Making Tax Digital for accountants and bookkeepers

By introducing and enforcing the Making Tax Digital (MTD) legislation, HMRC aims to reduce errors caused by manual tax filing and improve the process for everyone, from taxpayers to accountants. 

Part of MTD is about ensuring businesses and individuals keep digital records of their tax transactions. This makes it easier for accountants and bookkeepers to achieve greater accuracy, ensure compliance with UK tax law, and make tax submissions quicker and more transparent. 

MTD legislation doesn’t just affect businesses and individuals paying their taxes. Accountancy and bookkeeping firms have also begun taking action to support their clients by: 

- Using HMRC-recognised MTD software for managing records and submitting returns. 
- Providing guidance and resources on how to maintain digital records, like offering access to easy-to-use MTD bookkeeping software. 
- Keeping up to date with upcoming legislative deadlines (like MTD for income tax) to ensure timely compliance. 
- Advising on efficient processes to simplify tax administration under MTD regulations.

MTD for income tax, or MTD for Income Tax Self Assessment (ITSA), is a piece of HMRC-mandated legislation that affects self-employed individuals and landlords with a certain yearly income. 

MTD for ITSA has now been rolled out and requires the use of MTD-compatible accountancy or bookkeeping software to:
 
- Carry out adequate digital recordkeeping. 
- Send quarterly income tax updates to HMRC. 
- Submit yearly tax returns. 

MTD for income tax doesn’t just affect sole traders; accountants and bookkeepers whose clients are affected by MTD for ITSA also need to take action to ensure their clients comply with HMRC legislation. 

The MTD for Income Tax Self Assessment (ITSA) legislation, which has now been rolled out, applies to individuals who are:

- Not VAT-registered (e.g. sole traders, landlords etc).  
- Earning more than £50,000 from self-employment or property over the tax year. 

From April 2027, the MTD for income tax threshold will drop to include sole traders, landlords, or self-employed individuals earning £30,000 or more. And from April 2028, the threshold will drop further to include those earning £20,000 or more.

As part of Making Tax Digital (MTD), businesses must keep the following financial records stored digitally: 

- Sales and purchase records, including the date and value of supplies. 
- Adjustments and corrections made to tax returns.  
- VAT accounting records (if applicable). 

These records should be stored using MTD compatible software or digital spreadsheets linked to HMRC’s system.  

Yes—spreadsheets are a fully valid, HMRC-recognised approach to MTD compliance. If your clients are comfortable working in Excel (or similar tools), they don’t need to abandon that workflow.

The key requirement is that the spreadsheet data is digitally linked to MTD-compatible software for submission to HMRC. This is known as bridging, and it’s a legitimate, compliant route that many accountants and their clients use.

The annual Self Assessment return is replaced by a Final Declaration. This is submitted after the end of the tax year and captures any adjustments, additional income sources, and reliefs. The first Final Declarations under MTD ITSA will be due by 31 January 2028 (for the 2026/27 tax year).

Yes. Each income source generates its own set of quarterly updates. A sole trader who also rents out a property needs to submit quarterly updates for both (eight quarterly submissions per year).

Not yet. Partnerships are committed in principle but HMRC has not confirmed a mandation date. Currently, only sole traders and landlords are in scope for MTD ITSA.

Partnership income received by an individual does not count towards their qualifying income threshold for MTD ITSA. For example: if a client earns £35,000 from a partnership and £20,000 from self-employment, only the £20,000 self-employment income is assessed against the threshold—so they would not be mandated under the current £50,000 threshold.