Making Tax Digital (MTD) for Small UK Accountants: Complete 2026 Guide

Updated April 2026 · 11 min read

Making Tax Digital (MTD) has been HMRC's biggest tax administration change in a generation. For small accounting firms, MTD is both a service opportunity (new compliance work for clients) and an operational headache (more deadlines, more software, more client handholding). This guide covers what is in scope in 2026, what your clients need, and how to manage MTD compliance across your client portfolio without losing your mind.

Where MTD stands in 2026

MTD has rolled out in phases. Here is where things stand for the 2026/27 tax year:

• MTD for VAT: live for all VAT-registered businesses since April 2022, regardless of turnover. Quarterly digital VAT returns mandatory.
• MTD for Income Tax Self Assessment (ITSA): starts April 2026 for self-employed individuals and landlords with income over £50,000. Threshold drops to £30,000 in April 2027, then £20,000 in April 2028.
• MTD for Corporation Tax: delayed indefinitely. Not currently expected before 2027 and may slip further.

For most small firms, the immediate priority in 2026 is getting the right ITSA clients onto MTD-compatible software and quarterly submission cycles before the April 2026 deadline.

Which of your clients are in MTD ITSA scope?

A client is in scope for MTD ITSA from April 2026 if all of these are true:

• They are an individual (sole trader) or a landlord, including jointly-owned property.
• Their qualifying income (gross self-employment + gross property income) exceeds £50,000 in the 2024/25 tax year.
• They are required to file a Self Assessment return.

Partnerships are excluded for now (a separate MTD partnership regime is in development). Limited companies fall under Corporation Tax MTD which is not yet live. The £50,000 test is on gross income, not profit — a landlord with gross rental income of £52,000 and £40,000 of mortgage interest is still in scope.

What MTD ITSA actually requires

For each in-scope client, you (or they) must:

1. Keep digital records

Every income and expense item must be recorded digitally — date, amount, and category. Paper receipts are fine if they are scanned and the data is captured in software. Manual rekeying of monthly totals into accounting software at year-end no longer counts.

2. Submit quarterly updates

Four times per year, send HMRC a summary of income and expenses for the quarter. Quarterly cycles are calendar-aligned: April-June (due 7 August), July-September (due 7 November), October-December (due 7 February), January-March (due 7 May). These are estimates, not final figures — adjustments come later.

3. End of period statement (EOPS)

After the tax year ends, submit a finalisation per business showing accounting adjustments, allowances, and reliefs. Due 31 January following the tax year.

4. Final declaration

A final annual declaration combining all income sources (employment, dividends, savings, capital gains) — replaces the old Self Assessment return. Also due 31 January.

So for a single ITSA client with one self-employment business, that is 6 submissions per year (4 quarterly updates + EOPS + final declaration). For a client with self-employment AND property income, it is more — each business needs its own quarterly cycle and EOPS.

What software do your clients need?

Clients need MTD-compatible software for record-keeping AND submission. HMRC maintains a list of approved software. Common choices for small businesses:

• Full accounting platforms: Xero, QuickBooks Online, FreeAgent, Sage Business Cloud, Zoho Books. Best for clients who want full bookkeeping in one tool.
• Lightweight ITSA-only tools: Coconut, Untied, 123 Sheets. Cheaper and simpler for sole traders who don't need full accounting features.
• Bridging software for spreadsheets: Easy Digital Filing, Tax Calc, VitalTax. Lets clients keep their spreadsheets if they refuse to switch — the bridging software submits the data via the MTD API.

For each client, match the software to their behaviour. A tech-resistant landlord with 3 rental properties does not need Xero — bridging software with their existing spreadsheet is enough. A growing sole trader doing 200 transactions a month should be on Xero or QuickBooks.

How small firms should manage MTD operationally

The tricky part isn't the technology. It's tracking which clients are in scope, what software they use, when their submissions are due, and chasing them for missing records. Here is the workflow that works:

Step 1: Audit your client list

Run through every client. Tag each one as: in scope from April 2026, in scope from April 2027 (£30k threshold), in scope from April 2028 (£20k threshold), or out of scope (incorporated, no qualifying income, employed only). Keep this in your practice management system.

Step 2: Get clients onto the right software early

Don't wait until April 2026. Onboard in-scope clients onto their MTD software during 2025/26 so the first quarterly submission isn't their first time using the tool. Charge a setup fee — clients value getting the help.

Step 3: Set up deadline tracking

For each in-scope client, log their 6 deadlines per year in a system that reminds you. With 50 ITSA clients you have 300 deadlines per year — this isn't something you can keep in your head.

Step 4: Standardise document collection

Every quarter you need bank statements, expense receipts, mileage logs, and property income records from each client. Build a recurring process: a portal where clients upload monthly, automatic chaser reminders, a checklist of what must be received before you can submit.

Step 5: Repackage your fee structure

You're no longer doing one annual return — you're doing 6 submissions per client per year. Move to monthly fixed-fee billing rather than per-engagement. Clients accept this more easily when MTD is the explanation.

How FirmFlow helps

MTD compliance lives or dies on operational discipline. FirmFlowis built for the firm side of compliance, not the tax submission itself (that happens in your client's accounting software). What FirmFlow handles:

• Deadline tracking: log all 6 MTD deadlines per client per year, with calendar reminders and overdue alerts.
• Client portals: each client gets a branded portal where they upload bank statements, receipts, and property records monthly. No more email attachments.
• Document storage: all MTD-related records encrypted and audit-logged for the 6-year retention requirement.
• Recurring invoicing: monthly fixed-fee billing for MTD clients, generated and sent automatically by Stripe.
• Time tracking per client: see which MTD clients are profitable and which are bleeding hours, so you can re-price.

€29/month flat for the entire team, no per-user fees. 14-day free trial, no credit card required.

MTD ITSA readiness checklist

• ☐ Audited every client and tagged MTD scope (Apr 2026 / Apr 2027 / Apr 2028 / out of scope)
• ☐ Identified which software each in-scope client will use
• ☐ Onboarded in-scope clients to their software (or scheduled to)
• ☐ Set up deadline tracking system for 6 deadlines per client per year
• ☐ Document collection workflow in place (portal + reminders + checklist)
• ☐ Re-priced MTD engagements as monthly fixed fees
• ☐ Communicated MTD changes and new fees to all in-scope clients
• ☐ Authorised as agent under MTD for each client (separate from existing 64-8)
• ☐ Tested submission process with at least one client before April 2026
• ☐ MTD-related records retention process documented (6-year requirement)

Frequently asked questions

This article provides general guidance on UK MTD requirements as of April 2026. HMRC rules change frequently. For specific compliance questions, consult HMRC or a qualified tax adviser.