Nearly 1 Million People Are Now Under MTD IT. Is Your Software Ready or Are You the Bottleneck?

Nearly 1 million people are now under MTD IT as of the 6th of April 2026. Making Tax Digital for Income Tax (MTD IT) applies to any landlord or sole trader with a gross annual income of over £50,000. That’s 864,000 taxpayers that are in scope.

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

But here’s the detail that should focus every practice owner’s attention:

Two-thirds of those registrations are agents.

Not clients.

Which means that while accountants have been getting ready, their clients haven’t been as much.

The first quarterly update that covers the 6th of April to the 5th of July 2026 is due on the 7th of August. And while HMRC has confirmed a grace period on penalty points for this first year, there is no grace period on clients needing MTD-compatible software that’s properly connected to HMRC before any submissions can happen.

So, if your practice hasn’t sorted its MTD IT software stack, the bottleneck blocking that might be you rather than them.

While the client-awareness gap is real, it’s your problem to solve

Research published this year found that 39% of small business owners have never heard of MTD for Income Tax, with 19% not understanding anything about it.

Clients are likely not following HMRC updates. They’re running their businesses, and they’re relying on you to tell them what they need to do.

Not only that, but the window to inform them, guide them, and get them set up ahead of the August deadline is rapidly narrowing.

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

What “ready” actually means

The phrase “MTD-compatible software” appears in every HMRC communication about MTD IT, and it’s so much more than just downloading an app.

For a client to make their first quarterly update, they need software that:

• Connects securely to HMRC’s APIs

• Captures and categorises income and expense data on an ongoing basis throughout the quarter

• Produces a quarterly update in the correct format for submission

The software must be authorised with HMRC before any data is transmitted, which involves clients logging in with their Government Gateway credentials and granting permission.

The software question you need to answer now

There are a growing number of MTD-compatible products on the market, but the right choice depends on your client base. Take a look at whether your clients are already using accounting software, if they’re comfortable managing digital records themselves, or if they’ll lean on you to handle the whole process.

For practices with a mixed MTD IT client base, you don’t want to be using a bunch of incompatible products that some clients can’t even use.

The first question to ask any vendor is:

Can this product submit a quarterly update directly to HMRC, for a sole trader or landlord in scope for MTD IT?

If the answer involves manual exports, workarounds, or a future feature, keep looking.

The MTD IT deadline is fixed, but your preparation window isn’t

The MTD IT soft landing period on penalty points for 2026/27 isn’t an extension, it’s a cushion. Relying on it as a strategy rather than as a backup isn’t where you want to be when the first deadline is just weeks away.

However, there’s still time to get clients set up, the timeframe to do it is just narrowing. The practices that look best to their clients on the 7th of August are the ones that already in motion today.

For more on MTD IT deadlines, thresholds, and what practices need to have in place, check out our MTD IT hub below.

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.