Money Matters

Code red for MTD: Catching up if your practice is behind

MTD for Income Tax is live. But not every firm is in the same position, and the real challenges aren’t where most expected them to be.

Published 16 April, 202611 min read Share

MTD for Income Tax is now live.

If your accountancy practice is still finalising its approach, the priority is to close the operational gaps before quarterly reporting becomes part of day-to-day client work.

For accountants and bookkeepers, Making Tax Digital (MTD) for Income Tax is more than a software change.

It changes how work is organised, priced, and delivered across the year.

Conversations with practitioners over the past year, including at events run by ICAEW, ICB, and others, suggest that most firms have prepared in some way.

But readiness is uneven, and the practical challenges are not always where firms expected them to be.

If you are still working out where your firm stands, this article will help you identify what matters now, what cannot wait, and how to prioritise the catch-up work.

Key takeaways

• MTD for Income Tax is live, so practices that are still preparing need to move from education and testing into operational delivery.
• The first quarterly update deadline for clients above the £50,000 threshold falls on 7 August 2026.
• Technology readiness is only one part of MTD preparation. Firms also need clear workflows, client expectations, pricing, and responsibility terms.
• Quarterly reporting can create more frequent, ongoing work. If engagement terms and pricing do not reflect that work, margin pressure can build quietly.
• Practices that are behind should prioritise pricing and engagement terms, client expectations, client segmentation, and learning from the first quarterly submissions.

Here’s what we’ll cover:

Quick answer: what should a practice do if it is behind on MTD for Income Tax?

If your practice is behind on MTD for Income Tax, focus first on the changes that affect delivery and profitability:

• define responsibility,
• update pricing and engagement terms,
• set record-keeping expectations with clients,
• segment clients by readiness,
• and use the first quarterly submissions to identify process gaps.

Do not treat MTD as a software-only project.

The bigger challenge is moving from annual compliance work to a more continuous service model.

What is the MTD readiness model?

The MTD readiness model is a practical way to assess how prepared your practice is for MTD for Income Tax.

It looks at readiness as a progression, rather than a single moment of being ready.

The first quarterly update deadline falls on 7 August.

While work right now should focus on ensuring digital record-keeping processes are in place, this deadline means the window to prepare is not closed.

But it does need urgent, immediate attention.

Most firms move through a progression: from understanding the rules, to putting the right technology in place, to adapting how the practice operates day to day.

The four stages below offer a way to assess where your firm currently sits.

Many practices will sit somewhere between stages, but the model highlights the areas that may need attention.

Stage 1: awareness

At the earliest stage, the priority is understanding the fundamentals of MTD for Income Tax:

• following HMRC updates and timelines,
• learning how digital records will work,
• identifying which clients will be affected,
• and starting internal conversations about preparation.

Some firms are still here, and that is more understandable than it might appear.

 Detail in the final regulations only landed in late March, leaving little time to absorb the full picture before the start date.

Following HMRC guidance is not a one-off task. Expect the picture to keep developing.

But the timelines have been concrete for some time. For clients above the £50,000 threshold, the first quarterly deadline falls on 7 August 2026.

For those brought into scope from April 2027, the equivalent date is 7 August 2027.

Most practices will have clients across both groups, which means managing two timelines at the same time, not waiting on one distant deadline.

Awareness is only informational.

At this stage, it is unlikely you have fully considered the deeper changes MTD for Income Tax will make to the way you work with clients, or the way you price that work.

What this means for your practice

If your firm is still in the awareness stage, your immediate task is to turn knowledge into decisions.

That means identifying affected clients, confirming what records they need to keep digitally, and deciding who inside the practice owns each part of the process.

Stage 2: technology preparation

The next stage focuses on technology:

• selecting MTD-compatible accounting software,
• testing integrations and digital record systems,
• exploring tools that support quarterly submissions,
• and experimenting with digital bookkeeping workflows with clients.

For many firms, this stage feels like meaningful progress.

Choosing the right software and building the technical foundation is important work.

But as several practitioners pointed out at recent ICAEW and ICB events, technology decisions are often the easier part of the transition.

The harder challenges emerge when you start adapting your processes and client relationships.

For firms that are still at this stage now MTD is live, the priority is not careful testing.

It is getting to operational readiness before 7 August and ensuring the digital record-keeping rules are implemented for the practice and its clients.

What this means for your practice

If your software is selected but your workflows are not ready, focus on how work will actually move through the practice.

Decide how clients will send records, who checks them, when quarterly work will be scheduled, and how exceptions will be handled.

Stage 3: operational change

This is where MTD for Income Tax starts to reshape how your firm works, not just what tools you use, but how the practice operates between submissions.

Instead of focusing on software, you now confront the operational reality of a more continuous compliance model:

• designing quarterly reporting workflows,
• setting expectations for when and how clients provide records,
• onboarding clients to digital bookkeeping tools,
• and defining where the firm responsibility ends and the client responsibility begins.

This is also where a lot of friction appears, according to practitioners.

The challenge is rarely understanding the legislation. It comes down to practical questions:

• How regularly will clients provide information?
• How will internal workflows change?
• How will teams manage the increased rhythm of reporting across the year?

In other words, the focus shifts from technical readiness to operational readiness.

