Action Plan: Preparing for MTD for ITSA

There’s less than a year to go until Making Tax Digital is enforced. Act now to ensure you and your clients are ready.

With just under a year until the first group of taxpayers mandated for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) enters the new system, accountants and bookkeepers must act now to ensure clients – and their own practices – are fully prepared.

From April 6, 2026, approximately 795,000 sole traders and landlords earning over £50,000 annually will need to keep digital records, use MTD-compatible software and submit quarterly summaries of their income and expenses to HMRC. 

Those with qualifying income – gross income from self-employment and property before any tax allowances or expenses are deducted – above £30,000 will need to use MTD for ITSA from April 2027. The threshold will then decrease to £20,000 from April 2028.

Here’s how to get started.

1. Review and Segment Your Client Base

• Identify clients in scope: Focus on self-employed individuals and landlords with total annual income over £50,000 (from April 2026) and over £30,000 (from April 2027).
• Gross income from each source must be totalled. A client with £35,000 from self-employment and £20,000 from rental property will earn £55,000, so would be within scope.
• Categorise clients: Group them based on their current record-keeping practices (e.g., fully digital, partially digital, paper-based).
• Start implementing digital record-keeping solutions for these clients that have no records. Identify the necessary steps to bring clients with inadequate records up to standard.
• Prioritise engagement: Begin with clients who are least prepared for digital transition. MTD for VAT has been mandatory for VAT-registered businesses regardless of turnover since April 2022. So, clients that are already in MTD for VAT will be easy wins, as they will be more prepared to submit MTD quarterly updates.

2. Assess and Update Your Own Practice Systems

• Evaluate software: Ensure your practice software is MTD Income Tax-compatible or plan a transition.
• Train your team: Upskill staff on digital record-keeping requirements, quarterly updates and client support for MTD.
• Adapt workflows: Build quarterly processes into your firm’s tax return cycle now, so it’s routine by 2026. While it is possible to elect for calendar quarters instead of tax year quarters, these dates are still within five days of each other, and could create pinch points.
• Firms that have a mixed practice with audit work and clients that have December year-end accounts should ensure they are fully prepared for that peak in the first quarter of the year.
• Use practice management software to automate reminders, track client compliance and test these new processes internally or with beta clients.

3. Choose Suitable MTD-Compatible Software for Clients

• Research options: Select software that suits the needs of your different client segments (e.g., sole traders vs landlords). Sole traders with simple income may benefit from free or low-cost options, while landlords and complex businesses might need more advanced tools.
• Some software can submit both quarterly updates and year-end tax returns, but other products will only do one, so it’s important to check first.
• Standardise where possible: Reducing the range of software you support will make ongoing client management easier.
• Pilot internally: Test the software within your team or with a small number of clients before wide rollout.

4. Participate in HMRC’s Beta Testing Programme

• Join the public beta: From April 2025, HMRC’s open beta for MTD Income Tax is available for accountants and clients to test the system ahead of mandatory compliance.
• Select suitable clients: Encourage digitally confident clients to join the beta early. Pick several clients who all have different requirements or obligations – a self-employed client, a UK property only client, or a client who has got both of those income streams as well.
• Consider pricing: Practitioners will need to consider whether to charge clients who participate in the pilot.
• Learn and adapt: Use real-world experience from the beta to refine your workflows, educate staff, and identify any technical issues early. Early adopters can spot teething issues, fine-tune workflows, and build confidence ahead of wider rollout.
• Provide feedback: Beta testers have a direct line to HMRC to report issues, giving you an opportunity to shape the system and gain early insights.

5. Educate and Communicate with Clients

• Raise awareness: Start an MTD ITSA awareness campaign (emails, webinars, factsheets). Explain how quarterly reporting differs from the annual return.
• Set expectations: Outline the benefits (e.g., better financial visibility) alongside compliance obligations.
• Offer practical support: Provide software demos, training materials, or even one-to-one sessions for nervous clients.
• Where clients continue to rely on spreadsheets, ensure they use bridging tools or APIs to remain compliant with MTD’s digital link requirements.

6. Transition Clients to Digital Record-Keeping

• Set early deadlines: Encourage clients to move to digital record-keeping by early 2025, allowing a full year to adjust.
• Offer flexibility: Consider how to address the need for those clients to maintain digital records, either by providing that technology as part of a wraparound service as part of their annual compliance work or by advising clients to purchase their own software.
• Support onboarding: Offer checklists, templates, and how-to guides to ease the transition.
• Monitor progress: Regularly review which clients have fully transitioned and who might need further assistance.

7. Consider Pricing

For accountancy practices supporting clients through MTD for Income Tax, especially during the beta phase, pricing must reflect the added time, software costs, and client support required.

Practices should consider offering fixed monthly fees that bundle quarterly submissions and software use, apply tiered pricing based on client complexity, and clearly communicate the value of early adoption to justify any new or increased charges.

Three key pricing considerations:

• Service bundling: Use monthly or annual packages that cover quarterly updates, software, and support.
• Cost recovery: Pass on or include the cost of MTD-compatible software licences and bridging tools.
• Tiered pricing: Charge based on the complexity of client needs (e.g. sole trader vs property and self-employment).

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