Both Xero and Coconut are HMRC-recognised for Making Tax Digital for Income Tax and both appear on the HMRC compatible software register. They are aimed at different users, structured differently, and priced on different assumptions. Xero is a comprehensive accounting platform designed for businesses, practices, and complex financial structures. Coconut is a deliberately simple accounting and tax app built for sole traders and landlords who want to handle their own books and MTD compliance without accounting expertise.
This article draws exclusively on each provider's own published pricing and feature pages and on HMRC's published guidance, all verified as at June 2026. Prices are stated exclusive of VAT unless noted otherwise.
Brand Note: Coconut trades as !Coconut. The company is @Coconut Platform Ltd (Company No. 09904418). Throughout this article the product is referred to as Coconut for readability. The HMRC-recognised software code on the Coconut pricing page is 4YTVND. Coconut and GoSimpleTax are owned by the same directors and operate as complementary products in the same ecosystem.
The MTD for Income Tax mandate: the essentials
Making Tax Digital for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with combined qualifying income above £50,000 in the 2024 to 2025 tax year. The mandate extends to qualifying income above £30,000 from April 2027, and above £20,000 from April 2028.
Qualifying income is gross income from self-employment and UK and foreign property combined, before deductions. Employment, dividend, and capital gains income do not count toward the threshold.
Qualifying taxpayers must:
Keep digital records of all business income and expenses using HMRC-recognised software.
Submit four quarterly updates to HMRC, due by 7 August, 7 November, 7 February, and 7 May each tax year.
File a Final Declaration by 31 January following the end of each tax year, replacing the legacy Self Assessment return.
Ensure a direct digital connection between their records and HMRC's MTD API.
HMRC has paused penalty points for late quarterly submissions during 2026 to 2027. Financial penalties for a late Final Declaration apply from April 2026. The first quarterly deadline for the 2026 to 2027 tax year is 7 August 2026.
Xero and MTD: What The Platform Covers
HMRC recognition and income scope
Xero has been on HMRC's compatible software register for MTD for VAT since April 2019 and was recognised for MTD for Income Tax ahead of the April 2026 mandatory start. Every paid UK plan, namely Simple (£7/month), Ignite (£16), Grow (£37), Comprehensive (£50), and Ultimate (£65), covers UK property, self-employment, and foreign property income, with quarterly updates and the Final Declaration all included at no extra cost.
MTD for VAT
Xero supports MTD for VAT across all paid UK plans, covering standard, cash accounting, flat rate, and margin scheme VAT. Group VAT requires the Comprehensive or Ultimate plan. Coconut has no VAT submission capability at any tier. For VAT-registered sole traders or landlords, Xero is the only platform of the two that can cover both MTD for VAT and MTD for Income Tax.
Multi-business and multi-income support
Xero launched a multi-business MTD ITSA module in its 2025 public beta, allowing a taxpayer with multiple income sources to file separate quarterly updates for each from within one account. HMRC requires a distinct quarterly update per business source, so this capability matters for anyone with both a sole-trade business and rental income, or more than one sole-trade business.
Accounting depth
Xero is a full double-entry cloud accounting platform with bank feeds, Hubdoc receipt capture, tracking categories, invoicing with no monthly cap on higher plans, payroll, multi-currency, project tracking, accruals-basis accounting, a full nominal ledger, trial balance, and management reporting. This breadth of accounting functionality exceeds what any simplified sole-trader app provides. For clients who require formal management accounts, group accounts, or complex financial reporting, Xero is the appropriate tool.
Accountant and practice tools
Xero Practice Manager and Xero HQ give accountants a centralised multi-client dashboard for managing and filing MTD quarterly updates on behalf of clients, with direct agent-level submission. This is the established workflow for larger accountancy practices managing a portfolio of MTD ITSA clients.
What Xero does not offer
Xero does not include a Self Assessment filing tool as part of its core subscription. For clients under MTD, the Final Declaration replaces the need to file a separate Self Assessment return, but for clients not yet in scope for MTD or with complex tax affairs requiring a full SA100 return, a separate filing route is needed. Xero has no equivalent to Coconut's built-in +Self Assessment plan. Xero also has no real-time tax estimate tool of the kind Coconut provides across its MTD plans.
Coconut and MTD: What the Platform Covers
HMRC recognition: confirmed
Coconut was confirmed as HMRC-recognised MTD for Income Tax software via a press release published on its own website on 18 March 2026. The HMRC software code published on Coconut's pricing page is 4YTVND. Coconut is recognised for digital record-keeping and quarterly MTD submissions for sole traders and landlords.
