MTD for IT: What accountants must do in the first 90 days

Published Tuesday 9 June 2026

Table of contents

• What is MTD for Income Tax and who must comply?
• When do quarterly updates start and what changes in 2026 and 2027?
• What goes into your first 90-day plan?
• How to set up MTD for Income Tax processes that scale
• How do you avoid penalties and errors?
• Join the partner programme
• FAQs on MTD for Income Tax

Key takeaways

• Sole traders and landlords with qualifying income above £50,000 must keep digital records and submit quarterly updates under Making Tax Digital for Income Tax (MTD for IT). The first quarterly deadline is 7 August 2026.
• The first 90 days are critical for finalising client onboarding, setting up Agent Services Account authorisations, reconciling transactions, and submitting the first quarterly update before the deadline.
• Scalable processes save time as thresholds drop. Standardising digital recordkeeping and creating reusable onboarding materials after the first quarter helps your practice handle each round more efficiently.
• A 12-month soft landing means no penalties for late quarterly updates in the first year, but Final Declarations and payments are not covered, so accurate, timely recordkeeping remains essential.

What is MTD for Income Tax and who must comply?

Making Tax Digital for Income Tax (MTD for IT) requires sole traders and landlords to keep digital records and submit quarterly updates to HMRC using compatible software, replacing the single annual Self Assessment return with four quarterly updates and a Final Declaration each year.

Compliance is based on qualifying income, which is the combined gross income from self-employment and property. According to HMRC, 864,000 sole traders and landlords are affected by the new rules. For example, a client earning £35,000 from self-employment and £20,000 from property income has qualifying income of £55,000, placing them above the current threshold.

Sole traders and landlords must comply based on their qualifying income, with thresholds reducing each year:

• April 2026: Qualifying income above £50,000
• April 2027: Qualifying income above £30,000
• April 2028: Qualifying income above £20,000

Qualifying income includes all gross income from self-employment and UK property before expenses or reliefs. Partnerships, companies, and trusts are not currently within scope. You can find HMRC's eligibility guidance for a full breakdown of who must comply.

When do quarterly updates start and what changes in 2026 and 2027?

A quarterly update is a digital summary of a client's business income and expenses for a standard 90-day period, submitted to HMRC through MTD-compatible software. Under MTD for IT, clients submit four quarterly updates per tax year, followed by a Final Declaration that confirms their annual tax position.

Quarterly updates are already underway for the 2026/27 tax year. The deadlines for each reporting period are:

• 6 April to 5 July 2026: Deadline of 7 August 2026
• 6 July to 5 October 2026: Deadline of 7 November 2026
• 6 October 2026 to 5 January 2027: Deadline of 7 February 2027
• 6 January to 5 April 2027: Deadline of 7 May 2027

The Final Declaration for the 2026/27 tax year is due by 31 January 2028. This is the same deadline as the traditional Self Assessment payment date, which means practices will need to manage both MTD Final Declarations and remaining Self Assessment returns for clients not yet mandated.

The 2026/27 tax year is likely to be particularly intense. Alongside four quarterly updates for MTD clients, you'll still need to file final Self Assessment returns for non-MTD clients by 31 January 2027. Planning your team's capacity across both workstreams now can help you avoid bottlenecks later in the year.

What goes into your first 90-day plan?

Under MTD for IT, 90 days is the length of each quarterly reporting period. Your clients need complete and accurate digital records for each period, stored in MTD-compatible software and ready for submission.

Between April and the beginning of August, you'll need to work with clients to ensure they're keeping compliant digital records and on track for the first deadline. The following phases outline how to keep your practice on track.

Days 1–30: Final client onboarding and authorisation

Most clients should already be using compatible software if they're mandated to join MTD for IT in 2026. However, you may still be onboarding the remaining few. The sooner you bring them onto compatible software, the more time you'll have for bank reconciliation and quarterly submission preparation.

Before you can submit quarterly updates on behalf of clients, you need to get their authorisation through your HMRC Agent Services Account (ASA). An ASA is the gateway that lets you manage MTD services for your clients. Once clients accept your authorisation request, you can connect your MTD-compatible software to HMRC and submit updates directly. Step-by-step guidance for getting client authorisations is available on the HMRC website.

Provide clients with a calendar of quarterly deadlines, and share any internal deadlines as early as possible. For example, you might set an internal deadline two weeks before the first submission is due, giving clients time to provide any remaining documents or records.

Days 1–90: Bank reconciliation, reminders, and drop-in sessions

Once your clients are using software to keep digital records, reconcile transactions regularly. Attending to bookkeeping tasks throughout the quarter gives you more time to prepare the first quarterly update. The first period ends on 5 July, just over a month before the deadline.

If you've kept on top of bank reconciliation, you should be ready to prepare the first quarterly updates in early July. This also gives you time to check in with clients on missing information, support your team with preparing submissions, and perform final checks before updates are submitted.

Throughout the first quarter, allocate time for team training and client drop-in sessions. In these sessions, you can address challenges proactively and prevent delays if clients or team members are still getting to grips with the new system.

