Making Tax Digital: 2025/26 Action plan

As we're now counting down to Making Tax Digital (MTD) for Income Tax, HMRC’s MTD Team held an event for tax agents at Canary Wharf this week. We look at the practical suggestions arising from that session.

HMRC are going all-out to publicise MTD and say they are ready and able to assist accountants as this massive change to the Self Assessment filing system progresses.

HMRC have created a dedicated team to assist practices on their MTD 'journey'. They are encouraging everyone to join the MTD Public Pilot and not to leave signing up for MTD until the last minute in March 2026.

Re-cap on MTD essentials

Under mandatory MTD for Income Tax, taxpayers must:

• Use MTD-enabled software.
• Keep digital records.
• Send quarterly updates to HMRC.

Taxpayer type and requirement

• The first stage of MTD applies to self-employed business owners and landlords.
  • MTD is not currently scheduled for partners, partnerships, companies and trusts.
• If you are self-employed and/or a landlord, you report your MTD income under MTD and then report your non-MTD income in your end-of-year return.
• There are special reporting rules for complex cases where cumulative reporting is impossible: e.g. non-resident taxpayers who complete the SA109 residence and remittance basis pages of the current tax return and are affected by the changes to non-domicile taxation. At present, these taxpayers will file nil quarterly returns and make final submissions once their year-end position is known. Regulations are awaited to provide this detail.
• The following groups will not be required to join MTD: 
  • Ministers of religion. 
  • Lloyds Underwriters. 
  • Those in receipt of Blind Person's Allowance. 
  • Those in receipt of Married Couples Allowance. 

Measuring turnover

MTD is mandatory and the turnover criteria are set by sales and not by the size of profit or net income.

• The first cohort of taxpayers to join MTD will join in April 2026. This group are those who, in the year just ended (2024/25), have a turnover or sales (net of VAT, if applicable) over £50,000.
• The next phase will be April 2027 for taxpayers with a turnover of over £30,000.
• In April 2028  those with a turnover of £20,000 join.

Counting down to MTD

The countdown to MTD has started and accountants must now be actively planning for April 2026's changes. Don’t leave it until the last minute.

Draw up a timeline for your practice. Your key concerns will be:

• Software.
• Staffing.
• Training.
• Pricing.

Bookkeeping & software challenges

The challenge for many taxpayers is moving to keeping records digitally and also finding suitable MTD-enabled software. There is a growing choice of software to consider. See: Compare software for Making Tax Digital for Income Tax

The challenge for professional accountants is planning and logistics; organising workflow and staffing across the year to accommodate the new requirements.

Don’t overlook the importance of software choice.

MTD-enabled software does not need to replace tax filing software, but you might want to use this opportunity to review your options. You can still keep using multiple combinations of software if you want.

• E.g. You can report quarterly on bookkeeping software. You can migrate bookkeeping data from bookkeeping software to tax filing software as required (as you may currently do).

Join the Public Beta pilot: essential staff training

Now might be the time to join the Public Beta pilot, if you can. Select one or two taxpayers in your practice, and this may benefit all practice members. 

HMRC have a trained onboarding customer service team in place to assist practices. 

Setting up your Agent Services Account

Update your Agent Services Account (ASA). If you have not got one yet, register for an ASA. This is not the same as the agent online services account.

• You can now begin to sign up clients to MTD in your ASA.
• This will not automatically enter them into the pilot: that is a separate sign-up.
• Start signing in clients in batches, if required, to save time at the end of the year
• There is no bulk sign-up on the ASA and each client signed individually. Allow five minutes per sign-up.
• Watch HMRC's YouTube: How to sign up for MTD

MTD action plan for accountants

Data, data, data. It's all about the data! Perform data analytics on your client base to identify those who are in MTD, excluded from MTD, or going to struggle with it.

• Use HMRC's eligibility checker to see who can sign up if you are unsure.
• Review the software already in use and decide whether to make changes.
• For each case or client, decide who is responsible for each stage.
• VAT-registered clients are the quick wins. Those already in MTD for VAT may have no difficulty in submitting MTD quarterly updates.
• Some clients will be good at DIY. They may well be able to make the quarterly filings independently.
• Other clients may engage bookkeepers and ask you to review their figures before submission.
• Non-digital clients will need to be moved into digital record-keeping.

Engage with clients who are affected by MTD:

• Get the client involved: they must consent.
• The client needs to understand that the model is real-time bookkeeping and must be updated regularly.
• Tips on getting clients to sign up: 
  • Create an email campaign and then follow-up phone call.
  • Send out updated letters of engagement.
  • Engage with clients to have a business bank account (if necessary).

Pricing

HMRC advise agents to participate in the pilot to ensure an understanding of the new system and that your software is enabled. It is up to you if you wish to recharge that time to clients.

• When set up, physical MTD submissions, like the current system for MTD VAT submissions, only take a couple of minutes.
• You will continue to charge for bookkeeping and accounting as normal.
• Your workflow and charges will depend upon filing responsibilities throughout the year.

Training clients

Accountant and commentator, Rebecca Benneyworth’s main worries are about the non-digital element of clients who won't engage. In the end, if clients will not pay there is not a lot that can be done to assist them.

• Depending on the complexity of the software some clients may well require extra assistance in setting up.
• If you are using bank feeds, clients may require assistance in reconciliation.
• If clients are using spreadsheets (unless the spreadsheet software is MTD enabled) you will need to use bridging software to make the quarterly updates.

The reporting mechanism

Quarterly updates are a summary of your MTD income and expenditure. This is the raw data taken from the totals provided by the bookkeeping software: it is unnecessary to make accounting adjustments or tax claims unless you make those in normal accounting.

• The quarterly updates are cumulative: if you make an error in your bookkeeping, correct it as normal. You do not need to refile for that quarter.
• At the end of the year, the final filing allows you to make tax adjustments. Claim Capital Allowances, reliefs and other deductions.
• You also report other non-MTD income annually.

The numbers

The majority of taxpayers can sign up for the pilot now with HMRC estimating about 1.5m taxpayers would be eligible to join initially and now includes High-Income Child Benefit Charge (HICBC) cases and joint landlords.

The reporting cycle

Key notes

Quarterly updates match your VAT stagger (if VAT registered).

• Change your VAT stagger if it is not coterminous to your year-end.

Quarterly updates are submitted on a cumulative basis:

• If there is a bookkeeping error or omission in the previous quarter, it is unnecessary to resubmit that quarter.
• Correct the error when it is discovered and in submitting the next quarter it should show the correct cumulative total.

Year-end process

• The cumulative total from quarter four is now adjusted, as required to correct errors, claim reliefs and allowances etc.
• Report other non-MTD income and claim other reliefs and allowances, if required.

Filing dates 2025-26: assuming you joined the pilot in April 2025