The four plans: what each covers for MTD
Important: not all Coconut plans include MTD quarterly submissions to HMRC. The Bookkeeping plan (£99.99/year) covers digital record-keeping, bank feeds, property income preparation (SA105), receipt capture, invoicing, and a self-employment tax estimate, but does not include MTD quarterly submissions. The MTD filing plan (£129.99/year) adds quarterly updates, the Final Declaration, dedicated MTD expert help, and in-year tax estimates. Landlords and sole traders who need to file quarterly MTD updates must be on the MTD filing plan or above.
The four plans in full, all at annual prices (monthly billing available at higher per-month rates):
Bookkeeping: £99.99 per year (or £16.99 per month). Covers automatic bank feeds, expense categorisation, property income preparation, receipt capture, unlimited invoices, PayPal import, profit and loss, mobile app and web access. Does not include MTD quarterly submissions.
MTD filing: £129.99 per year (or £21.99 per month). Everything in Bookkeeping, plus quarterly MTD updates to HMRC, Final Declaration, dedicated MTD expert help, multiple income streams, in-year tax estimates, and HMRC-recognised digital records.
+Self Assessment: £129.99 per year. Everything in Bookkeeping, plus Self Assessment filing direct to HMRC via GoSimpleTax integration. Supports SA100, SA102, SA103, SA104, SA105, SA106, SA107, SA108, and SA109. Does not include MTD quarterly submissions.
Full: £159.99 per year. Everything in Bookkeeping, MTD filing, and Self Assessment combined. Covers both quarterly MTD updates and SA filing.
A 14-day free trial is available on all plans with no card details required.
The Zempler partnership: free software for two years
Coconut has a partnership with Zempler, a digital business bank. Sole traders who open a free Zempler business bank account within the Coconut app receive access to Coconut's software free for two years, described by Coconut as a saving of up to £238. The bank account can be opened directly within the Coconut sign-up journey. Landlords and sole traders who do not want to open a Zempler account can still subscribe to Coconut directly. Source: Financial IT press release, June 2026; getcoconut.com/zempler-customers-get-coconut-free-for-making-tax-digital, June 2026.
The Zempler free offer covers Coconut's software for two years. The specific plan tier included in the free offer, whether it covers MTD quarterly submissions, and any conditions or eligibility requirements should be confirmed directly with Coconut before advising clients. Source: getcoconut.com/free-making-tax-digital-software, June 2026.
GoSimpleTax integration: Self Assessment within the Coconut ecosystem
Coconut and GoSimpleTax are owned by the same directors and operate as complementary products. GoSimpleTax is an HMRC-recognised Self Assessment filing platform. The Coconut +Self Assessment and Full plans include SA filing directly within the Coconut ecosystem via this integration, covering all main SA supplementary pages including SA105 (property income) and SA106 (foreign income). This means Coconut users who are not yet in scope for MTD, or who need to file a full Self Assessment return for tax affairs beyond their business income, can do so without leaving the Coconut platform or purchasing a separate SA tool.
Accountant access and agent filing
Coconut supports accountant access via a dedicated accountant login portal at accountant.getcoconut.com. Clients can invite their accountant to their Coconut account at any time on any plan. Coconut's sign-up guide confirms that accountants can register for MTD for Income Tax and submit returns on behalf of clients, provided the client approves them via their HMRC Government Gateway account. Coconut also offers a dedicated accountant product and payroll services for accountancy firms.
FCA authorisation
Coconut is FCA-authorised as an Account Information Service Provider under the Payment Services Regulations 2017, reference number 931194. This enables it to securely connect to bank accounts via Open Banking. This is stated on the Coconut pricing page and confirmed on the FCA register.
What Coconut does not cover
Coconut is a simplified app. It does not offer accruals-basis accounting, a nominal ledger, trial balance, balance sheet, multi-currency, payroll within the main product, project tracking, or the accounting depth of a full platform such as Xero. It is not designed for VAT-registered businesses, limited companies, or complex financial structures. The MTD quarterly submission scope for foreign property income as a separate income stream under MTD ITSA is not explicitly confirmed on published pages, though SA106 foreign income is supported within the Self Assessment plans. Landlords with overseas rental income requiring MTD quarterly submissions for foreign property should verify this directly with Coconut.
Pricing Comparison
Xero
Xero Simple at £7 per month (£84 per year, excluding VAT) is the lowest entry point to a full MTD ITSA platform covering all income types, with quarterly updates and the Final Declaration included. All other Xero plans include the same MTD capability at higher price points with additional accounting features. There is no permanent free plan.
