The MTD for Income Tax Mandate: What Changed in April 2026
Under the Making Tax Digital framework, sole traders and landlords within the qualifying income thresholds must now:
Maintain 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 year.
File a Final Declaration by 31 January following the end of the tax year, replacing the legacy Self Assessment return.
Use software that connects directly to HMRC's MTD API; bridging spreadsheets remain permitted only where the software holds the digital record.
Qualifying income is gross income from self-employment and UK property combined. Employment (PAYE) income, dividends, and capital gains are excluded from the threshold calculation but may still need to be declared separately.
HMRC has confirmed that penalty points for late quarterly submissions are paused during the 2026–27 tax year, but penalties for a late Final Declaration still apply from April 2026. Both Xero and Hammock support the full submission workflow required by the mandate.
What Xero Covers Under MTD
HMRC Recognition and MTD VAT
Xero has been HMRC-recognised for MTD for VAT since April 2019, making it one of the longest-established MTD-compliant platforms on the market. MTD for VAT capability is included across all paid UK plans. VAT-registered businesses can calculate, review, and submit their VAT return directly to HMRC via the API without leaving the software. Standard, cash accounting, flat rate, and margin scheme VAT are all supported; group VAT submissions require the Comprehensive or Ultimate plan.
HMRC Recognition and MTD VAT
Xero has been HMRC-recognised for MTD for VAT since April 2019, making it one of the longest-established MTD-compliant platforms on the market. MTD for VAT capability is included across all paid UK plans. VAT-registered businesses can calculate, review, and submit their VAT return directly to HMRC via the API without leaving the software. Standard, cash accounting, flat rate, and margin scheme VAT are all supported; group VAT submissions require the Comprehensive or Ultimate plan.
Multi-Business and Multi-Income Support
A significant capability distinguishing Xero from Hammock is multi-business MTD ITSA support. Xero launched its multi-business MTD ITSA module in its public beta during 2025, allowing a single taxpayer who runs more than one sole-trade business or holds multiple property portfolios to file separate quarterly updates for each income stream from within a single account. This is a material advantage for landlords who also freelance or operate a side business, as HMRC requires a separate quarterly update for each distinct business source.
Xero handles property income through tracking categories, allowing a landlord to tag rental income and expenses against individual properties for per-property reporting. However, joint-ownership scenarios require manual share calculations; there is no native automated profit-splitting tool in Xero for jointly owned properties.
Sole Trader and VAT-Registered Businesses
For sole traders who are also VAT-registered, Xero is the only realistic single-platform solution between Xero and Hammock, as Hammock covers property income only and has no VAT submission capability.
Accountant and Practice Support
Xero Practice Manager and Xero HQ allow accountants and bookkeepers to manage a portfolio of MTD ITSA clients centrally. Agents can submit quarterly updates on behalf of clients from within the practice tools. This is a meaningful difference from Hammock, where the landlord, or an accountant logged in as the landlord, must submit directly. Hammock does not currently support agent-level filing.
What Hammock Covers Under MTD
HMRC Recognition: First Dedicated Landlord Platform
Hammock was officially recognised by HMRC as compatible with Making Tax Digital for Income Tax in December 2024, making it the first dedicated landlord accounting platform to achieve this status. The official HMRC recognition is limited to UK property income. Hammock does not appear on the HMRC register for sole trader income, foreign property income, or VAT.
Hammock won the Best Product of the Year award at the National Landlord Investment Show Awards 2025–26, reflecting strong practitioner endorsement. ICAEW has also referenced Hammock as the first landlord software recognised by HMRC in guidance published for accountants advising landlord clients.
Property Accounting and MTD ITSA Workflow
Hammock's core design is the automated reconciliation of rental income and expenses against HMRC's SA105 (UK property) categories. Once a landlord adds their properties and tenancies, the platform automatically identifies recurring rent payments, categorises expenses, and matches transactions to the correct property and tenant in real time via Open Banking feeds through TrueLayer, which is itself FCA regulated. Hammock is authorised by the FCA as a Payment Institution (Register No. 911254).
