Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is a significant change in UK tax rules. Starting April 2026, businesses and landlords earning over £50,000 must maintain digital records and submit quarterly updates to HMRC, with those earning over £30,000 falling to the threshold in 2027.
For accountants, this shift is more than just a compliance update; it’s an opportunity to enhance client relationships and modernise workflows. Preparation is crucial, and at Stellaripe, we assist accounting firms by handling time-consuming back-office tasks, ensuring MTD compliance, and freeing up valuable time to focus on higher-value services.
Understanding MTD for income tax
MTD for Income Tax Self Assessment (ITSA) is part of HMRC’s move to modernise the tax system. From April 2026, self-employed individuals and landlords earning over £50,000 must use HMRC-approved software to keep digital records and submit quarterly updates. Those earning over £30,000 will follow in 2027. Under MTD, your clients will need to:
- Keep digital records with HMRC-approved software.
- Submit quarterly updates on income and expenses.
- Provide a final yearly statement confirming accuracy.
MTD aims to improve tax reporting accuracy and provide clients with clearer insights into their taxes. Accountants must prepare clients now to avoid last-minute stress, particularly those who still use paper records.
MTD for income tax: Quarterly updates and final declaration
Under MTD, clients must send HMRC electronic summaries of their income and expenses every three months.
- Submissions must be filed within one month after the end of each quarter (e.g., a 5 July quarter-end must be submitted by 7 August).
- No tax is due at this stage; HMRC will provide an estimated tax bill based on submitted figures for payment by 31 January following the end of the tax year, and on 31 July if payable on account.
- Clients can revise past submissions by including corrections in a future update.
Final submission
At year-end, clients must confirm their total income and expenses through a final declaration.
- HMRC generates a Business Source Adjustable Summary (BSAS) for each income type—such as self-employment and property.
- Adjustments are made to finalise figures before submission.
- This replaces the SA100 and must be submitted by 31 January following the tax year, along with any outstanding tax.
What information do clients need to provide?
For self-employment:
- Business income and allowable expenses
- Capital allowances for equipment or vehicles
- Necessary adjustments (e.g., basis period)
For property income:
- UK and overseas property income
- Associated property expenses
- Adjustments like carried-forward losses
At final submission:
- UK dividend income
- Savings interest (taxed and untaxed)
- Other income sources and claims
Who can opt out of MTD for income tax?
While most clients must comply, exemptions apply in specific cases:
- Clients below the £30,000 threshold for three consecutive tax years
- Voluntary users in the pilot phase
- Those with disabilities or no reliable internet access
- Trustees, personal representatives, foster carers, and non-resident companies
These individuals can apply to HMRC for an exemption if eligible.
What does this mean for accountants and their clients?
MTD for Income Tax will transform how accountants work with clients. It’s not just about new software — it’s about supporting clients through regular digital reporting.
What it means in practice:
- More frequent deadlines: Clients must send updates every three months, requiring more regular checks and communication.
- Digital record-keeping: Clients must switch to MTD-compliant software for tracking income and expenses.
- Client education: Accountants must guide clients on MTD tools, deadlines, and compliance.
- Higher demand for support: Clients will need ongoing help to avoid mistakes and penalties.
- Risk of penalties: Non-compliance can result in fines, so accountants must ensure clients stay compliant.
- Opportunities for added value: Accountants can offer services like real-time financial advice and tax planning.
Key steps for accountants to take now
- Review client readiness – Start by segmenting your client base. Who earns above £50,000 annually through self-employment or property income? Are their records digital or paper-based?
- Advise on digital record-keeping – Explain the benefits of digital bookkeeping: accuracy, efficiency, and HMRC compliance. Recommend tools and practices to help clients maintain real-time records.
- Ensure MTD-compatible software – Clients must use HMRC-recognised software. You can help evaluate client needs and recommend the best fit.
- Prepare for quarterly reporting – Unlike annual returns, MTD requires submissions every three months. Help clients understand this schedule and ensure they’re prepared for regular updates.
Are clients registered for MTD for VAT automatically registered for MTD for Income Tax?
No, the two schemes are separate. Making Tax Digital for VAT and Making Tax Digital for Income Tax each have their own eligibility criteria and sign-up processes. Being signed up for MTD for VAT doesn’t automatically mean a client is enrolled for MTD for Income Tax. However, many businesses that meet the criteria for both will eventually need to comply with both schemes.
How will MTD for income tax affect your firm’s operations?
Moving from annual returns to quarterly updates means an increase in reporting volume. This could place a strain on in-house teams, especially during busy seasons. The need to monitor deadlines, ensure data accuracy, and respond to HMRC updates will demand more time and resources.
How can Stellaripe support accountants throughout the MTD journey?
Making Tax Digital (MTD) is not a one-time setup—it’s an ongoing process. Clients will need regular support, and we’re here to help you every step of the way.
Here’s what Stellaripe can do for your firm:
- Client onboarding
We help register your clients and move their data into the right software. - Software setup and training
We set things up properly and show your team how to use the tools if necessary. - Quarterly submissions
We take care of submitting the updates to HMRC on time. - Deadline reminders
We help you on behalf of your clients, stay on top of important dates. - Compliance checks
We review records to keep everything accurate and penalty-free. - Final submissions
We help with the year-end filing, making sure everything is correct.
With Stellaripe as your back-office partner, you can offer smooth MTD services without the extra workload. We’re here to make things easier for you and your clients.
Conclusion
Making Tax Digital for Income Tax is a significant shift, but with the right support, it strengthens client relationships and future-proofs your firm. Stellaripe helps accountants ensure clients are compliant and confident in the digital future. Contact us today for a smooth, stress-free MTD experience.
