The spring of 2026 will bring a generational shift for the UK accountancy firms, as Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) becomes a legal mandate from 6 April 2026. Unlike many earlier updates from HMRC, the Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will holistically change the way millions of sole traders, self-employed individuals, and property owners in the UK report their income. Taxpayers familiar with the January deadline for self-assessment will no longer have to endure sleepless nights, as the entire system will be dismantled and replaced by a system of continuous, digital tax reporting.
The transformation will be incremental in nature, with the first mandate applying only to unincorporated businesses and property owners with an annual income of £50,000 or less. A year later, starting from April 2027, the upper threshold will be brought down to include those earning above £30,000. In a similar manner, it will later be extended to include general partnerships, although we have yet to receive a specific date for this extension.
The entire shift away from the traditional tax system will have a massive impact on the UK’s small businesses and, by extension, their client base. For the UK accountancy firm, to survive and thrive in this period, it will have to re-engineer its digital accounting services, forge new partnerships to withstand the overall business impact, and build a resilient, high-value future. However, for that to happen, you must begin preparation today. In this blog, we will cover everything that you need to know about the new digital mandate to help you get ready for a new digital era that is upon us.
The Non-Negotiables in the New Digital Era
With Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), HMRC has made it clear to every taxpayer that manual and paper-based tax returns have no place in their vision for the future. Every taxable business and individual that falls within the mandated scope is required to comply with the new digital record-keeping requirements and must make tax submissions using HMRC’s list of compatible, approved software. Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is about introducing new, stringent tax compliance guidelines; it also lays the foundation for more transparent, real-time, and accurate reporting for clients and regulators alike.
Key Points of Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA):
- Mandatory Digital Record-Keeping – HMRC has clearly stated that manual and paper-based record keeping will no longer be accepted unless it is embedded in their list of compliant digital accounting software.
- Annual reporting for income tax self-assessment (ITSA) will replace the traditional quarterly digital submissions. The deadlines are strict:
- For the period 6 April to 5 July: Deadline 5 August
- For the period 6 July to 5 October: Deadline 5 November
- For the period 6 October to 5 January: Deadline 5 February
- For the period 6 January to 5 April: Deadline 5 May Final tax declarations must align with year-end tax reporting, providing an up-to-date and accurate representation of income throughout the year.
- End of Period Statement (EOPS): Once the final quarterly update has been submitted, every property owner or business must submit an EOPS for each of their entities. This End of Period Statement will be your final accounting and tax adjustments, such as calculating private use adjustments, claiming capital allowances, and accounting for stock. The EOPS will finalize the taxable profit or loss for that specific income source for the tax year. The deadline is 31 January of the following tax year.
Opportunities for Accountancy Firms
HMRC’s Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) push is as much about compliance as it is about giving accountancy firms new growth opportunities. Here are some opportunities that accountancy firms in the UK can capitalize on.
By offering quarterly digital updates, UK accountancy firms can expand their advisory services by offering cash flow analysis, real-time tax planning, and strategic advice based on accurate quarterly data. This expansion into digital advisory services will help them forge proactive financial partnerships and strengthen client retention compared to the traditional year-end compliance advisory.
Many businesses and individuals, particularly sole traders, self-employed professionals, and small property owners, will need to be educated on the impending changes to stay compliant with the new Making Tax Digital mandates. Accountancy firms can educate their clients by offering webinars, tailored training sessions, or one-on-one support. You can also offer MTD guides or software tutorials to establish your firm’s position as a trusted partner, fostering long-term client loyalty.
To truly thrive in the digital accounting era, accountancy firms in the UK will need compatible, intuitive, and reliable cloud-based software. The MTD mandate from HMRC requires accountancy firms to use recognised digital accounting solutions for both record keeping and submission. As an accountancy firm, you must audit your current technology suite for tax and general practice.
You must ensure that your technology ecosystem is compatible with quarterly ITSA requirements, end-of-year statements, and real-time error checking. If you do not already have compliant software, you can select software from HMRC’s prescribed list available online. The software you are using for record keeping and tax preparation must be a cloud-based solution for maximum compatibility and data security.
Leveraging these cloud-based accounting software solutions, you can encourage seamless collaboration, client access, and remote work integration. The internal teams and stakeholders must receive proper training and instructions on the new systems, processes, and cloud software in advance to avoid any last-minute rush. You must harness the power of smart, intelligent software to improve efficiency, deliver insight-led client service, and offer actionable financial insights.
With the increasing focus on making tax compliance and filing digital, accountancy firms will find themselves leveraging the power of advanced automation to streamline their repetitive accounting work. As a result, they will be able to regain their focus on delivering strategic advisory services.
In addition to delivering regular accounting services, accountancy firms in the UK will also evolve into digitally enabled financial advisors for their clients, offering strategic data analytics based on real-time financial snapshots. Many accountancy firms will also start offering proactive, year-round tax planning, especially for self-employed and property owner clients with fluctuating incomes.
Furthermore, there will also be an increased focus on digital record-keeping and offering workflow “health checks” for tax purposes. In the new digital era, accountancy firms that successfully embed advisory services with compliance will be the ones that lead the industry into the future. If you are looking to get your practice ready for HMRC’s Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) but don’t know where to start, write in to us at marketing@datamaticsbpm.com and we will have our UK tax experts reach out to you with accounting solutions suited to your practice.
When does MTD for Income Tax Self-Assessment start?
MTD ITSA begins on 6 April 2026 for individuals with combined self-employment and property income over £50,000, extending to £30,000 in April 2027 and £20,000 in April 2028.
What will change under MTD ITSA?
Taxpayers must keep digital records and submit quarterly updates to HMRC using approved cloud-based software, followed by a final digital declaration each January.
Can clients still use spreadsheets?
Yes—if connected to HMRC through bridging software. However, cloud-based accounting software is recommended for smoother compliance and efficiency.
