MTD for Income Tax: What Your Firm Needs to Know Before April 2026

Making Tax Digital for Income Tax is arriving in April 2026, and the deadline is approaching faster than many firms realise. For self-employed clients and landlords earning over £50,000, quarterly digital reporting will become a legal requirement. Yet a significant number of accounting firms have barely started preparing.

The challenge is not just technical. MTD for Income Tax will fundamentally change the way firms interact with a large portion of their client base. Annual engagements become quarterly ones. Manual record-keeping gives way to mandatory digital processes. The workload implications are substantial, and the firms that plan now will be in a far stronger position than those scrambling at the last minute.

This guide covers everything your firm needs to know: what is changing, the key deadlines, which software is compatible, and a practical step-by-step plan to get your practice ready.

What Is MTD for Income Tax?

Making Tax Digital for Income Tax (MTD for ITSA) is an HMRC mandate that requires self-employed individuals and landlords to keep digital records and submit quarterly updates to HMRC using compatible software. It is the next major phase in HMRC's wider Making Tax Digital programme, following the rollout of MTD for VAT.

From April 2026, anyone with self-employment or property income exceeding £50,000 per year will be required to comply. From April 2027, the threshold drops to £30,000. This means millions of taxpayers, and the firms that serve them, will need to adopt new processes and tools.

This is arguably the biggest change to tax reporting since the introduction of self-assessment in 1996. Instead of filing a single annual return, affected taxpayers will need to submit four quarterly updates, an end of period statement, and a final declaration that replaces the traditional SA100 tax return.

Key Dates and Deadlines

Here are the critical dates your firm needs to have on the calendar:

• April 2026: MTD for Income Tax becomes mandatory for self-employed individuals and landlords with annual income over £50,000.
• April 2027: The threshold drops to £30,000, bringing a second wave of taxpayers into scope.
• Quarterly updates: Affected taxpayers must submit digital updates to HMRC four times a year, not just once. Each update is due within one month of the end of the quarter.
• End of period statement: An annual summary confirming that the quarterly updates are complete and accurate. This is still required alongside the quarterly submissions.
• Final declaration: This replaces the SA100 self-assessment return. It brings together all sources of income and allows the taxpayer to claim reliefs and allowances.

The quarterly cadence is the most significant operational change. Firms will need to plan capacity carefully to handle the increased submission volume across their entire affected client base.

What This Means for Your Firm

MTD for Income Tax will have a direct impact on how your practice operates. Here are the key implications:

• Quarterly touchpoints with every affected client. You will need to collect records, reconcile data, and submit updates four times a year for each client in scope. This is a fundamental shift from annual-only engagement.
• Compatible software is non-negotiable. All digital record-keeping and submissions must be done through HMRC-recognised software. Manual processes and standalone spreadsheets will not be accepted.
• Bank feeds and digital receipt capture become essential. To make quarterly reporting practical, clients need to be capturing transactions digitally in real time, not handing over carrier bags of receipts once a year.
• Capacity planning is critical. Quarterly submissions effectively multiply the compliance workload by four. Without careful planning, firms risk bottlenecks and missed deadlines.
• There is a genuine opportunity here. More frequent client contact creates natural touchpoints for advisory conversations. Firms that position MTD as a service upgrade, rather than a burden, can strengthen client relationships and increase revenue.

Which Software Is MTD-Compatible?

HMRC maintains a list of software that is recognised as compatible with MTD for Income Tax. The major cloud accounting platforms have all confirmed their support:

• Xero has confirmed full MTD for ITSA compatibility, with quarterly reporting built into its tax module.
• QuickBooks Online supports MTD for Income Tax submissions directly from the platform.
• Sage Accounting includes MTD for ITSA compliance as part of its cloud offering.
• FreeAgent is fully MTD-compatible and popular with sole traders and micro-businesses.

For clients who are not yet on a cloud platform, bridging software is available. This allows data to be submitted to HMRC from spreadsheets or desktop tools, though it adds an extra step and is generally less efficient than using a natively compatible platform.

Digital record-keeping tools such as Dext and HubDoc are also important in this context. They automate the capture of receipts, invoices, and bank statements, making it far easier for clients to maintain the digital records that MTD requires.

Five Steps to Prepare Your Firm

Step 1: Audit Your Self-Assessment Client Base

Start by identifying which of your clients will be affected. Pull a report of all self-employed and landlord clients, segmented by income level. How many earn over £50,000 and will be in scope from April 2026? How many earn between £30,000 and £50,000 and will follow in April 2027? This gives you a clear picture of the scale of work ahead and helps you prioritise.

