What Making Tax Digital means for accountants and bookkeepers

Published Thursday 2 October 2025

Table of contents

• How Making Tax Digital transforms your practice and benefits your clients
• Key MTD deadlines to prepare for
• Making Tax Digital for Income Tax
• Making Tax Digital for VAT
• Get your practice ready for Making Tax Digital
• FAQs on Making Tax Digital

Key takeaways

• Implement HMRC-recognised MTD software and establish an Agent Services Account to manage client VAT and IT submission.
• Prepare clients for the Income Tax rollout by identifying those earning over £50,000 (April 2026) or £30,000 (April 2027) and helping them transition to digital record keeping before mandatory deadlines.
• Leverage MTD compliance as an opportunity to modernise your practice operations, improve client relationships through real-time collaboration, and provide more proactive advisory services based on up-to-date financial data.

How Making Tax Digital transforms your practice and benefits your clients

Making Tax Digital (MTD) represents a shift from traditional compliance to digital advisory services. As your clients transition to digital tax submissions, your practice can leverage this change to deliver more valuable services. Some key impacts and requirements to adopt in your practice include:

• Software implementation: Use HMRC-recognised software for all VAT submissions and prepare for Income Tax deadlines.
• Agent services: Set up one HMRC Agent Services Account to manage all clients across both VAT and Income Tax.
• Client enrolment: While VAT-registered clients are automatically enrolled, you'll need to separately enroll qualifying clients for MTD for Income Tax.

Business benefits:

• Enhanced advisory services: Automated compliance frees time for strategic advice (45% of businesses value their advisor more since MTD).
• Improved accuracy: Digital systems reduce errors by automating tasks and minimising manual data entry.
• Real-time collaboration: Work with live financial data rather than periodic updates.
• Data-driven insights: Provide proactive advice based on current financial information.

Key MTD deadlines to prepare for

Keep your clients compliant by tracking these Making Tax Digital rollout dates:

• April 2022 - now: Making Tax Digital for VAT extended to all VAT-registered businesses, including those with turnover below £85,000, as of April 2022. All qualifying businesses are now automatically enrolled after registering for VAT.
• April 2026: MTD for Income Tax (MTD for IT) will apply to self-employed individuals and landlords with a total business or property income above £50,000 per year, affecting an estimated 780,000 self-employed individuals and landlords in its first phase.
• April 2027: MTD for IT will be extended to those with a total business or property income above £30,000 per year.
• April 2028: MTD for IT will be extended to those with a total business or property income above £20,000 per year.

Making Tax Digital for Income Tax

MTD for Income Tax will transform how sole traders and landlords report their earnings to HMRC. Here's what you need to know about implementation timelines, affected clients, and how to prepare your practice.

How to set up your accounting or bookkeeping practice for MTD for IT:

Making Tax Digital for Income Tax starts in April 2026 for sole traders and landlords earning over £50,000 a year.

Prepare your practice for MTD for Income Tax with these essential steps:

• Client identification: Review your client base to identify which sole traders and landlords earn over £50,000 or £30,000 annually, create a prioritised list based on income thresholds, and schedule personalised consultations to discuss their MTD for IT requirements.
• Choose the right software: Select HMRC-recognised software that's cloud-based, user-friendly, and integrates with bank feeds and business tools to help your clients beyond just MTD compliance.
• Early adoption: Help clients start digital record keeping now by setting up quarterly check-ins, providing training sessions on receipt capture, and establishing consistent bookkeeping routines as soon as possible.
• Sign up planning: Create a staggered timeline for signing up affected clients based on upcoming deadlines. Prepare their business information and UTR numbers in advance, and schedule dedicated time to complete sign ups at least three months before April 2026.
• Team education: Ensure your entire practice team understands MTD for IT requirements by attending Xero and HMRC webinars, completing software certification courses, and establishing internal knowledge-sharing sessions to keep everyone updated on quarterly filing processes and deadlines.

Which of my clients will be affected by MTD for IT?

MTD for Income Tax will roll out in a phased approach based on annual turnover.

