|---|---|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
Quarterly update deadlines
| Update covers | Send it by |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May |
After the year ends, the tax return (HMRC calls it the final declaration) has to be submitted using MTD for Income Tax software, or by your accountant if they are your main agent. Not sure where you stand? Our free self-employed tax calculator estimates your bill and tells you which MTD start date your turnover puts you on.
MTD rules checked against GOV.UK on 5 October 2026: when you need MTD for Income Tax, qualifying income, quarterly updates, submitting your tax return, MTD for VAT, VAT Notice 700/22, HMRC’s MTD for Income Tax software finder.
What it does not do yet
- The final declaration. Quarterly updates file from IQ Books, but the year-end tax return does not yet. Under MTD it has to go through MTD software that supports it, or your accountant as your main agent.
- Landlord filing. Quarterly updates for property income are not live yet, so a landlord should use software that files property updates today.
- Payroll runs. IQ Books records the payroll journal your payroll provider gives you; it does not run payroll.
- Emailing invoices from the app and automatic reminders are on paid plans, from £5 a month. Creating invoices and sharing a payment link is free.
Ledger or bridging software: which do you need?
If you keep your records in a spreadsheet and want to carry on, bridging software is a legitimate route: HMRC describes it as a digital tool that connects your records to its systems through the MTD APIs (VAT Notice 700/22, section 3.2.3). You still own the job of keeping the spreadsheet right, and of keeping every link between sheets digital.
IQ Books replaces the spreadsheet rather than bridging it. The records, the VAT return and the quarterly updates live in one double-entry ledger, so there is nothing to copy across and nothing to keep in step. Moving in from a spreadsheet means importing your bank statements once; the CSV importer remembers each bank’s layout.
Who it suits
MTD software for the way you trade
Sole traders, VAT-registered businesses, limited companies and practices all file from the same ledger, on the same free plan.
Sole traders
Keep your digital records and send your quarterly updates without a monthly fee. At year end, your accountant or other MTD software makes the final declaration from the same figures.
VAT-registered businesses
The VAT return builds as you trade and files from the free plan, on the standard, cash accounting or flat rate scheme. Our VAT calculator handles the one-off sums.
Limited companies
File MTD VAT from the same ledger that prepares FRS 105 and FRS 102 Section 1A accounts with iXBRL. Direct filing to Companies House is built but not live yet, so for now you download the file and submit it.
Accounting practices
Give clients their own IQ Books with MTD filing, and work across all of them from one login. How it works for practices.
What MTD costs
Free MTD software against the paid routes
The cheapest plans from the two biggest names, checked on their UK pricing pages on 5 October 2026. Prices exclude VAT.
| Software and plan | Per month | MTD VAT returns | Income Tax quarterly updates |
|---|---|---|---|
| IQ Books, free plan | £0 | Yes | Yes, self-employment |
| Xero Simple | £7 | No (for businesses that are not VAT registered) | Yes |
| Xero Ignite | £18 | Yes (20 invoices and 10 bills a month) | Yes |
| QuickBooks Sole Trader Plus | £10 | No | Yes |
| QuickBooks Simple Start | £16 | Yes (1 user) | Yes |
To be fair to both: Xero Simple and QuickBooks Sole Trader Plus also take you through the year-end final declaration, which IQ Books does not yet do. Where IQ Books differs is that the free plan is the whole ledger, with no caps on invoices or bills, and VAT filing included. We set out the full comparison in Xero vs QuickBooks in the UK (2026), and the third option.
Switching costs nothing
If you are already on Xero, QuickBooks or Sage, IQ Books imports your opening balances, contacts and open invoices in one step, free, so trying it costs an afternoon rather than a rebuild. How the one-click switch works.
Sources: Xero UK pricing, Xero Simple, QuickBooks UK pricing, checked 5 October 2026.
MTD filing, free
One organisation with the whole IQ Books ledger: invoices, quotes and bills, bank feeds and receipts, stock, projects and multi-currency, with MTD VAT returns and Income Tax quarterly updates filed to HMRC. Typing and coding by hand is always free; automation such as reading receipts and coding bank lines draws on 1,000 free credits. No card needed.
Add email, reminders and CIS
Emailing invoices from the app, automatic payment reminders and CIS300 filing come with every paid plan, from £5 a month. Paid plans also carry monthly credits for the automation, so the bookkeeping keeps doing itself.
Questions
MTD software, answered
About Making Tax Digital, and how IQ Books handles it.
Is there free MTD software?
Yes. IQ Books by ReconcileIQ files MTD VAT returns and MTD for Income Tax quarterly updates on its free plan, which includes one organisation with the full double-entry ledger. HMRC's software finder lists other products too, and lets you filter for ones with a free version.
Is IQ Books HMRC-recognised?
For MTD for Income Tax, IQ Books is on HMRC's list of compatible software, for quarterly updates on self-employment income. For MTD for VAT, HMRC approved IQ Books for live filing in September 2026; it is not yet on HMRC's separate list of VAT software, which is a different process.
Does IQ Books file the final declaration?
Not yet. Your quarterly updates file from IQ Books. Under MTD, the year-end tax return (the final declaration) has to be submitted using MTD software that supports it, or by your accountant as your main agent, and the figures for it come from the same IQ Books records.
Is IQ Books bridging software?
No. Bridging software connects a spreadsheet or other records to HMRC. IQ Books is the records: a full double-entry ledger with invoices, bills, bank feeds and receipts, which builds the VAT return and the quarterly updates from the books and sends them to HMRC itself.
Does MTD apply to me?
MTD for VAT applies to every VAT-registered business. MTD for Income Tax applies to sole traders and landlords registered for Self Assessment whose qualifying income, meaning turnover plus gross rent before expenses, was over £50,000 in 2024 to 2025 (from 6 April 2026), over £30,000 in 2025 to 2026 (from 6 April 2027) or over £20,000 in 2026 to 2027 (from 6 April 2028).
Can I file MTD VAT returns for free?
Yes, on IQ Books' free plan. The VAT on each transaction is set as it is recorded, the return builds itself as the quarter runs, and you submit it to HMRC from the app. The standard, cash accounting and flat rate schemes are supported, and a filed period locks so the return always ties back to the books.
Can landlords use IQ Books for MTD for Income Tax?
Not for property income yet. IQ Books sends quarterly updates for self-employment income; landlord and property filing is not live. If most of your qualifying income is rent, choose software that files property updates today.
What does IQ Books charge for?
The free plan covers one organisation with the full ledger and MTD filing for VAT and Income Tax quarterly updates. Paid plans, from £5 a month, add emailing invoices and automatic reminders from the app, and CIS300 and Companies House filing. AI coding of bank lines draws on credits, with 1,000 free to start; coding by hand is always free.
MTD without the monthly fee, or the spreadsheet
Keep the books in IQ Books and the VAT return and quarterly updates come out of them, ready to file. One organisation with the whole ledger is free. Emailing invoices, automatic reminders and CIS300 filing come with paid plans, from £5 a month.