Making Tax Digital for Income Tax (MTD for ITSA) became mandatory on 6 April 2026 for sole traders and landlords with qualifying income above £50,000. With only 28% of the 780,000 affected taxpayers registered so far, accountancy practices are under considerable pressure to get clients signed up and submitting before the August deadline. Here is what has changed, what is still outstanding, and how to prepare.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax Self Assessment, commonly referred to as MTD for ITSA or MTD for Income Tax, is HMRC’s framework for moving sole traders and landlords away from a single annual Self Assessment return towards quarterly digital reporting throughout the year.
Under MTD, affected taxpayers must keep digital records using HMRC-approved software and submit four quarterly updates to HMRC each tax year, plus a final declaration by 31 January. That means five submissions per year instead of one, a substantial shift in how income and expenses are reported.
The scheme has had a long and drawn-out history. Originally proposed in 2015 with a target launch of 2018, MTD for Income Tax has been delayed multiple times. Phase one finally went live on 6 April 2026, eleven years after it was first conceived.
Where do sign-up numbers stand right now?
The headline figures make for sobering reading. Despite the April 2026 mandation date arriving, the majority of affected taxpayers have yet to register.
According to HMRC, more than 219,000 taxpayers have signed up to MTD for Income Tax, approximately 28% of the 780,000 sole traders and landlords required to comply this year. That leaves around 560,000 still to register before the first quarterly filing deadline of 7 August 2026.
Of those who have registered, around two thirds are accountants and agents signing up on behalf of clients, meaning direct taxpayer registration remains extremely low.
HMRC has confirmed it will not penalise late submissions during the 2026-27 tax year. From 2027-28 onwards, however, fines of £200 will apply after four missed quarterly deadlines. The grace period exists now, but it will not last long.
What are the phased rollout thresholds?
MTD for Income Tax is being introduced in three stages. The income thresholds below are based on gross receipts, not taxable profit, from sole trading and UK property income combined.
Phase 1, which is live now from 6 April 2026, applies to those with income over £50,000, affecting approximately 780,000 taxpayers.
Phase 2 arrives in April 2027 with a threshold of £30,000, bringing in around 970,000 additional taxpayers.
Phase 3 follows in April 2028 with a threshold of £20,000, adding a further 975,000.
By 2028, approximately 2.7 million sole traders and landlords will be within scope. Practices that start identifying and segmenting their Phase 2 and Phase 3 clients now will be significantly better placed than those who wait.
What does this mean for accountants and bookkeepers?
For practices, MTD for Income Tax represents both a compliance obligation and a significant service opportunity, but only for those who are prepared.
The immediate challenge is straightforward: clients who are in scope need to be identified, made aware of their obligations, signed up with HMRC, and equipped with compliant software before their first quarterly deadline of 7 August 2026. For a practice with dozens or hundreds of affected clients, this is a considerable undertaking.
Beyond the immediate scramble, MTD also reshapes the nature of the accountant-client relationship. Quarterly submissions mean more frequent touchpoints, more structured record-keeping conversations, and for many clients a much closer reliance on their accountant to stay on top of things. Practices that position themselves well now stand to deepen client relationships and build recurring revenue from ongoing compliance support.
Is your practice MTD-ready? A quick checklist
- Identify Phase 1 clients. Review your client list and flag any sole traders or landlords with gross income above £50,000 for the 2024-25 tax year.
- Check registration status. HMRC will not automatically enrol anyone. Registration for MTD for ITSA is a separate process from Self Assessment and must be completed by you or your client.
- Confirm software compatibility. HMRC’s existing online filing portal cannot be used for MTD submissions. All clients need HMRC-approved software in place.
- Brief clients on quarterly obligations. Many clients still do not understand what quarterly reporting will require of them in terms of record-keeping and timing.
- Plan capacity for August onwards. Four quarterly deadlines per client per year, across potentially hundreds of clients, requires capacity planning well in advance.
- Start identifying Phase 2 clients now. With the £30,000 threshold arriving in April 2027, now is the time to segment your client base and begin proactive outreach.
How does Bright’s MTD software suite support your practice?
Bright has built a connected suite of products that covers every stage of the MTD for Income Tax workflow, from the moment a client photographs a receipt through to the final annual declaration. Here is how the four products fit together.
