TapTax vs FreeAgent
Which MTD tool does a sole trader actually need?

FreeAgent is one of the most respected names in UK small-business accounting, and for good reason. It is mature, well supported and trusted by thousands of accountants. But "respected accounting software" and "the right tool for a sole trader who just needs to file MTD updates" are not always the same thing. FreeAgent is a full double-entry accounting platform built originally with limited companies, contractors and accountants in mind. TapTax is a focused MTD filing app for sole traders. That difference in design intent shapes everything: the price, the learning curve, and how much software you end up paying for versus actually using.

In brief: if you run a limited company, want full bookkeeping with balance sheets, payroll and accountant collaboration, or you bank with NatWest, RBS, Ulster Bank or Mettle and get FreeAgent free, FreeAgent is a strong, often unbeatable choice. If you are a sole trader or landlord whose real job is staying MTD compliant cheaply and without a steep learning curve, TapTax is the sharper, lower-cost fit. Here is the honest detail.

The single biggest difference: accounting platform versus focused filing tool

FreeAgent is a full accounting system. It tracks invoices, bills, projects, expenses, payroll, dividends, corporation tax and self-assessment, and produces proper financial statements. That breadth is exactly what an accountant wants and exactly what a limited company needs. It is also why FreeAgent has a real learning curve and a price that reflects a professional-grade product.

TapTax was built to do one job well: keep a UK sole trader MTD-compliant. You connect your existing bank via open banking, AI categorises your transactions, you snap receipts and log mileage, and you file your quarterly update to HMRC in a tap. There is no payroll module, no balance sheet and no double-entry ledger, because a sole trader filing under MTD for Income Tax does not need any of those to comply. The result is a faster path to filing and a much lower price.

Pricing in detail: what you actually pay each year

If you do not bank with NatWest, RBS, Ulster Bank or Mettle, FreeAgent runs to roughly £228 to £396 a year once any introductory discount ends. TapTax Starter is £59.88 a year. That is a difference of well over £150 annually for a sole trader whose core need is filing, not full accounting. But the caveat matters and we will not bury it: if you do hold one of those eligible bank accounts, FreeAgent is effectively free, and at that price its depth is excellent value.

Before you commit to either, the TapTax sole trader tax calculator is free to anyone, so you can estimate your bill in minutes, and it is always worth using our free tax-code checker to confirm HMRC is taxing you on the right code before you read too much into any in-app estimate.

MTD compliance and recognition: an honest comparison

MTD for Income Tax becomes mandatory for sole traders and landlords with gross income above £50,000 from April 2026. If you want the full picture of what each quarterly update must contain and the penalties for missing one, the plain-English guide to MTD for sole traders walks through the timeline and HMRC's expectations.

On recognition, we will be straight with you. FreeAgent is HMRC-recognised for MTD for Income Tax today, which is a genuine, present-tense advantage. TapTax is MTD-compatible and built directly around HMRC's quarterly submission API, with production recognition still pending at the time of writing. We do not claim recognition we do not yet hold. If having that confirmation live right now is a dealbreaker for you, FreeAgent currently has the edge on that one point. Where TapTax competes, and competes hard, is price, speed of setup and the freedom of a no-commitment free tier.

Where TapTax genuinely wins

For a sole trader, TapTax wins on three things that actually matter day to day. First, price: £4.99 a month at Starter versus FreeAgent's full subscription is a meaningful annual saving unless your bank bundles FreeAgent in. Second, simplicity: there is no double-entry concept to learn, no chart of accounts to set up, just connect, categorise and file. Third, the free tier lets you connect your bank, categorise transactions and explore the filing flow before you spend a penny, which FreeAgent does not offer.

TapTax also handles the realities of modern sole-trader income cleanly. If you juggle a freelance income with a rental flat or some dividends, the multiple-income tax calculator shows how the pieces stack against your £12,570 personal allowance, the 20% basic and 40% higher bands, and the 60% effective band where the allowance tapers between £100,000 and £125,140.

Where FreeAgent genuinely wins

It would be dishonest not to say this clearly: FreeAgent is the better product for a whole category of users. If you run a limited company, FreeAgent handles corporation tax, payroll, dividends and statutory accounts in a way TapTax simply does not attempt. If you send a lot of invoices, FreeAgent's invoicing is full-featured, with reminders and payment tracking, whereas TapTax deliberately has none. If you work closely with an accountant, FreeAgent's accountant collaboration and audit trail are first-class. And if you bank with NatWest, RBS, Ulster Bank or Mettle, you get all of that at no extra cost.

For complex finances, that depth earns its keep. A contractor running a company with payroll and dividends is far better served by FreeAgent than by any focused filing app.

Self Assessment and the tax angles that catch sole traders out

Whichever tool you pick, the underlying tax rules are the same, and getting them right matters more than the software. For 2025/26, sole traders pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, then 2% above that, with Class 2 settled through Self Assessment. The £1,000 trading allowance can replace your actual expenses if they are lower. Watch the VAT registration threshold too: it is £90,000 of taxable turnover on a rolling 12-month basis, not a tax-year figure.

Income mix changes the maths. Dividend income above the £500 allowance is taxed at 8.75%, 33.75% and 39.35%. Property income reported on SA105 has its mortgage-interest relief restricted to a 20% tax credit rather than a full deduction, and the furnished holiday lettings regime was abolished from April 2025. If you work in construction under CIS, contractors deduct 20% (or 30% if you are unregistered) from your labour, which usually means you are due a refund through Self Assessment rather than owing more. FreeAgent's depth helps capture all of this in detail; TapTax keeps the same numbers accurate but presents them simply, oriented around the quarterly filing itself.

Who should choose which

If you are a freelance designer earning £55,000 with a Starling account

You do not bank with NatWest, so FreeAgent would cost the full subscription. Your need is straightforward MTD filing, not company accounts. TapTax connects to Starling via open banking, costs £59.88 a year at Starter, and files your quarterly updates without the accounting overhead. The choice is clear.

If you run a limited company with payroll and dividends

FreeAgent is the right tool, full stop. TapTax does not handle corporation tax or company accounts by design. FreeAgent's depth is exactly what you need, and if you bank with an eligible NatWest-group account, it is free.

If you bank with NatWest, RBS, Ulster Bank or Mettle

FreeAgent is free for you. At zero cost, its accounting depth is genuinely hard to beat, and it is HMRC-recognised today. TapTax's lower price advantage disappears in your specific case, so weigh simplicity against depth and pick what suits how you like to work.

If you are newly self-employed and want to test before paying

Start with TapTax's free tier. Connect your bank, see your transactions categorise, and walk the filing flow with no commitment. If you later find you need full invoicing or company accounts, you can move to FreeAgent. Starting free costs you nothing and teaches you what you actually need.

The bottom line

FreeAgent and TapTax are answering different questions. FreeAgent asks: what if a small business had professional-grade accounting that an accountant would happily endorse? TapTax asks: what if MTD filing for a sole trader was so cheap and simple there was no reason to dread it?

If you need real accounting depth, run a company, or get FreeAgent free through your bank, FreeAgent is an excellent, well-earned choice, and it is recognised by HMRC today. If you are a sole trader or landlord who mainly needs to stay MTD compliant without paying accounting-platform prices, TapTax wins on cost, simplicity and the freedom to start free. Be honest with yourself about which problem is actually yours, and the right tool becomes obvious.

People also ask

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Is TapTax HMRC-recognised for MTD?

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