What do your clients need to know about MTD IT?

Making Tax Digital for Income Tax Self-Assessment (MTD for IT) represents one of the most significant shifts in the UK’s tax system in recent years. Designed to improve efficiency, reduce errors, and foster better compliance, it signals a new era in digital tax management. This transition, while beneficial in the long run, brings new challenges for accountants tasked with preparing clients for the upcoming changes.

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

What is MTD IT and who will be affected?

MTD IT is an initiative by HMRC aimed at modernising tax administration by replacing manual processes with digital record-keeping and submissions. It targets self-employed individuals and landlords, requiring them to use HMRC-approved software to maintain digital records, submit quarterly updates on income and expenses, and complete an annual Final Declaration to confirm income and calculate tax liabilities.

This shift significantly changes how taxpayers manage and report their income, replacing the traditional annual tax return with a more continuous and transparent process.

The rollout will affect individuals based on their income levels:

• From April 2026: Those earning over £50,000 from self-employment or property will be required to comply

• From April 2027: The threshold lowers to £30,000

• From April 2028: Individuals earning over £20,000 will be included

It’s essential for accountants to identify which clients fall within these categories and to ensure they are fully prepared before the deadlines.

Key requirements under MTD for IT

Transitioning to MTD for ITSA involves several new requirements. Clients will need to:

Clients must use HMRC-recognised software to record income and expenses, submit quarterly updates, and file the necessary end-of-year documents. Accountants will need to help clients learn how to use appropriate MTD IT software tools. Approved software with bridging solutions can be used for this purpose.

Clients must provide HMRC with income and expense totals every three months. These updates ensure accurate tax estimates throughout the year.

After the tax year, the Final Declaration will confirm all sources of income and calculate the final tax liability.

What clients need to do now

Preparing for MTD IT doesn’t have to be overwhelming. Here are the steps your clients should take to get ready:

Ensuring clients understand what the MTD IT legislation is, along with the key dates for quarterly updates and Final Declarations, is crucial to a smooth start and avoiding penalties down the line.

Encourage clients to review their current systems for recording income and expenses. With nearly 1 million people now under MTD IT, many may need to move from manual methods to digital solutions to ensure compliance.

Guide clients in selecting software that connects directly with HMRC. The right MTD IT software will depend on clients’ specific needs and level of technical competence.

Transitioning to MTD-compliant processes ahead of deadlines will allow clients to ease into the system and address challenges proactively.

Clients who aren’t tech-savvy may need training or your professional support to adapt to digital tools and quarterly submissions. For further information, see our blog on what clients need to know about MTD IT.

Common client concerns and how to address them

Change can be daunting, and many clients will have concerns about MTD IT. Addressing these fears proactively can build trust and make the transition smoother.

Concern 1: “I’m not tech-savvy”

Reassure clients that many MTD-friendly software options are designed with user-friendliness in mind. Offer demonstrations or workshops to help clients get familiar with their chosen tools.

Concern 2: “It’s too costly”

Explain that while there may be initial costs for software or training, digital systems typically offer long-term savings by reducing errors and time spent on manual processes.

Concern 3: “Is my data safe?”

Assure clients that HMRC-compliant software adheres to strict security standards, protecting sensitive financial information through encryption and other measures.

Concern 4: “Quarterly updates are too complicated”

Simplify quarterly submissions by offering support services or guiding clients through the process step by step, ensuring compliance is stress-free.

Concern 5: “Do I have to do this?”

Clarify that for anyone above the MTD IT income thresholds it’s a legal requirement, but reassure clients that your team will manage the entire digital filing process, so they can focus on their business while staying fully compliant.

MTD for ITSA: FAQs from HMRC.

How accountants can help

Accountants play a vital role in helping clients transition to MTD IT. Here’s how you can support them:

Educate clients early and often about the changes and their implications. Position yourself as a resource clients can rely on. Your expertise and proactive support can ease the transition and even strengthen client relationships.

Encourage clients to adopt MTD IT practices before they are legally required to, giving them time to adjust with your guidance.

Create service packages tailored to MTD compliance, including software onboarding, quarterly updates management, and year-end submissions.

Clients may need help understanding their MTD responsibilities and using digital tools effectively. Offering one-on-one sessions or workshops can be invaluable.

For further information, check out our article on 5 MTD IT actions accountants should take today.

Preparing for MTD IT: The time to act is now

MTD IT is gradually transforming how income tax is reported in the UK. By preparing early and partnering with your clients, you not only ensure compliance but also position yourself as a leader in the accounting field.

For more support and resources, visit Bright’s MTD Hub. From insights to downloadable guides, it’s your one-stop shop for navigating the MTD IT transition smoothly.

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.