The platform delivers four quarterly MTD updates and a Final Declaration through direct HMRC API submission. Reminders and deadline alerts are built in. The running property tax statement, which tracks taxable income and allowable expenses against SA105 categories, is available 24/7 via web and mobile.
Joint Ownership and Portfolio Structures
Hammock natively supports individual ownership, joint ownership, and ownership through a limited company with multiple shareholders. All taxable income and expenses are displayed in full and allocated pro rata to each individual owner or shareholder automatically. This removes a known pain point for landlords with properties held jointly with a spouse, partner, or co-investor, a scenario that requires manual calculation in Xero.
Investment Analytics
Beyond MTD compliance, Hammock provides real-time investment metrics that Xero does not offer as standard: loan-to-value ratios, rental yield per property, occupancy rates, arrears balances by tenant, and a running tax bill estimate to help landlords set aside funds throughout the year.
Limitations
Hammock's MTD scope is materially narrower than Xero's. Key limitations include:
No sole trader (self-employment) income support. Landlords who also operate a business as a sole trader need a second piece of MTD software, such as QuickBooks, with which Hammock launched a deep integration in March 2026, to cover that income stream.
No foreign property income. Hammock covers UK property only; UK-resident landlords with overseas rental income must use a separate platform for that stream.
No VAT submission capability.
No agent filing. Accountants cannot submit on behalf of clients through a separate practice login; the submission must be made by the landlord directly, or by an accountant logged in to the landlord's account.
Cash basis only. There is no chart of accounts, journal entries, or formal balance sheet, which limits the platform's suitability for landlords whose accountant requires accruals-basis records.
No OCR or AI-driven receipt categorisation. Receipts can be attached manually to transactions, but there is no automated extraction of data from receipts.
Side-by-Side Comparison: Xero vs Hammock for MTD
The table below reflects information current as at June 2026 based on each provider’s published documentation and the HMRC compatible software register.
Feature | Xero | Hammock |
|---|---|---|
HMRC Recognition | HMRC-recognised for MTD VAT (since April 2019) and MTD ITSA (2024–25) | HMRC-recognised for MTD ITSA – first dedicated landlord platform to achieve recognition (Dec 2024) |
Primary Audience | Sole traders, landlords, SMEs, accountancy practices | UK landlords only (property income focus) |
MTD VAT | Yes – all paid UK plans | No – property income only; VAT not in scope |
MTD ITSA – UK Property | Yes – all paid plans (tracking categories) | Yes – core feature; purpose-built SA105 categorisation |
MTD ITSA – Sole Trader | Yes – all paid plans | No – requires separate software or QuickBooks integration (March 2026) |
MTD ITSA – Foreign Property | Yes (UK-resident landlords with worldwide income) | No – UK property income only (per HMRC register) |
Multi-Business Support | Yes – multi-business MTD ITSA module (released 2025 public beta) | No – single-stream property income |
Quarterly Updates | Yes – four submissions per tax year, deadline 7th of following month | Yes – four submissions, same HMRC deadlines |
Final Declaration | Yes – replaces Self Assessment return, due 31 January | Yes – due 31 January |
Bank Feeds | Yes – Open Banking, most UK banks | Yes – Open Banking via TrueLayer (FCA regulated) |
Joint Ownership | Manual share calculation via tracking categories | Automated per-owner P&L split; joint/limited company structures supported |
Agent (Accountant) Filing | Yes – via Xero Practice Manager / HQ | No – landlord or accountant must log in as landlord |
Mobile App | Yes – iOS and Android | Yes – iOS and Android, mobile-first design |
Entry-Level Price | £7 + VAT/month (Xero Simple) | From free, then £8/month (core MTD features) |
Investment Analytics | Limited – standard P&L and balance sheet | Real-time LTV ratios, rental yields, occupancy rates, arrears |
Receipt Capture | Yes – Hubdoc integration (OCR) | Manual attachment only – no OCR or AI categorisation |
Accounting Basis | Accruals and cash basis | Cash basis only |
FCA Regulated | No (Xero is not FCA regulated) | Yes – Authorised Payment Institution, FCA Reg. No. 911254 |
Prices exclude VAT. Always verify current pricing directly with each provider before advising clients.
