Making Tax Digital has been coming for years. HMRC delayed it. Then delayed it again. But this time, it's real.
From 6 April 2026, MTD for Income Tax Self Assessment (MTD ITSA) goes live for self-employed individuals and landlords with gross income over £50,000.
If you're an accountant, bookkeeper, or sole trader in the UK, this affects you or your clients. Here's what you actually need to know — without the jargon.
Who's Affected First?
From April 2026: Self-employed individuals and landlords with annual gross income above £50,000.
From April 2027: The threshold drops to £30,000.
HMRC has signalled further expansion below £30,000, but no confirmed dates yet.
If your client is a sole trader turning over £55,000 a year, they're in scope from next month. If they're a landlord with rental income of £52,000, same story.
Partnerships, companies, and trusts are not included yet — though partnerships are expected to follow.
What Actually Changes?
Under MTD ITSA, affected taxpayers must:
- Keep digital records of all business income and expenses using MTD-compatible software
- Submit quarterly updates to HMRC through that software (not manually via the HMRC portal)
- Submit a final declaration at year end, replacing the traditional Self Assessment return
The quarterly deadlines follow a fixed pattern:
| Quarter | Period | Deadline | |---------|--------|----------| | Q1 | 6 April – 5 July | 7 August | | Q2 | 6 July – 5 October | 7 November | | Q3 | 6 October – 5 January | 7 February | | Q4 | 6 January – 5 April | 7 May |
The final declaration replaces the Self Assessment tax return and is due by 31 January following the end of the tax year — same as the current SA deadline.
What Software Do You Need?
HMRC maintains a list of MTD-compatible software, but the big names you'd expect are there: Xero, QuickBooks, FreeAgent, Sage, and others.
The key requirement is that the software must be able to:
- Store digital records of income and expenses
- Submit quarterly updates via HMRC's MTD API
- Submit the year-end final declaration
Spreadsheets alone won't cut it. You can use spreadsheets for record-keeping, but they must feed into MTD-compatible bridging software that handles the HMRC submissions. The days of manually typing figures into the Government Gateway are numbered.
The Real Impact on Accountants and Bookkeepers
Let's be honest about what this means for practices:
More touchpoints per client. Instead of one annual conversation ("send me your receipts"), you now need four quarterly submissions plus a final declaration. That's five compliance deadlines per client per year.
Higher expectations on record-keeping. Clients can't dump a carrier bag of receipts on your desk in January anymore. Records need to be digital and reasonably up to date throughout the year.
Pricing conversations. If you're currently charging £500–£800 for an annual Self Assessment, you need to rethink that. Quarterly submissions mean quarterly work. Some practices are moving to monthly retainers; others are repricing per submission.
Software costs. If clients aren't already on cloud accounting software, they'll need to be. That's either a cost you absorb, pass on, or build into your fee structure.
How to Prepare (Without Panic)
1. Identify affected clients now
Run through your client list. Anyone self-employed or with rental income above £50,000 needs to be on MTD-compatible software by April 2026. Above £30,000? They've got until April 2027, but getting them set up early is less painful.
2. Get the bookkeeping basics right
MTD ITSA is essentially enforcing what good practice looks like anyway: digital records, regular reconciliation, timely submissions. If you're already running clients on Xero or QuickBooks with regular bookkeeping, you're most of the way there.
For the calculations that sit alongside bookkeeping — VAT, mileage claims, CIS deductions, late payment interest — having reliable tools matters more than ever when you're submitting quarterly instead of annually.
We built a set of free accounting tools specifically for this:
- VAT Calculator — add or remove VAT at any rate, including the flat rate scheme
- Mileage Calculator — HMRC-approved rates for 2025/26, handles the 10,000-mile threshold automatically
- CIS Calculator — gross, net, and 20%/30% deduction calculations for contractors and subcontractors
- Late Payment Calculator — statutory interest and compensation under the Late Payment of Commercial Debts Act
- Invoice Cost Calculator — work out what manual invoice processing is actually costing your practice
No sign-ups. No trials. No "book a demo." Just tools that work.
3. Automate the repetitive stuff
If you're processing purchase invoices manually — downloading PDFs, typing line items into Xero, matching VAT codes — that workflow doesn't scale when you're doing it four times a year instead of once.
Our AI Invoice Importer reads supplier invoices (PDF, photo, email) and pushes them straight into Xero with the correct account codes, VAT treatment, and line items. It handles the tedious data entry so you can focus on the advisory work that clients actually value.
4. Communicate early with clients
Don't wait until March to tell clients their world is changing. Send a clear, simple communication now:
- What MTD ITSA is
- Whether they're affected (and when)
- What you need from them (digital receipts, regular bank feeds)
- How your fees may change
Clients handle change much better when they're not surprised by it.
Common Questions
"My client uses spreadsheets — do they have to switch?" They can keep using spreadsheets for day-to-day records, but the data must flow into MTD-compatible software for HMRC submissions. Bridging software exists for this, but honestly, it's often simpler to move to proper cloud accounting.
"What about penalties?" HMRC is introducing a new points-based penalty system alongside MTD ITSA. Late submissions earn penalty points; accumulate enough and you get a financial penalty. Late payments attract interest from day one. The old £100-per-day regime is being replaced, but don't mistake "new" for "lenient."
"Can I opt out?" If you're above the income threshold, no. MTD ITSA is mandatory, not voluntary. There are limited exemptions for digital exclusion (e.g., religious objections to technology, disability, remote location), but these are genuinely exceptional cases.
"What about the tax year basis reform?" Good question. The tax year basis reform (which aligned all sole trader accounting periods to the tax year from April 2024) was partly designed to make MTD ITSA simpler. If your clients are already on a 6 April – 5 April accounting period, they're aligned. If they had a different year end, the transition year (2023/24) should have handled the overlap.
The Bottom Line
MTD ITSA isn't a revolution — it's the formalisation of digital bookkeeping that most good practices are already doing. The real challenge isn't technical; it's operational. More deadlines, more client touchpoints, and a need for better-automated workflows.
The practices that come out ahead will be the ones that invested in automation early, priced the work properly, and communicated clearly with clients.
We're building tools to help with the automation side. The pricing and communication? That's your expertise.
Drakon Systems builds free accounting tools and an AI Invoice Importer for UK accountants and small businesses. No subscriptions, no nonsense.