Is Your AI Up to Date For MTD ITSA?

Making Tax Digital for Income Tax (MTD IT) takes effect in stages: April 2026 (income >£50k), April 2027 (income >£30k), and April 2028 (income >£20k). Your AI must handle quarterly updates, as your clients’ compliance depends on it.

This blog is part of our series on: Your MTD IT Survival Guide. Be Ready for the August 7th Deadline.

What does MTD IT actually require?

MTD IT means quarterly reporting to HMRC instead of annual filing. Every self-employed person and landlord above the threshold must submit summary data four times a year, the 7th of August, the 7th of November, the 7th of February, and the 7th of May. Each submission summarises income and expenses for that quarter. You then file a final declaration by the 31st of January after the end of the tax year. This is not optional, and the thresholds are dropping.

Does your AI know the current MTD IT rules?

Ask any generic AI tool ‘What is the MTD IT threshold for 2027?’ and you might get a wrong answer or an uncertain one. That’s unacceptable for compliance work. That’s why generic AI is a professional liability for accountants. That’s why our AI MTD tool, BrightCapture, captures data for quarterly updates. It does this by letting the client take a photo of an invoice or a receipt, and BrightCapture does the rest. It extracts the data and sends it to an email. Once published, it gets sent to our bookkeeping software, BrightBooks. This is an example of AI that works specifically for MTD IT. Generic AI that hasn’t been built from the ground up with MTD IT in mind is a most likely risky endeavour.

What happens if your AI makes a mistake?

Making a mistake can be serious, especially when it comes to missing an MTD IT. From the 2027/28 tax year onwards, a £200 penalty applies as soon as the deadline is missed. There’s no grace period after the 2026/27 tax year. If your AI (or your process, or your staff) misses even one quarterly submission, your client faces a penalty immediately. Your practice could then face a client dispute and a reputation hit. The only way to avoid this is with software that’s designed to work with MTD IT from the ground up. Generic AI has none of these safeguards.

Does your AI keep you in control?

An important part of MTD IT is that you (the accountant) retain control of the final submission. Your client’s quarterly data flows to HMRC, you receive an in-year tax calculation, and then you review and file the final declaration. Any software that you use must support this workflow by automating admin and alerting you to anomalies, but leaving the final decision to you. You need to be able to see exactly what’s being submitted, you can amend it before filing, and you retain full responsibility and visibility.

How to check your current AI’s MTD readiness

If you’re currently using any AI tool, ask these questions now:

• Does it integrate with HMRC’s MTD API?

• Does it handle quarterly submissions automatically?

• Will it apply the April 2027 threshold?

• Can you see an audit trail of what’s being submitted?

• Does it alert you to deadline breaches?

If the answer to any of these is ‘no’, your MTD IT workflow depends on manual steps or on tools that will become non-compliant when the thresholds drop. Now is the time to switch.

Explore our MTD IT solutions at Bright, and discover how our AI tool, BrightCapture, can revolutionise your approach towards quarterly updates. Any client, whether they’re paper-based or fully digital, would be able to easily use this tool, as it’s as simple as taking a photo on your phone.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.