Days 61–90: Quarterly updates and process review

You can submit quarterly updates for clients up to 10 working days before the update period ends, provided they don't have any further transactions for that period. Otherwise, quarterly submissions need to be finalised and sent in the last 30 days.

Once the first quarterly updates are submitted, go back to your team and clients to see what their experience was like. Ask about the processes they followed and whether there were any tools that might help in the next quarter. Track how long submissions took your team and whether anyone missed the deadline. You can use these data points as benchmarks for the next round of submissions.

How to set up MTD for Income Tax processes that scale

Your MTD processes need to work for multiple client types: small business owners who also have a property portfolio, part-time landlords, freelancers, and contractors. Building consistent processes now saves time as the thresholds drop and more clients come into scope.

Under MTD for IT, clients must keep digital records of all business income and expenses. This includes sales invoices, bank transactions, receipts for allowable expenses, and any adjustments. Records must be stored in MTD-compatible software or digitally linked spreadsheets, and retained for at least five years.

Here are some approaches that can help your processes scale across a growing client base.

• Use more than one method of communication to get the word out. When sending deadline reminders, that could mean scheduling emails, text messages, or sharing a digital calendar with due dates clients can view at any time.
• Create onboarding materials as your confidence grows. After the first quarter, you'll have a sense of which questions and concerns come up regularly, which means you can create guidance materials to help clear up confusion for future clients.
• Manage your team and assign tasks using practice management software. This makes it easier to keep on top of deadlines and figure out where to spend your time next, by centralising client information, jobs, and staff capacity.
• Choose MTD for Income Tax software that works for a variety of clients. Using different software for every client means juggling multiple subscriptions. With a single piece of software, you and your clients only need to become proficient in one system.
• Look for automation features in software. For example, software that lets clients connect their bank accounts so that transactions flow in automatically can save time on manual data entry and reduce errors.

How do you avoid penalties and errors?

HMRC uses a points-based penalty system for MTD for IT. Each late quarterly update adds one penalty point. Once you reach the threshold of four points, a £200 penalty is issued for that submission and for each further late submission until the points are reset.

For the first year of MTD for IT, a soft landing period applies to quarterly updates. During this period, no penalty points are issued for late quarterly submissions, giving practices and clients time to adjust. The soft landing does not extend to Final Declarations or payments, which will be penalised if they're late.

Even with the soft landing, getting your clients into good habits early is important. Regular digital recordkeeping throughout each quarter is the most effective way to avoid errors. When transactions flow into your software automatically and you reconcile them regularly, there's less risk of missing income or duplicating entries.

You can also reduce the risk of errors by reviewing quarterly submissions before they're sent. Check that income and expense categories are coded correctly and that bank reconciliation is complete. Make sure no transactions are missing. Using cloud-based software to store records and prepare submissions can help, because records flow directly into draft quarterly updates without manual re-entry.

Join the partner programme

MTD for IT is underway. You can make it easier for your team and clients by choosing MTD-compatible software designed to make tax filing fast and straightforward.

With Xero accounting software, you can create and submit compliant quarterly updates and Self Assessment returns with a single piece of software. Xero also supports MTD for VAT, which means you can handle a range of compliance tasks in one place.

There are extra products that can help make practice life easier too, like Xero Practice Manager for assigning tasks to staff and tracking productivity and progress, and Xero HQ, a secure portal for requesting information from clients.

Join the partner programme

FAQs on MTD for Income Tax

Here are some frequently asked questions about Making Tax Digital for Income Tax.

Who needs to follow MTD for Income Tax rules?

Sole traders and landlords whose qualifying income exceeds the threshold for the relevant tax year. If a client's income fluctuates around the threshold, the qualifying income in the tax year before the mandate date determines whether they must join. Clients who voluntarily signed up during the pilot are already subject to the new rules.

What do quarterly updates include?

Quarterly updates summarise total income and total expenses by category for the 90-day period. They do not require a full tax calculation or adjustments. If a client's records are incomplete at the period end, you can still submit and amend later before the Final Declaration.

Can I use spreadsheets for MTD for Income Tax?

You can use spreadsheets in combination with bridging software to meet MTD compliance rules and file quarterly updates. However, this means using multiple tools, and spreadsheet formulas can break, leaving clients vulnerable to data entry errors. Using a single piece of software for records and submissions keeps everything in one place and reduces risk.

How do agents sign up clients and get authorisation?

You need an Agent Services Account (ASA) with HMRC. Once created, you use the ASA to request authorisation from clients for MTD. The client accepts your request, and you can then sign them up for MTD for IT through HMRC's online service. Follow HMRC's sign-up steps for the full process.

What happens if a client is under the threshold or digitally exempt?

Clients with qualifying income below the current MTD for IT threshold do not need to follow MTD rules and can continue with Self Assessment. Clients who have applied for and received a digital exemption from HMRC are also not required to comply. The threshold reduces each year until April 2028, so clients currently below the limit may come into scope in future years.