After a short delay, the government is pressing ahead with the next stage of its project to get taxpayers providing more information in real-time using digital technology.
Making Tax Digital for Income Tax Self-Assessment (‘MTD ITSA’) will be implemented from April 2026. This means individuals with income from small businesses, including self-employed people and landlords, will need to keep digital records and send information to HMRC quarterly using compatible software. Currently, such individuals must submit a self-assessment tax return (SATR) to HMRC each year by 31 January after the end of a tax year (5 April).
From April 2026, the new rules mean:
- self-employed individuals (such as sole trades) and landlords with income of more than £50,000 will need to keep digital records and provide quarterly updates about their income and expenses to HMRC using MTD-compatible software
- from April 2027, the income threshold for affected taxpayers is reduced to £30,000.
After consultation, the government made some changes to the rules, though the changes do not affect the key requirement to keep information digitally and then submit it each quarter to HMRC. Once the tax year is complete, and information for all four quarters submitted online, affected taxpayers must submit a final return and pay any tax due by 31 January.
Accountants have been working hard to identify taxpayers affected by MTD ITSA and communicate the new requirements to them. However, many accountants are not taking the opportunity to look critically at the way SATR work is delivered in 2024 (and 2025) to make the most of the new MTD world.
This blog provides some practical tips and action accountants can take now to get ready for MTD ITSA and deliver SATR services more effectively.
The importance of digital record keeping for clients
The need to maintain digital records using compatible software is essential to deliver the government’s MTD project. Many self-employed people are comfortable maintaining records digitally using cloud accounting software or engage accountants as their agents to maintain their records and submit tax information to HMRC. For these clients, the transition to MTD ITSA should be relatively smooth with only minimal effort needed to remind individuals about their responsibilities to submit information each quarter and ensure compatible software is used.
Accountants with clients who do not maintain digital records at all will need to invest time and resources getting them up to date about the new requirements and ensuring they are prepared for HMRC’s implementation deadline of April 2026. Taking time to introduce such clients to simple bookkeeping or accounting software to record income and expenses in advance of April 2026 will help prepare for MTD ITSA, though challenges may remain to ensure records are maintained accurately and on time.
As accountants contact clients to prepare SATRs for the tax year ending 5 April 2023, it is worthwhile encouraging them to become fully digital for the tax years commencing 6 April 2024 and 6 April 2025.
Accountants should look critically at all personal tax clients and margins
Accountants have been dealing with problematic personal tax clients for many years. Some clients prefer not to keep information digitally and will only provide paper records when the annual SATR is due. The client will usually meet their accountant in person to provide multiple documents for review to enable completion of the SATR by the 31 January deadline. Accountants have historically maintained such clients knowing they make little profit on the work but feel obliged to maintain the working relationship.
At the other extreme, some clients are comfortable maintaining digital records but decide not to engage at all in the work accountants need to complete to prepare the SATR and calculate the annual tax liability. Such clients will require support to submit information quarterly, approve their SATR and pay any tax due by 31 January.
Under MTD ITSA, accountants will find it difficult to serve clients who cannot follow HMRC rules for submitting accurate information online each quarter. The risk of fines and penalties is high under the new points regime to be introduce by HMRC and clients need to be kept up to date as penalty points accrue.
By acting now to understand which clients may struggle with MTD ITSA and require additional support, accountants will be able to resource work appropriately. Moving clients to a monthly subscription fee for personal tax work may help clients understand the importance of systematic record keeping and make conversations about any increase in fees easier to complete.
Re-engineer client communication
Under MTD ITSA, most clients will need support to keep them on top of their responsibilities. This may involve additional communication when deadlines are looming, or when action is needed to correct errors or omissions. Automating messaging using email, SMS text or other media provides a cost-effective way to keep in touch with clients when a deadline is due. Where more action is needed, for instance where tax advice is required or unusual transactions are recorded in a quarterly submission, the accountant can contact clients directly, offering additional support and advice as needed.
Using a commercial Customer Relationship Management (CRM) system, bulk SMS text or bulk email system to automate messaging and track responses offers a cost-effective way for accountants to communicate with clients continuously while making the most effective use of any direct, human contact needed.
Get your clients ready for MTD ITSA
All clients affected by MTD ITSA will need to be contacted and notified about their new responsibilities to maintain digital records and submit information to HMRC. If clients need to register for ITSA they made need support obtaining government gateway logins and unique registration numbers as well as advice on how to use accounting software.
Where clients are sole traders or have income as a landlord, they may require advice on the potential benefits of converting their business to a limited company structure. Reviews of business structures are often overdue, and circumstances can change which mean a limited company structure is more suitable. If a client decides to continue with their self-employed status, they will require clear instructions on how to comply with MTD ITSA. At a minimum, they will need to:
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- maintain records digitally using bookkeeping software
- submit information online to HMRC each quarter using compatible software and understand they may need bridging software depending on how digital records are maintained
- Understand HMRC will apply penalties using a points-based system every time a deadline is missed and that fines will accrue quickly for every failure to submit information.
Get your Practice ready for MTD ITSA
Accountants learned many lessons from the introduction of making tax digital for VAT. Most Practices updated client management systems and introduced automated messaging to keep clients up to date about their responsibilities and when deadlines are looming. Accountants also took the opportunity to look forward and identify those clients likely to exceed the VAT threshold and provided advice accordingly.
With MTD workflows in place for submitting VAT returns each quarter, accountants can start testing those workflows for ITSA clients. In the lead up to April 2026, accountants can remind clients of the importance of maintaining records using appropriate software and identify any clients struggling to comply with the new regime. Such clients may require additional services such as bookkeeping or tax advice to ensure information is up to date and accurate.
Accountants can also support clients by offering online learning tools or ‘how to’ guides to ease the transition to the new MTD world.
Of course, providing additional services requires a review of fees and pricing. Accountants may wish to introduce monthly subscription-based fees for clients to spread costs throughout the tax year.
How outsourcing can help
The accounting profession is undergoing significant changes, driven by advancements in technology and shifts in client expectations. Accountants are expected to provide more value-added services beyond traditional bookkeeping and tax work. The new world of MTD offers opportunities for accountants to provide real-time insights, tax forecasting, and strategic advice to affected clients. To meet these changing needs, accountants need to be agile and innovative.
This is where outsourcing comes into play. By leveraging the capabilities of outsourcing partners, you can streamline and augment your services, make your operations more efficient, and make sure you stay competitive. Whether it’s accessing a global talent pool, reducing overhead costs, widening the scope of services you offer to clients, or improving turnaround times, outsourcing presents many opportunities for growth and innovation.
Some of the work accountants can outsource now to help prepare clients for MTD ITSA and deliver in 2024 and 2025 includes:
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- HMRC registration and obtaining unique tax reference (UTR) numbers
- Data collection
- Client communication
- Tax computations
- Form SA 100 and Form SA 800 completion
- Prior period returns (‘historic claims’)
- HMRC queries
- HMRC filing.
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Free trial offer
At Initor Global we have been providing offshore personal tax services to UK accountants since 2006. Our customers include sole proprietors, as well as small and medium sized UK Accountancy Practices. Our outsourced tax, accounting and payroll services are suitable for all client engagements – from sole traders and micro businesses to SMEs and large companies.
We offer a free trial of up to 10 hours of accountant time or completion of two self-assessment tax returns regardless of complexity. We promise to turn your trial work around within 72 hours.
If you are an accountant looking to prepare for MTD ITSA effectively by outsourcing services, while increasing margins and helping your clients, you can book a video call with one of Initor Global’s expert advisors using this link or send an email to hello@initor-global.co.uk.