In the biggest change to self assessment since the 1990s, accountants are gearing up to implement and test Making Tax Digital (MTD) income tax-compliant software, ensuring clients are digitally connected to meet HMRC’s requirement for digital income tax reporting next year as part of its 10-year MTD campaign.

With the deadline for the first submission of quarterly updates just over one year away, ICAEW hosted an MTD event with HMRC, software providers and tax consultants to encourage accountants and their clients to prepare for the landmark change.

From April 2026, if a taxpayer’s turnover from a sole trade or income from property, or both together, is more than £50,000, they will need to keep digital accounting records and use MTD-compatible software to submit quarterly updates to HMRC.

HMRC will expand the new regime further in April 2027, reducing the threshold to £30,000. The Chancellor also announced in the Spring statement that from April 2028 there will be a further rollout for those with turnover/rent over £20,000. 

Of the 12 million people within self assessment, HMRC is expecting around 780,000 people within the first cohort from April 2026, and a further 970,000 from April 2027.

HMRC’s research shows that the level of awareness among accountants is very high, but it is aware that a gap remains between the detailed knowledge and readiness plans.

Although some practices have already enlisted clients for testing ahead of the April 2026 start date, the panellists nevertheless reiterated the urgency for accountants and their clients to work in partnership with software companies and HMRC to meet the deadline.

Tax consultant Rebecca Benneyworth, MBE, said that although there were still complaints about the usefulness and accuracy of quarterly in-year tax calculations, because trade fluctuates, having an earlier indication of their tax liability was hugely beneficial to both clients and practices alike as it allows clients to start budgeting for their tax bill sooner.

Aaron Patrick, Head of Accounting at Boffix, said as his starting point he’d been using tax return software to define when each of his clients should be ready for MTD for income tax.

After consultation with his client base, the practice then considered what service offering to supply and because of differing client needs, Patrick then decided to opt for three different offerings.

“We’ve decided we’re not doing any bridging software going forward. We’ve had to make that decision and that’s now determined how we’re going to deliver services to clients going forward,” Patrick said.

Once the offerings were finalised, the firm then moved on to how to educate its clients, which it is doing via YouTube videos, webinars and newsletter updates. But Patrick said what really got clients to sit up and pay attention was their 2024/25 tax questionnaire this year, which outlined when they would have to comply with MTD for income tax.

“That instantly got clients to take ownership. That’s been invaluable to us,” he said.

Accounting software for MTD compliance

Boffix is now focusing on software solutions, of which there are now a plethora of innovative artificial intelligence (AI)-driven solutions.

“There has never been a better time – we’ve never seen more innovation. I’ve been spending my time looking at all the offerings and seeing how AI’s made a huge impact on it.”

Besides assessing software solutions, Boffix is focused on how to improve its services and client communications around MTD for income tax, as well as highlighting the benefits of MTD and training its team.

Digital disruption in property space

Manoj Varsani, MBE, CEO and founder of Hammock, which provides landlord software for MTD, agreed that practices now were laser-focused on MTD. “The smaller accountants are moving a lot faster. They are segmenting their clients a lot faster, choosing the software faster and just bringing them on straight away. There is movement now happening because of MTD.”

In contrast, Varsani said most landlords were not “digitally savvy”, but are suddenly realising that they have a lot to do to meet the deadline because they have just started receiving their notification letters from HMRC.

“Most landlords do not use any software at all. This is not just a big tax change: MTD is a huge digital disrupter in the property space because that space is not digitised at all. So, this is a huge, huge change,” he said.

Hammock sells directly to landlords as well as accountants, but when a landlord comes to Hammock directly, the firm is now asking those landlords to add their accountants into the software over the next two months. The figure, he said, was in the thousands.

“I recommend for those accountants who are not speaking to landlords, start speaking to them because if you’re not speaking to them, somebody else is,” Varsani said.

MTD onboarding 

Besides the MTD challenges, practices must consider the practical elements of onboarding clients to MTD, Patrick said.

It isn’t a process that clients want nor wish to pay for, he said, adding: “How do you future-proof your business? Is it about the right software, or is it how you’re onboarding your clients? And what about engagement letters? Because the truth of the matter is, with MTD there’s not much meat on the bone when you look at the prices for these services. This is going to be about sustainability. This is about how you service those clients in a fair way and for that you’re going to need to challenge the way you’re onboarding your clients.”

Indeed, Benneyworth said that the benefit of testing early is working out how long the process takes and how she can price the service. “That’s another of the reasons for putting a few more clients into the testing phase because I can see how long it’s taking, what we’re doing and how it all pans out before I commit to pricing.”

Accountants also need to work with software providers and challenge them to build more efficient solutions for MTD implementation that are right for accountants and their clients, Patrick said.

A further challenge for practices is in training their teams and allocating the right work to the right team members.

Patrick said: “My biggest fear is this work could be quite mundane in some circumstances where it’s going to be data handling. What we don’t want to do is discourage the team from feeling like they’re progressing and that’s where we're seeing a bit of difficulty.”