Xero has no free plan for Making Tax Digital for Income Tax. Its cheapest option is Xero Simple at £7 a month plus VAT, for sole traders and landlords who aren’t VAT registered. Xero says it is HMRC-recognised for MTD for Income Tax, and that its plans cover quarterly updates and the final declaration.
Xero MTD plans compared
| Plan | Price a month, plus VAT | VAT-registered businesses | Invoices | Bills |
|---|---|---|---|---|
| Simple | £7 | No | 10 | None |
| Ignite | £18 | Yes | 20 | 10 |
| Grow | £39 | Yes | Unlimited | Unlimited |
| Comprehensive | £55 | Yes | Unlimited | Unlimited |
| Ultimate | £70 | Yes | Unlimited | Unlimited |
These are the standard prices. New customers get 90% off for the first 6 months, which makes Simple 70p a month to begin with. Xero labels all five plans as ready for MTD for Income Tax. The Simple plan includes bank reconciliation and receipt capture.
Can Xero send quarterly updates and the tax return?
Xero says its MTD for Income Tax filing covers quarterly updates and the final declaration. Its pages described this as a beta earlier in 2026; when we checked on 5 October 2026 that label had gone. Before you sign up, confirm with Xero that your plan can send the end-of-year tax return, due by 31 January after the tax year ends.
Xero MTD for landlords
Xero aims the Simple plan at landlords as well as sole traders, and says you can manage a property and a business with one subscription. Its landlord page mentions buy-to-let and joint ownership in general terms.
We couldn’t confirm how Xero handles overseas property or jointly owned property in practice.
How to connect Xero to HMRC
You first sign up for Making Tax Digital for Income Tax with HMRC, which our guide on how to sign up for MTD covers. Xero then has a help article called “Set up MTD for Income Tax in Xero” in Xero Central. We couldn’t read its steps, so follow Xero’s own instructions for this part.
What to check before you choose Xero
- That your plan can send the end-of-year tax return as well as quarterly updates.
- The limits on Simple: 10 invoices a month and no bills.
- That you aren’t VAT registered if you want Simple. VAT-registered businesses need Ignite or above.
- The price after the first 6 months, when the discount ends.
Want a free option? See our free MTD software comparison, or try the MTD software picker.
Sources: Xero’s Simple plan page, pricing page and MTD for Income Tax page. Checked 5 October 2026. MTD HQ is independent and not connected to Xero. This page has no affiliate links and is general information, not tax advice.