- BrightBooks is where the ongoing MTD compliance work happens. It handles digital record-keeping and quarterly submissions to HMRC, with multiple pathways to suit clients across all levels of digital readiness, including full bookkeeping, Excel bridging, and bank-based filing. For practices managing large numbers of clients through the quarterly cycle, BrightBooks is the engine at the centre of the MTD workflow.
- BrightCapture is an AI-powered document capture feature that works with BrightBooks to help practices serve clients who still operate the traditional shoebox approach to record-keeping. Taxpayers photograph receipts and invoices on their mobile phones and forward them; documents arrive at the practice in a digitised format with VAT already split and data extracted, flowing directly into BrightBooks ready for quarterly filing. What would typically require hours of manual bookkeeping arrives as verified data ready to process.
- BrightTax handles the annual declaration and final submission at the end of each tax year. Where BrightBooks manages the quarterly rhythm, BrightTax ensures the year-end piece is accurate, efficient, and fully compliant with HMRC requirements. Together, BrightBooks and BrightTax cover the complete annual MTD cycle.
- BrightManager is the command centre for practices managing MTD compliance across a large client portfolio. It gives practices a single view of all clients, making it straightforward to monitor who has registered, who has outstanding submissions, and where follow-up is needed. For practices facing the challenge of chasing dozens or hundreds of clients through each quarterly deadline, BrightManager makes that process significantly more manageable.
Used together, the four products form a complete MTD solution: BrightCapture brings client documents into the workflow, BrightBooks handles the quarterly filing, BrightTax covers the annual declaration, and BrightManager keeps the practice in control of the whole picture.
What lessons should HMRC learn from the MTD rollout?
The AccountingWeb commentary that accompanied the Phase 1 mandation date raised a fair challenge: after eleven years in development, and with nearly three quarters of mandated taxpayers still unregistered on day one, there are clear lessons for how government handles future compliance modernisation, whether that is e-invoicing, further MTD phases, or other digital tax initiatives.
Chief among them: the gap between mandation and readiness is most acute when the burden falls disproportionately on small businesses and their agents, who lack the internal resource that larger organisations can deploy. Adequate lead times, accessible tooling, and proactive HMRC communication are not optional extras in a programme of this scale.
For practices, the lesson is a different one: relying on HMRC’s timeline to drive client preparation is a losing strategy. The practices navigating MTD most smoothly are those that got ahead of it, identifying clients early, investing in the right software, and treating MTD as a practice development moment rather than a compliance burden.
Ready to get your practice MTD-ready?
Book a demo with the Bright team and see how Bright’s MTD solutions work together to make compliance easier for practices of every size.
Frequently asked questions
Who needs to register for Making Tax Digital for Income Tax in 2026?
Sole traders and landlords whose combined gross income from self-employment and UK property exceeded £50,000 in the 2024-25 tax year must register for MTD for Income Tax from 6 April 2026. This applies to gross income, not taxable profit. HMRC estimates this affects approximately 780,000 taxpayers in Phase 1.
What is the deadline for the first MTD quarterly submission in 2026?
The first quarterly update must be submitted to HMRC by 7 August 2026. HMRC has confirmed it will not penalise late submissions during the 2026-27 tax year, but from 2027-28 onwards fines of £200 apply after four missed deadlines.
How many people have signed up for MTD for Income Tax so far?
As of April 2026, more than 219,000 taxpayers have registered, approximately 28% of those required to comply this year. Around two thirds of those sign-ups are accountants and agents registering on behalf of their clients.
What software do accountants need for MTD for Income Tax?
Taxpayers and their agents must use HMRC-approved software to keep digital records and file quarterly updates. HMRC’s existing free Self Assessment portal cannot be used for MTD submissions. Bright’s MTD suite, including BrightBooks, BrightTax, BrightManager, and BrightCapture, supports full MTD for Income Tax compliance for accountancy practices.
When will MTD for Income Tax apply to lower income thresholds?
In April 2027, the threshold drops to £30,000, bringing in approximately 970,000 more taxpayers. In April 2028, it falls again to £20,000, adding a further 975,000. Practices should begin identifying and communicating with Phase 2 and Phase 3 clients now.
Written by Rachel Quinn | Rachel has worked in accounting software since 2014 and has been part of the Bright team since its inception. She writes from first-hand experience of how UK accounting practices use Bright’s products to manage compliance, reduce admin, and grow their practices.
