Strategy, Legal & Operations

MTD for Income Tax: The biggest shift in 25 years—driven by HMRC, shaped by accountants and bookkeepers

Discover insights from Accountex London 2025 about how Making Tax Digital for Income Tax changes are unfolding and what they mean for accountants and bookkeepers.

Making Tax Digital (MTD) for Income Tax is the start of something much bigger: a long-term transformation of how tax works in the UK—and the biggest shift for accountants and bookkeepers in 25 years. It’s a change that will shape the future of your practice.

MTD for VAT is already compulsory for most VAT-registered businesses. Now, with MTD for Income Tax mandation approaching for sole traders and landlords, we can see HMRC laying out its broader digital vision—driven by pre-populated tax returns, real-time data matching, and AI-supported compliance.

In this article, we’ll share insights from Accountex London 2025 about how these changes are unfolding—and what they mean for accountants and bookkeepers.

The message is clear: adapting to MTD for Income Tax today will prepare you for what comes next in HMRC’s wider transformation.

Here’s what we cover:

Why MTD for Income Tax is a foundation for change

MTD for Income Tax is about much more than replacing paper with digital forms.

MTD for Income Tax introduces structure to data—capturing income and expenses in real time, in formats that HMRC can process, verify, and eventually automate.

Jonathan Athow, director general for Customer Strategy and Tax Design at HMRC and advisor to ministers on UK tax policy, describes MTD for Income Tax as a major building block in a more efficient and less intrusive tax system.

Rather than relying on reactive year-end filings, HMRC wants a future where the tax system works quietly in the background.

“We want to design out the need for people to contact us at all.”

Jonathan Athow, HMRC

Regular digital updates create a foundation of structured data that allows HMRC to move beyond tax return-based workflows.

For accountants and bookkeepers, your job is to maintain continuous data quality throughout the year.

“Quarterly updates aren’t tax returns—they’re unadjusted snapshots of income and expenditure that build a behavioural foundation for better record-keeping,” explains Craig Ogilvie, HMRC’s director of Making Tax Digital.

“Quarterly updates let us provide better tax estimates using HMRC-held data and help nudge taxpayers where action is needed.”

Craig Ogilvie, director, Making Tax Digital, HMRC

HMRC’s vision: From tax returns to real-time automation

HMRC’s long-term goal is bold but clear: a future where tax just happens.

For millions of salaried workers, that’s already reality via PAYE.

But for sole traders, landlords, and company directors, the tax system has relied on manual inputs, uploads, and corrections.

So, what’s next?

HMRC is building a more intelligent, automated infrastructure that blends third-party data, machine learning, and real-time APIs to remove friction and reduce the need for intervention.

“We already match about 80% of the third-party records we get. But the goal is to remove manual transcription entirely.” 

Jonathan Athow, HMRC

Here’s what that vision looks like in action:

• Pre-populated returns: data from banks, merchant acquirers, and payroll systems flows directly into returns, reducing errors and admin.

• Real-time risk detection: AI models scan for anomalies, flag inconsistencies, and free up staff to focus where they’re most needed.

• API-led data access: instead of uploading PDFs or forms, HMRC pulls live, structured data directly from software.

• Digital assistants and integrated guidance: swift resolution of questions without the need for call centres.

HMRC doesn’t want to watch or penalise you—it wants you to be more productive and quicker in completing your tax—less friction, fewer errors, and better outcomes for compliant businesses.

The UK’s take on e-invoicing: A different path, with big implications

E-invoicing is fast becoming a global norm. Countries like Italy and Spain already require invoices to be submitted to tax authorities in real time to help auto-populate VAT returns and reduce fraud.

But the UK might be taking a different route—one that’s less centralised, more flexible, and designed to reduce the burden on small businesses.

“We’re more likely to use a decentralised model, where software providers or other third parties hold the data, and HMRC can access it when needed via APIs. That’s more manageable for us—and less burdensome for businesses.”

Jonathan Athow, HMRC

Instead of mandating invoice uploads to government portals, HMRC would integrate quietly into existing software, allowing tools like Sage Accounting to become the connection point between your business data and the tax system.

Why this matters:

• Late payment risk could reduce: e-invoicing opens the door to automated payment reminders, invoice tracking, and verified receipt—all of which support stronger cash flow.

• VAT processes could evolve: structured invoice data means HMRC can cross-check VAT submissions in near real time, potentially reducing the need for corrections and audits.

• Digital systems will become the norm: businesses still relying on manual processes or spreadsheets will struggle to comply or benefit from these changes.

Your role as an adviser:

• Help clients choose the right invoicing tools now—before requirements become stricter.
• Educate them on the link between e-invoicing, VAT accuracy, and cash flow health.
• Stay informed on how Sage and other software providers are enabling API-ready compliance.

Bottom line: e-invoicing isn’t mandatory yet—but it’s on HMRC’s roadmap.

The firms helping clients adopt digital workflows now will be ready when it is.

Why accountants and bookkeepers are central to this shift

“Tax just happening” doesn’t mean tax without accountants and bookkeepers.

On the contrary, you’re critical to making it possible.