• April 2026: Landlords, and sole traders with income over £50,000
• April 2027: Landlords, and sole traders with income over £30,000
• April 2028: Landlords, and sole traders with income over £20,000 will be included.

Trusts, estates, and non-residential companies are not required to comply with MTD for IT at this time, though this could change as the rules roll out.

When do my clients need to sign up to MTD for IT?

Sole traders and landlords with gross income above £50,000 must be signed up by April 2026. Some businesses can voluntarily sign up to MTD for IT now. Check the criteria for voluntary registration here.

How do I sign my client up for MTD for IT?

First off, make sure you have:

• your Agent Services Account
• MTD for IT compatible software

Sign your client up using compatible software. They must already be registered for Self Assessment. It’s important to note that clients who meet the criteria for both MTD for VAT and MTD for IT must register for both taxes separately.

Read HMRC's guide to signing up for Making Tax Digital for Income Tax.

How to help make sure your clients are compliant with MTD for IT

Clients will need to use MTD-compatible software in order to submit their tax returns. Make sure you confirm that they have this software in place before signing them up to MTD for IT.

Making Tax Digital for VAT

Making Tax Digital for VAT is mandatory for all VAT-registered businesses. Learn who must comply and how to support your clients with MTD for VAT compliance, from authorisation and setup to submitting returns as an agent.

Who is affected by MTD for VAT?

All VAT-registered businesses must follow Making Tax Digital rules, regardless of turnover. This includes limited companies, partnerships, sole traders and charities.

Only businesses with specific HMRC exemptions do not need to follow Making Tax Digital rules.

How do I authorise a client for MTD for VAT?

Authorise clients for MTD for VAT through your HMRC Agent Services Account in three steps:

1. Generate link: Select 'ask a client to authorise you' in your agent account
2. Send to client: Share the authorisation link with your client immediately
3. Ensure completion: Client must complete authorisation before the link expires

Find out more on the gov.uk website.

How do I submit my client's VAT return as an agent?

Once your client authorises you as their agent, you can use Making Tax Digital compatible software, such as Xero, to submit their VAT returns directly to HMRC. If you're having trouble locating this feature, your software provider can guide you through the specific steps.

How to help your clients stay compliant with MTD for VAT

HMRC has introduced a penalty system from January 2023. Make sure your clients remain compliant. Ensure your clients are using HMRC-recognised or bridging software that meets the MTD requirements.

Get your practice ready for Making Tax Digital

MTD for Income Tax transforms how you deliver value to clients. By implementing digital tools early, you can streamline compliance processes, provide real-time financial insights, and position your practice as a proactive advisor rather than just a compliance service. Preparing clients well before deadlines creates a smoother transition and strengthens your relationship as their trusted partner.

For comprehensive MTD resources and updates, visit our hub for accountants and bookkeepers.

Frequently asked questions about Making Tax Digital for VAT and Income Tax

Here are answers to common questions about Making Tax Digital for accountants and bookkeepers.

How much does Making Tax Digital software cost?

The cost of Making Tax Digital software depends on the provider. Many, including Xero, offer monthly plans with different features. Xero includes invoicing, expense tracking, and reporting.

Can my clients continue using spreadsheets?

If your clients use spreadsheets, they can stay compliant with Making Tax Digital by using bridging software that connects their spreadsheets to HMRC. However, using accounting software is easier and less likely to cause errors, and provides more features for staying on top of finances. Read our guide to learn about bridging software, digital links, and how to avoid common problems.

What's the difference between MTD-compatible and bridging software?

Making Tax Digital compatible software is a full accounting solution that keeps digital records and submits returns to HMRC. Bridging software connects spreadsheets or other non-compatible tools to HMRC for submitting information.

Can I manage multiple clients through one MTD software solution?

Yes, you can manage multiple clients through one Making Tax Digital software solution, like Xero. You can switch between client accounts, manage compliance, and work with them in real time.

What happens if my client misses an MTD deadline?

HMRC uses a penalty point system for late submissions and payments. If your client misses a deadline, they get a penalty point. If they collect enough points, they get a financial penalty. Help your clients meet deadlines to avoid charges.