Preparing for the MTD ITSA Second Cohort: How BrightTax and BrightManager Get Practices Ready Before April 2027

Making Tax Digital for Income Tax (MTD IT) is no longer a future deadline. It is live, and it is growing. With the first cohort embedded and the second cohort mandate less than twelve months away, the window for deferral has closed. Practices that used the 2026/27 soft landing period for MTD IT to develop and test their quarterly workflow are in a strong position. Those that treated it as permission to continue as before face a sharp transition — managing second cohort clients who have never submitted a quarterly update, while simultaneously managing first cohort clients whose own soft landing will have expired.

This blog is part of our series, Making Tax Digital for Income Tax: Your Complete Practice Guide to Multiple Cohorts, Workflows, and Compliance.

The difference between a practice that manages the second cohort smoothly and one that does not comes down to preparation done before April 2027, not after it.

Who Is in the Second Cohort for MTD IT?

The second cohort comprises sole traders and landlords whose combined income from self-employment and property businesses exceeds £30,000. Clients who fall between £30,000 and £50,000 are the target group. Those above £50,000 who are already in the first cohort are already subject to the mandate. some of those below £30,000 will join the third cohort in April 2028, when the threshold reduces to £20,000. The income test applies to the combined gross income from trading and property.

Why the Absence of a Soft Landing Matters

HMRC’s soft landing for the first cohort in 2026/27 means no penalty points are issued for late quarterly updates in the first year. This grace period does not carry over to the second cohort. From April 2027, late quarterly updates for second cohort clients accumulate penalty points immediately under the points-based late filing penalty system.

Under that system, a single penalty point is awarded for each late quarterly update. Once a client reaches two points (out of a maximum of four before a financial penalty is levied), HMRC issues a warning. At four points, a £200 penalty is charged and the points reset. Subsequent breaches accumulate further penalties.

For a practice managing fifty second cohort clients, even a low error rate produces significant penalty exposure. The soft landing was a gift; the second cohort will not receive it.

What Practices Need to Do Before April 2027

Identify and segment the client base. Any client with combined sole trade and property income above £30,000 is likely in scope. Flag those with income between £30,000 and £50,000 specifically, as this is the new cohort — those above £50,000 should already be subject to the mandate.

Confirm digital record-keeping. MTD IT requires digital records maintained in MTD-compatible software from the start of the mandated tax year. A client still using spreadsheets or cashbooks in April 2027 will not be compliant from day one. For each identified client, confirm whether they have a compliant digital bookkeeping system — and where they do not, initiate the migration conversation now.

Register clients for MTD IT. Registration should happen well in advance to ensure the quarterly submission cycle is correctly configured from 6 April 2027.

Brief clients on the quarterly cadence. The biggest client relations challenge in MTD IT is managing the expectation that contact and data review will now happen four times a year, not once at year-end. Clients need to understand the four quarterly deadlines (7 August, 7 November, 7 February, 7 May) and the final declaration. Clear communication before the mandate starts avoids friction once it is live.

How BrightTax and BrightManager Support the Workflow

BrightTax handles the annual MTD IT submissions for sole trader and landlord clients through HMRC’s MTD-compatible API. The cumulative quarterly updates are done through Bright’s bookkeeping software, BrightBooks.

BrightManager tracks all of your MTD IT deadlines per client alongside all other practice deadlines. As the second cohort grows the mandate population, BrightManager’s deadline tracking scales accordingly, giving practices a centralised view of all outstanding submissions without manual diary management.

The combination of BrightBooks for quarterly submissions, BrightTax for final declarations and BrightManager for deadline tracking means practices can add second cohort clients to their MTD IT workflow without a proportionate increase in administrative overhead.

Frequently Asked Questions

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.