For the UK accountancy firms, the “January crunch” is not something new. None of them signed up for it. Yet, everyone feels it. However, when you stare down the barrel of April 2026, you will see that seasonal stress evolving into a year-round reality. HMRC’s Making Tax Digital initiative has shifted the goalposts from a single annual submission to five mandatory submissions. Simply put, the compliance burden for UK accountancy firms is about to quintuple.
The increase in submissions has significantly fuelled capacity anxiety among UK accountancy firms. The headlines about “the great resignation” might have gotten too old for you to care, but the fact is that nearly 73% UK firms are still struggling to attract or retain talent. So, it is clear that “hiring” is not the solution to the impending crisis.
Why is Making Tax Digital for Income Tax a Resource Trap?
| Feature | Old Tax Assessment | MTD for ITSA |
|---|---|---|
| Submission Frequency | 1 Annual Return | 4 Quarterly Updates + 1 Final Submission |
| Record Keeping | Paper / Spreadsheet Allowed | Mandatory Digital Records |
| HMRC Penalty System | Initial £100 fine | Point-based system (£200 fine at threshold) |
| Data Accuracy | Year-end reconciliation | Real-time digital linking required |
Often, during our conversations with UK accountancy firm owners/partners, we hear, “Automation sounds wonderful, but I doubt if my clients will use it.” So, it is clear that not everyone is a fan of automation. However, the good news is that you do not need all your clients to be tech experts; you need a system that minimizes reliance on manual data entry. According to a recent study, nearly 31% of businesses reported spending less time on tax returns after switching to fully MTD-compliant software.
With seamless integration of bank feeds and OCR (Optical Character Recognition) tools, you can easily transform an MTD for ITSA nightmare into a seamless pipeline. The idea is to let the data flow into your systems every day, rather than the mad dash in January. The goal is “continuous accounting.” Automation can help your team with data handling for Making Tax Digital for Income Tax, enabling them to focus on technical adjustments that require human judgment.
While technology is a great enabler, it is not always enough. For mid-sized accountancy firms, the cost of managing the tech stack for MTD for ITSA can often exceed the profit margin on small property owner clients. This is why many mid-sized accountancy firms turn to outsourcing. By outsourcing Making Tax Digital for Income Tax, you are not simply “sending the work away.” You are creating a global back office that works while you sleep.
Several accounting firms have already confirmed they will help their clients adopt digital bookkeeping through hybrid delivery models. Partnering with an outsourcing service provider enables you to deliver a “fully managed” MTD for ITSA services without adding additional resources to your payroll. The offshore team takes care of the tedious reconciliations, while your in-house team focuses on strengthening client relationships and final sign-offs.
Every accounting firm in the UK will have at least a few “legacy clients.” These clients have been with you for decades and are least interested in any form of change. According to a study, nearly 26% of clients in the UK still rely on non-digital records. For these individuals, Making Tax Digital for Income Tax is not merely a change in the law; it will be a complete change in their lifestyle.
If you have such clients, do not wait until March to have such discussions. Start segmenting your database now by identifying clients who are “Cloud-ready,” who need “Bridging Software,” and who are in “high touch.” For the clients in the “high touch” bracket, you can leverage a “managed digital” service model, where they just have to send in their records over a secure portal, and your offshore team can digitize them. This will keep the client satisfied while ensuring you remain compliant with the Making Tax Digital for Income Tax rules.
Margin is often where most clients feel pressure. Several recent studies have also flagged recruitment and retention as their biggest operational risk. With rising salaries and severe staff shortages, mid-sized accounting firms are already operating on thin margins. Now, when you consider quarterly accounting in the absence of automation, standardized processes, and reimagined delivery models, per-client costs will skyrocket.
However, when you implement Making Tax Digital for Income Tax properly, you can not only improve your profitability, but also easily stabilise recurring revenue. So, the bigger problem for accountancy firms is not Making Tax Digital for Income Tax, it is delivering it inefficiently.
To make Making Tax Digital for Income Tax work in your favor, you do not need to do anything heroic. You need a well-thought-out architecture. For mid-sized accountancy firms, a scalable MTD for the ITSA model usually includes:
- Standardized digital onboarding
- Fixed quarterly review cycles
- Pre-agreed data submission cycles
- Clear division between bookkeeping, review, and sign-off
- Tiered service package
You also need to accept that not all work needs to be done in-house.
You can segment your process:
- Data capture
- Bookkeeping clean-up
- Quarterly review
- Submission
- Advisory overlay
Most of these steps can be automated, except for the review and advisory overlay, which demands high-level judgment. When you document and standardize these processes, your delivery becomes predictable, and predictable work can be easily scaled.
It’s 2026, and the firms with the most staff are not necessarily the ones that will thrive. Neither are they the ones with the most advanced technology ecosystem. Making Tax Digital for Income Tax is a huge change. At the same time, it is an opportunity for accountancy firms to optimize their processes, clean up internal processes, and position themselves as “compliance only”.
By harnessing the power of smart automation and smarter resource allocation, you can scale your firm without straining your team.
Ready to future-proof your accounting firm for MTD for ITSA? Write to us at marketing@datamaticsbpm.com, and we will have our experts audit your workflows and identify opportunities to improve efficiency ahead of the 2026 deadline.
When does Making Tax Digital for Income Tax become mandatory?
From 6 April 2026 for individuals earning over £50,000 from self-employment and/or property. The threshold reduces to £30,000 in April 2027.
Is MTD for ITSA the same as MTD for VAT?
No. While both are part of the broader digitalisation strategy, MTD for ITSA requires quarterly income and expense reporting, as well as an End-of-Period Statement.
Will all clients need quarterly submissions?
Only those above the initial qualifying thresholds, with further expansion expected in future phases
Is bridging software allowed?
Yes, if it meets HMRC’s functional compatibility requirements, but many firms prefer integrated bookkeeping platforms.