Step 2: Check Your Software

Is your current accounting software MTD-compatible for Income Tax? If you are already using Xero, QuickBooks Online, Sage, or FreeAgent, you are likely covered. If you have clients on desktop software or manual systems, you will need to plan a migration. Our accounting tech stack guide can help you evaluate your options.

Step 3: Set Up Quarterly Workflows

Quarterly reporting means quarterly workflows. Your practice management system needs to be configured to handle recurring tasks for every affected client, four times a year. If you are using tools like Karbon or Senta, now is the time to build out templates for MTD quarterly cycles, including client reminders, data collection checklists, and submission deadlines.

Step 4: Communicate with Clients Early

Do not wait until January 2026 to tell your clients about MTD. Start the conversation now. Explain what is changing, what they will need to do differently, and how your firm will support them through the transition. Early communication reduces last-minute panic and gives clients time to adopt digital tools at their own pace.

Step 5: Run a Pilot

Pick five to ten clients and trial the full quarterly process before the mandate takes effect. Submit test updates, identify bottlenecks in your workflow, and refine your processes. A small pilot now will save you enormous headaches when the deadline arrives and you are doing this for hundreds of clients simultaneously.

Common Misconceptions

"MTD only affects VAT-registered businesses"

This is one of the most widespread misunderstandings. MTD for Income Tax is a completely separate mandate from MTD for VAT. It applies to self-employed individuals and landlords based on their income level, regardless of whether they are VAT-registered. The two programmes have different rules, different timelines, and different software requirements.

"My clients can just use spreadsheets"

Spreadsheets alone will not satisfy the MTD requirements. HMRC requires that records are kept digitally and that data flows to HMRC through compatible software without manual re-keying. If a client insists on using spreadsheets, they will need approved bridging software to connect those spreadsheets to HMRC. In practice, it is almost always easier and more efficient to move clients onto a cloud accounting platform.

"We have until April 2026 to think about it"

Technically the mandate starts in April 2026, but preparation should be well underway already. Migrating clients to new software takes time. Building quarterly workflows takes time. Training staff and educating clients takes time. Firms that wait until the final months will find themselves under enormous pressure, with limited access to support from software vendors who will be overwhelmed with last-minute requests.

Frequently Asked Questions

Does MTD for Income Tax apply to limited companies?

No. MTD for Income Tax applies only to self-employed individuals and landlords. Limited companies fall under a separate programme called Making Tax Digital for Corporation Tax, which has its own timeline and is not yet mandated. If your client operates through a limited company, they are not affected by the April 2026 deadline.

What happens if a client does not comply?

HMRC will apply penalties for late or missed quarterly submissions, following a points-based system similar to the one used for MTD for VAT. Each missed deadline adds a penalty point, and once a threshold is reached, a financial penalty is issued. Continued non-compliance will result in escalating consequences. It is important to build compliance into your processes from the start.

Can I use Excel for MTD?

Only with approved bridging software. HMRC will not accept data that has been manually entered or submitted outside of recognised software. If you or your clients want to continue using Excel for record-keeping, the data must be digitally linked to an MTD-compatible submission tool. However, for most firms, adopting a cloud accounting platform is the more practical long-term solution.

How often do quarterly updates need to be submitted?

Quarterly updates must be submitted within one month of the end of each quarter. The quarters are aligned to the tax year, so for a standard April to April tax year, the deadlines fall in August, November, February, and May. Missing a deadline will trigger a penalty point under the new points-based system.

What if a client earns between £30,000 and £50,000?

Clients with self-employment or property income between £30,000 and £50,000 will not be required to comply until April 2027. They are in the second wave of the mandate. However, it is still worth preparing them in advance, particularly if they are not yet using digital record-keeping tools. Starting early avoids a second rush of migrations in 2027.

Ready to Prepare?

The firms that act now will have a significant advantage when April 2026 arrives. Here are three ways to get started:

1. Review HMRC's Making Tax Digital for Income Tax guidance to understand the full regulations and requirements.
1. Browse our accounting tech stack guide to find MTD-compatible software for your firm.
1. Book a free discovery call to discuss your firm's specific situation and get tailored advice.

MTD for Income Tax is not something that can be left to the last minute. The sooner you start, the smoother the transition will be for your firm and your clients.