Coconut
The Bookkeeping plan at £99.99 per year provides digital records, bank feeds, and property income prep, but does not include MTD quarterly submissions. The MTD filing plan at £129.99 per year adds quarterly submissions and the Final Declaration. The Full plan at £159.99 per year adds Self Assessment filing on top. Via the Zempler partnership, Coconut may be obtained free for two years for those who open a Zempler business bank account, subject to the plan tier and conditions described in Section 3.3 above. Source: getcoconut.com/pricing, June 2026.
On a like-for-like basis for MTD quarterly submissions, Xero Simple (£84/year) is cheaper than Coconut MTD filing (£129.99/year). However, the Coconut MTD filing plan includes real-time in-year tax estimates, dedicated MTD expert help, and unlimited invoicing, which the Xero Simple plan partly caps. The Full plan at £159.99/year bundles MTD filing and Self Assessment in a single subscription, which may represent better value for clients who need both.
Side-by-Side Comparison
The table below is based on each provider's own published pricing and feature pages and on HMRC's published guidance, all current as at June 2026.
Feature | Xero | Coconut (!Coconut) |
|---|---|---|
Legal entity | Xero Limited (NZ-incorporated) | @Coconut Platform Ltd, Company No. 09904418 (England). Trading as !Coconut |
FCA status | No FCA registration | FCA-authorised Account Information Service Provider under PSRs 2017, Ref. 931194 |
HMRC MTD ITSA recognition | Yes, confirmed on HMRC compatible software register | Yes, HMRC-recognised software code 4YTVND (shown on pricing page, June 2026) |
Product category | Full cloud accounting platform | Simple accounting and tax app, purpose-built for sole traders and landlords |
MTD for VAT | Yes, all paid plans (since April 2019) | No |
UK property income (SA105) | Yes, all paid plans | Yes, property income preparation (SA105) on Bookkeeping plan and above; MTD quarterly submissions on MTD filing plan and above |
Self-employment income | Yes, all paid plans | Yes, core use case on all plans |
Foreign property income | Yes (UK-resident landlords) | Yes, SA106 foreign income supported on the +Self Assessment and Full plans (via GoSimpleTax integration); MTD submission scope for foreign property quarterly updates not explicitly confirmed on published pages |
Multi-business MTD ITSA | Yes, multi-business module (2025 public beta) | Multiple income streams listed as feature on MTD filing plan; separate sign-up per income source required per HMRC process (confirmed on Coconut how-to-sign-up page, June 2026) |
Quarterly updates to HMRC | Yes, direct HMRC API | Yes, direct HMRC API, MTD filing plan and Full plan (£129.99/year and £159.99/year) |
Final Declaration (MTD tax return) | Yes, all paid plans | Yes, MTD filing plan and Full plan |
Self Assessment return (SA100) | Not included as a dedicated SA filing tool; Final Declaration replaces SA under MTD | Yes, +Self Assessment plan (£129.99/year) and Full plan (£159.99/year); via GoSimpleTax integration; SA105, SA106, SA108 all supported |
Bank feeds (Open Banking) | Yes, all paid plans | Yes, automatic bank transaction imports, all plans including Bookkeeping |
Receipt capture | Yes, via Hubdoc integration | Yes, snap and store receipts on all plans |
Real-time tax estimates | No dedicated real-time tax estimate tool | Yes, in-year tax estimates on MTD filing plan and Full plan; SA103 self-employment tax estimate on Bookkeeping plan |
Invoicing | Yes, all paid plans (cap of 10/month on Simple plan) | Yes, unlimited professional invoices on all plans |
PayPal income import | No native PayPal import | Yes, PayPal income automatically imported, all plans |
Profit and loss report | Yes, full P&L on all plans | Yes, instant P&L report on all plans |
Accruals-basis accounting | Yes, all paid plans | No; cash basis only |
Nominal ledger / trial balance | Yes, on Grow plan and above | No |
Agent / accountant access | Yes, via Xero Practice Manager / Xero HQ for agent-level filing | Yes, accountant can be invited to client account; accountant login portal at accountant.getcoconut.com; HMRC agent registration supported (confirmed on Coconut sign-up guide, June 2026) |
Accountant product | Xero Practice Manager / Xero HQ | Dedicated accountant product at getcoconut.com/accountant-software; payroll for accountants also available |
GoSimpleTax integration | No | Yes, Coconut and GoSimpleTax are owned by the same directors; SA filing available within the !Coconut ecosystem via the +Self Assessment and Full plans |
Zempler bank partnership | No | Yes, Zempler bank account holders get !Coconut free for two years (saving up to £238 per the press release, Financial IT, June 2026); bank account opened directly within !Coconut |
Mobile app | Yes, iOS and Android | Yes, iOS and Android; also accessible via web browser |
Free plan | No permanent free plan | No permanent free plan; 14-day free trial (no card required); free for two years via Zempler bank account |
Entry-level paid price | £7 + VAT/month (Xero Simple, £84/year) | Bookkeeping: £99.99/year (or £16.99/month). MTD filing: £129.99/year (or £21.99/month). +Self Assessment: £129.99/year. Full: £159.99/year |
MTD submissions included in price | Yes, all paid plans | MTD filing plan (£129.99/year) and Full plan (£159.99/year) only. Bookkeeping plan does not include MTD quarterly submissions to HMRC |
HMRC recognised code | Not published on Xero pricing page | 4YTVND (shown on getcoconut.com pricing page, June 2026) |
Prices exclude VAT. Always verify current pricing, plan inclusions, Zempler offer terms, and HMRC recognition scope directly with each provider and on the HMRC compatible software register at tax.service.gov.uk before advising clients.