Pricing: What You Pay and What You Get
Xero
Xero Simple at £7 + VAT per month is the most affordable route to a full-platform MTD ITSA solution from Xero. The plan is positioned for individuals with straightforward affairs, specifically a single sole-trade business or a small property portfolio, who need HMRC-recognised software without a full accounting suite. The 10-invoice cap on Simple means sole traders with more than 10 monthly clients need Ignite at £16 + VAT per month.
For more complex cases, such as multiple businesses, VAT registration, payroll, or multi-currency requirements, the Grow (£37), Comprehensive (£50), and Ultimate (£65) plans add progressively more capability.
Hammock
Hammock offers an entry point from free, rising to approximately £8 per month for landlords with one or two properties, covering core accounting and MTD submission features. Pricing scales modestly with portfolio size. The platform does not offer a full free tier with unlimited MTD ITSA filing; a paid subscription is required for most landlords with more than a single property.
Which Software Is Right for Your Client?
Choose Xero if your client:
Is a sole trader without property income, or a sole trader who is also a landlord and needs a single platform to file both income streams under MTD.
Is VAT-registered and requires MTD for VAT submissions alongside MTD ITSA.
Has foreign property income alongside UK property, requiring a platform that can record worldwide rental income.
Requires accruals-basis accounting or formal management accounts (P&L, balance sheet, trial balance).
Works with an accountancy practice that manages client portfolios through Xero Practice Manager or Xero HQ, where agent-level submission is needed.
Has more than one sole-trade business and needs the multi-business MTD ITSA module.
Choose Hammock if your client:
Is a landlord whose income is exclusively or predominantly from UK property and who does not have a material sole-trade business.
Holds properties in joint ownership structures and wants automated profit-splitting without manual share calculations.
Wants real-time property investment analytics, including LTV, yield, occupancy, and arrears, as part of their accounting platform.
Values a mobile-first, automated reconciliation experience with minimal manual bookkeeping.
Is in the HMRC MTD pilot for the 2025–26 tax year and wants a platform already live on the pilot programme.
Has a buy-to-let portfolio and a separate sole-trade business, and is prepared to use Hammock alongside QuickBooks (via the March 2026 integration) for the self-employment income stream.
What Neither Platform Fully Resolves Yet
Both Xero and Hammock cover the core MTD ITSA obligations. However, accountants should be aware of the following open areas as at June 2026:
Partnerships are not yet in scope for MTD for Income Tax. HMRC has not confirmed the launch date. Neither platform currently supports partnership MTD filing.
Corporation tax under MTD has a separate, still-developing timetable. Xero handles company accounts and CT600 preparation, but MTD for Corporation Tax is not yet mandated.
The Final Declaration under MTD ITSA covers income from self-employment and property but does not replace the need to declare other income sources, such as employment income, dividends, and capital gains, which still require separate reporting through HMRC's systems or compatible software.
Hammock’s agent filing capability is a known gap. Accountants with a large landlord client base should factor the submission workflow into their practice processes.
Conclusion
For sole traders, VAT-registered businesses, and landlords with mixed income streams, Xero is the more versatile platform. Its HMRC recognition covers both MTD for VAT and MTD for Income Tax across all income types, including sole trade, UK property, and foreign property, and its multi-business module, accountant practice tools, and accruals-basis accounting capability make it a strong default for most general-purpose MTD engagements.
For landlords whose income is overwhelmingly from UK property, Hammock offers material advantages: automated SA105 categorisation, native joint-ownership profit-splitting, real-time investment analytics, and a mobile-first design built around the way landlords actually manage their portfolios. For these clients, Hammock is not simply a compliant option. It is likely to be a materially better fit than a general accounting platform.
The two platforms are not direct competitors for most clients. The right question is not which is better in the abstract, but which matches the income structure, ownership arrangements, and practice workflow of the specific client or business.
