Make Tax Digital (MTD) is changing how millions of UK individuals and businesses report their taxes to HMRC. But how much does it actually cost to comply?
In this guide, we break down the real costs of Make Tax Digital in the UK, including software, accountant fees, and hidden expenses — so you can plan ahead and avoid surprises.
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QUICK ANSWER
The cost of Make Tax Digital in the UK typically ranges from £0 to £50+ per month, depending on whether you use free software, paid accounting tools, or a professional accountant. Most small businesses can expect to pay £10–£30 per month for compliant software.
WHAT IS MAKE TAX DIGITAL?
Make Tax Digital (MTD) is a UK government initiative from HMRC designed to make tax reporting more accurate and efficient by requiring digital record keeping and online submissions.
Instead of filing annual returns manually, individuals and businesses must use compatible software to keep records and submit updates throughout the year.
MAKE TAX DIGITAL COST BREAKDOWN
1. Software Costs
- Free options: £0 (limited features)
- Basic plans: £10–£20/month
- Advanced software: £20–£50/month
Popular providers include:
- QuickBooks
- Xero
- FreeAgen
2. Accountant Fees
- Basic support: £20–£50/month
- Full service: £50–£150+/month
👉 Some accountants include software in their fee
3. Time & Admin Costs
Even if you go DIY:
- Learning software
- Updating records regularly
- Quarterly submissions
👉 This “hidden cost” is time rather than money
4. Setup Costs
- Initial setup: £0–£200
- Migration from old systems
EXAMPLE MONTHLY COSTS
| Setup Type | Monthly Cost |
|---|---|
| DIY (free software) | £0–£10 |
| Small business (software only) | £10–£30 |
| With accountant | £50–£150+ |
WHO NEEDS TO USE MAKE TAX DIGITAL?
As of now and expanding into 2026:
- VAT-registered businesses ✅
- Self-employed individuals (phased rollout)
- Landlords earning above threshold
👉 This will expand — so more people will need to comply
WHAT HAPPENS IF YOU DON’T COMPLY?
- HMRC penalties
- Late submission fines
- Possible interest charges
👉 Compliance is becoming mandatory, not optional
IS MAKE TAX DIGITAL WORTH IT?
Pros:
- More accurate records
- Less paperwork
- Real-time financial tracking
Cons:
- Ongoing costs
- Learning curve
- Software reliance
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Frequently Asked Questions
How much does Make Tax Digital cost per year?
Most users will pay between £120 and £600 per year, depending on software and accounting support.
Can I use free software for Make Tax Digital?
Yes, some free options exist, but they often have limited features and may not suit growing businesses.
Do I need an accountant for Make Tax Digital?
No, but many people choose to use one to save time and ensure compliance.
CONCLUSION
Make Tax Digital is a major shift in how taxes are managed in the UK, and while it does come with costs, most individuals and small businesses can keep expenses relatively low with the right setup.
Planning ahead and choosing the right software or support can help you stay compliant without overspending.