Which Platform Is Right for Your Client?
Choose Xero if your client:
Is VAT-registered and needs MTD for VAT alongside MTD for Income Tax from a single platform.
Has multiple income streams including both self-employment and property, and needs a confirmed multi-business MTD ITSA module covering all streams.
Requires accruals-basis accounting, a full nominal ledger, trial balance, management accounts, or complex financial reporting.
Works with an accountancy practice that manages their MTD compliance through Xero Practice Manager with agent-level filing capability.
Has multi-currency income, payroll requirements, or needs accounting tools that go beyond bookkeeping for a sole trader or small landlord.
Does not need a built-in Self Assessment filing tool alongside MTD, as the Final Declaration covers their year-end obligation under MTD.
Choose Coconut if your client:
Is a sole trader or landlord with straightforward finances who wants a simple, jargon-free platform designed around their day-to-day workflow rather than a full accounting suite.
Needs both MTD quarterly submissions and Self Assessment filing in one ecosystem, at a fixed annual price, via the Full plan (£159.99/year).
Is not VAT-registered and has no accounting complexity requiring double-entry bookkeeping, a nominal ledger, or formal management accounts.
Wants real-time in-year tax estimates throughout the year, so they know what to set aside for tax without waiting for a year-end accountant review.
Is opening or already holds a Zempler business bank account and wants to access Coconut's software free for two years via the Zempler partnership.
Wants unlimited professional invoicing with PayPal import included in their accounting platform.
Is not in scope for MTD yet but wants to start organising finances with a Bookkeeping plan now, then upgrade to MTD filing when the mandate applies.
What Neither Platform Fully Resolves
Partnerships are not yet in scope for MTD for Income Tax. HMRC has not confirmed a start date. Neither Xero nor Coconut currently supports MTD ITSA for partnership income, though both platforms' SA products cover partnership supplementary pages.
MTD for Corporation Tax is not yet mandated. Limited company landlords are outside the scope of MTD ITSA.
The Final Declaration under MTD covers qualifying business income but does not replace the need to declare employment income, dividends, capital gains, or other non-business income. Coconut's Full plan includes the SA supplementary pages needed for these, which Xero does not provide as a built-in tool.
HMRC has paused penalty points for late quarterly submissions during 2026 to 2027. Financial penalties for late Final Declarations apply from April 2026.
The MTD quarterly submission scope for foreign property income in Coconut is not explicitly confirmed on published pages. Clients with overseas rental income requiring foreign property quarterly submissions should verify this directly with Coconut.
Conclusion
Xero and Coconut are not competing for the same users in most cases. The distinction is not primarily about price but about the complexity of the client's finances and the level of accounting depth they need.
Xero is the clear choice for VAT-registered businesses, clients with complex multi-stream income, practices managing large portfolios of MTD ITSA clients, and anyone who needs the full infrastructure of a double-entry cloud accounting platform. Its MTD coverage is comprehensive, its agent tools are established, and its breadth of accounting functionality is unmatched by any simplified app.
Coconut is the better fit for sole traders and landlords with straightforward finances who want a simple, purpose-built app that handles their day-to-day bookkeeping, MTD quarterly submissions, and Self Assessment filing in one place, without accounting jargon or unnecessary complexity. Its built-in GoSimpleTax integration for Self Assessment, the Zempler free-for-two-years offer, and the real-time tax estimate tool are genuine differentiators that Xero does not offer. For a sole trader or small landlord who manages their own accounts and simply needs to comply with MTD at the lowest possible friction, Coconut presents a compelling case.
For accountants advising clients, the practical question is whether the client needs accounting infrastructure or tax compliance simplicity. Xero provides the former. Coconut provides the latter.
