MTD for Income Tax: What Accountants Need to Know and Do

Even Albert Einstein rightfully said, “The hardest thing in the world to understand is the income tax.” That thought holds right till date. Tax admin can be a source of pressure. 

For sole traders and landlords, Making Tax Digital for Income Tax brings that reality closer to the day-to-day. From April 6, those earning more than £50,000 from self-employment or property are expected to maintain digital records and submit quarterly updates to HMRC using authorised software. The annual self-assessment return stays in place, but preparation now starts earlier in the year.

Here is what accountants need to understand about Making Tax Digital for Income Tax, how the rules apply in practice, and where early decisions will make the difference between steady compliance and avoidable penalties.

What does Making Tax Digital mean for accountants?

Making Tax Digital means accountants deal with tax work earlier, more often, and in a more structured way.

Instead of reviewing records once a year, accountants now need to support clients with digital record keeping throughout the year. Income and expenses must be captured in software, not spreadsheets or paper files. Quarterly updates replace the long gap between year-end and filing. Errors show up sooner. Fixes also need to happen sooner.

MTD compatible software is no longer a convenience. It is part of compliance. Accountants must choose tools that work for clients and ensure data is submitted correctly to HMRC. Accountants will need to set expectations clearly and early.

When does MTD for self assessment start?

Making Tax Digital for Income Tax Self Assessment starts in April 2026 for sole traders and landlords earning more than £50,000. A second phase follows in April 2027 for those earning over £30,000. Lower income thresholds are expected to be included later.

What changes under MTD for Income Tax?

MTD for Income Tax changes how and when information is reported, not the tax itself. Taxpayers must keep digital records of income and expenses using approved software. Under MTD accounting, clients must:

• Keep digital records of income and expenses
• Submit quarterly updates to HMRC
• Complete an end of period statement
• File a final declaration

At the end of the year, taxpayers still complete an end of period statement and a final declaration. The annual self assessment process remains, but it is built on information already submitted during the year.

How does MTD for partnerships affect partners and complex structures?

Partnership structures and complexity will become more challenging under MTD; many of their records, duties and reports do not naturally exist together at this time. Partnerships can have numerous partners, shared income streams, and various record-keeping standards, but once MTD is effective, it will be more difficult to manage because of the variances.

Digital records within the partnership must now be aligned across all partners, as the absence of data from one partner will impact all submissions. Historically, informal means of managing inconsistencies between each partner’s record-keeping have been used, but these methods will become increasingly ineffective as MTD proceeds. In addition, accountants will require tighter coordination for partnership-related reporting and individual partner reporting. Reconciliation issues caused by timing differences will have a compounding effect throughout the year.

A few practical effects show up quickly:

• Partners may need to use the same software or follow the same data rules, even if they have worked differently in the past
• Quarterly updates reduce the time available to resolve disagreements or missing information
• Changes in partner shares or responsibilities need to be reflected sooner, not adjusted quietly at year-end
• Larger or layered structures demand clearer ownership of who maintains records and who signs off submissions

How to choose MTD compatible software for your business?

When choosing MTD compatible software, the aim is not feature depth. It is dependable compliance with minimal friction for clients and staff.

This is how you can evaluate a MTD compatible software before finalising:

• Check whether the software connects directly to HMRC for quarterly updates and final submissions.
• Review how income and expenses are captured, especially how much manual correction is still required.
• Assess how easily clients can use the system without constant support.
• Look at agent access controls, including visibility, permissions, and audit trails.
• Confirm how the software handles corrections after submission.
• Consider how well it scales when client volumes increase or reporting becomes more frequent.
• Test the quality of support during busy periods, not just during onboarding.

Software that looks impressive in demos can fail under routine use. Reliable basics matter more than advanced features.

7 things making tax digital accountants should start doing now

Accountants perceive Making Tax Digital (MTD) as transforming the approach of managing tax-related activities for an entire year rather than just doing it near the end of the fiscal year. Ultimately preparing earlier makes transitioning to MTD smoother for clients and internal team members alike. MTD is an excellent opportunity and accountants may want to get started on their MTD transition by taking the following steps:

1. Identify which clients will enter MTD first and review how reliable their current records are.
2. Look at how income and expenses are recorded, shared, and checked today, and note where manual work still plays a big role.
3. Flag clients who depend on paper records or basic spreadsheets, as these methods often struggle with regular reporting.
4. Decide which software the firm will support and aim to reduce the number of tools in use.
5. Update engagement terms so ongoing reporting and client responsibilities are clearly explained.
6. Start talking to clients about the move to regular reporting instead of year-end only work.
7. Help teams adjust to checking data more often rather than handling everything at once.

Early tax preparation gives accountants time to guide clients and refine processes. Leaving it too late increases pressure and limits room to correct issues.

Closing note

With Datamatics, UK CA firms stay MTD-ready across self assessments, corporation tax, partnerships, and trusts. Speak to our UK tax specialists to see how we support compliance without increasing internal workload. Connect with us today for your tax preparation services.