And that shift is where the economics start to change.

This is where many firms start to run into a different problem: the more continuous the work becomes, the harder it is to price using a model built around annual submissions.

There is another dimension to this that is easy to miss.

The more frequently a firm interacts with clients, the greater the opportunity to expand the practitioner role beyond accounting.

Quarterly touch points create opportunities for clients to ask about business decisions, technology problems, and personal financial anxieties that have nothing to do with the engagement.

Most practitioners absorb this work instinctively because there is no one else to do it.

But it is rarely scoped, rarely priced, and it can quietly consume capacity that digital MTD preparation is supposed to free up.

What this means for your practice

If your firm is in the operational change stage, the key question is whether your internal process, client communication, and pricing model all match the new rhythm of work.

If one part is missing, pressure will show up elsewhere.

Stage 4: continuous responsibility

The final stage represents something bigger than operational adjustment.

It is a structural shift in how your firm carries, and is compensated for, ongoing responsibility.

Under the traditional annual compliance model, the rhythm was familiar: you prepare clients, submit records, they review and file, you move on.

Work was annual and priced accordingly. MTD quarterly update requirements change that equation.

You now carry responsibility for client records on a rolling basis, whether or not you have priced for it.

This creates what you might call a visibility gap. Clients see the quarterly submissions.

What they do not see is the ongoing monitoring, record chasing, and quality assurance that sits behind them.

Firms absorb that work, and unless engagement terms and pricing reflect it, the result is margin erosion gradual enough that it is not obvious until it is already built into the way you operate.

The parallel is the SaaS transition that reshaped the software industry 15 to 20 years ago.

Annual licences gave way to recurring revenue, and the businesses that adapted their pricing and delivery models survived.

Those that did not adapt fell behind and became structurally unprofitable.

Firms that recognise this shift will rebuild around tiered pricing, retainer models, clear responsibility clauses, and regular review cycles tied to client behaviour.

Firms that do not will keep doing the work while slowly losing margin.

Some practices are already operating this way, particularly those that have embraced digital bookkeeping and regular client interaction.

They are doing continuous work.

They just have not always named it or priced for it. This stage gives that reality a frame.

Where is your firm today?

Going into the April start date, some firms were located between technology preparation and operational change. MTD being live does not close that gap automatically.

Many practices are still working through the implications of running a more continuous model, with the 7 August quarterly deadline providing the real forcing function.

The questions that keep coming up are revealing:

• how to get clients to maintain digital records consistently,
• how to manage quarterly workflows internally without overwhelming existing capacity,
• how to balance new workloads against current compliance commitments,
• and how to price services that are delivered more regularly throughout the year.

In most cases, the technology is ready.

The operating and commercial model is where the work remains.

How can your firm move forward if it is behind?

MTD for Income Tax is live, so if you think your firm is behind, the priority is closing the gap quickly and in the right order.

Do not try to fix everything at once.

Start with the decisions that affect everything else:

• how your firm prices the work,
• defines responsibility,
• sets client expectations,
• and manages the first live quarterly cycle.

Prioritise pricing and engagement terms first

If your firm has not updated its commercial terms to reflect continuous responsibility, this is the most urgent conversation.

Every week that passes with quarterly work being done under annual pricing is margin that is unlikely to be recovered.

Some firms are already moving to retainer-style pricing and behaviour linked review clauses.

The ones that wait will find the conversation harder once the work is already being done for free.

Set expectations with clients now

Establishing a rhythm for how and when clients provide records cannot wait for the next engagement review.

For clients already in scope, that conversation needs to happen immediately.

For those coming into scope in 2027, you still have time to establish the right pattern before obligation arrives.

Segment clients by readiness and urgency

Some clients are already using digital systems and will transition smoothly. Others will need significant support.

With the 7 August deadline approaching, trying to move everyone at once is a route to bottlenecks.

Prioritise clients above the £50,000 threshold first, and use what you learn to prepare for the second cohort.

Use the first quarterly submissions as a calibration exercise.

The window for low-stakes testing has closed, but the first round of live quarterly updates will reveal process gaps before they become embedded.

Treat it as a structured learning exercise.

Common mistakes to avoid when catching up on MTD

• Treating MTD as a software project only, rather than an operational and commercial change.
• Waiting until the first quarterly deadline to set record-keeping expectations with affected clients.
• Doing continuous quarterly work under annual pricing without reviewing engagement terms.
• Trying to move every client at the same pace instead of segmenting by readiness and urgency.
• Assuming the first live submissions will run smoothly without using them to identify and fix process gaps.

Final thoughts: making the real transition

Navigating MTD smoothly might not be about having the latest software.

It is more about recognising how MTD for Income Tax changes the economic relationship between practice and client.

Annual compliance was annual and bounded.

Quarterly reporting is continuous. And continuous work, delivered without continuous pricing, is a business model problem, not a technology problem.

You may understand the rules behind MTD for Income Tax.

The harder question is whether your firm is ready for what those rules do to the way you operate and how you get paid.

Next step

If you are already thinking about how this affects your firm, the next step is to look directly at how MTD changes your pricing model.

Read next: Why MTD for Income Tax breaks your pricing model

Frequently asked questions on if your practice is behind on MTD for Income Tax

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