You’ll be:

• Helping clients adopt digital tools
• Ensuring clean, structured data
• Navigating emerging rules and guidance
• Adding value where automation can’t

MTD for Income Tax is the first step—laying the groundwork for the systems, behaviours, and integrations to make tax “just happen”.

“We’re already doing some of this. But full automation depends on structured data, new tech, and buy-in from the accounting profession.”

Jonathan Athow, HMRC

The future HMRC outlines is a direction of travel, with MTD for Income Tax as the first real-world implementation.

Here’s what accountants and bookkeepers need to take away:

Quarterly updates = behavioural shift

MTD for Income Tax is a mechanism to get clients working digitally and make real-time updates a habit.

That behavioural change will support everything else: pre-population, risk reduction, and thoughtful planning.

Your software matters more than ever

With HMRC moving toward third-party data access and API-connected systems, your clients’ tools will shape their experience—and yours.

Clients using spreadsheets or manual methods won’t benefit from automation, but those on cloud platforms will.

The advisor role is evolving

As compliance becomes more automated, your value shifts.

You’ll still need to review, explain, and in many cases correct HMRC’s assumptions—but increasingly, your work will focus on:

• Interpreting data
• Spotting edge cases
• Coaching clients through digital change
• Defending them when HMRC gets it wrong

Navigating systems and HMRC processes will be just as important as your technical tax knowledge.

“Good advice helps people get their tax right… It’s valuable for complex affairs, vulnerable customers, and those confused by digital systems.”

Jonathan Athow, HMRC

Accountants and bookkeepers who lean into this change—rather than resist it—are best placed to lead.

Wait for HMRC to perfect its systems before you act, and you’ll miss the opportunity.

“Quarterly updates will give us so much more information to give our clients the best advice. It’s not just compliance—it’s about spotting issues like VAT thresholds early and being proactive.”

Carianne Pope, Pope Accountancy

How to prepare your practice now

Don’t won’t wait for HMRC to finish setting up—use MTD for Income Tax as a catalyst to modernise.

“We’re shaping the system with you. Accountants have a real voice in what comes next.”

Jonathan Athow, HMRC

1. Embrace MTD for what it really is

MTD for Income Tax is your entry point into building a practice built on clean data, real-time updates, and better decision-making.

“MTD is the foundation that lets everything else work—pre-population, APIs, automation.”

Jonathan Athow, HMRC

Adopt MTD for Income Tax as a behavioural shift—not a filing obligation—and be better positioned for the future.

Use this transformative period to:

• Automate manual workflows
• Set up repeatable check-ins with clients
• Build reporting habits that drive better planning

“It’s about opening up the conversation with clients and telling them it’s coming. We have to prepare for it—and that starts by making sure they’re aware and up to date with what’s going on.”

Carianne Pope, Pope Accountancy

2. Segment your client base

Work out who’s digital-ready, who needs guidance, and who’s likely to resist. Onboarding is easier when you know where clients are in their journey.

“Some customers need hand-holding; others are already digital. The support needs are very different.”

Jonathan Athow, HMRC

Segmentation could support better tooling, smoother workflows, and more tailored communication. You might want to divide customers in this way:

• Digital-ready: on cloud software, open to automation
• On the fence: open to tech, but needs guidance and training
• At risk: resistant or reliant on manual records

Create onboarding journeys for each group—this helps you prioritise your time and increase adoption success.

“I started by tagging clients by income threshold—who’s over £50k, who’s not—so I could plan those conversations. Now we’re tailoring messaging and using Sage tools to monitor who’s ready, who needs more help, and who’s likely to resist.”

Carianne Pope, Pope Accountancy

3. Reassess your services and pricing

With HMRC automating the basics, your value shifts to interpretation, planning, and advice. It’s time to rethink your bundles.

“Good advice really helps people get their tax right… and that’s where accountants are vital.”

Jonathan Athow, HMRC

Think tiered services: basic compliance + insights → strategic advisory. This aligns your pricing with where clients truly see value.

• Introduce advisory tiers (e.g., MTD For Income Tax-only, MTD for Income Tax + monthly insights, full-year planning)
• Build pricing models around client outcomes, not hours
• Create service bundles that combine compliance with proactive coaching

4. Talk to your software partners

The tools you choose now shape your readiness for API-led workflows and real-time compliance.

“HMRC won’t build everything—we rely on software partners to create those connections.”

Jonathan Athow, HMRC

If your provider isn’t prioritising integration, automation, or UX, push them—or consider alternatives.

Ask the right questions:

• Are you building toward HMRC’s API and data access roadmap?
• How are you supporting pre-population and AI insight layers?
• What tools do you provide for digital nudges, alerts, and collaboration?
• Do you have tools that match our future, not just our present?

“Don’t wait for the perfect system—get involved now. If you wait too long, you’ll miss the chance to influence the system and prepare your team in the real world, with real support.”

Craig Ogilvie, HMRC

5. Stay plugged into guidance changes

HMRC is investing in more digital help and targeted support—but it won’t all arrive at once.

“We know there’s a gap in clarity. We’re working on better guidance, more dynamic support, and getting information out faster.”

Jonathan Athow, HMRC

In the meantime, stay informed. Sign up for updates, join webinars, and share feedback with HMRC where needed.

• Sign up for consultation updates and working groups
• Join beta programmes (like the MTD for Income Tax pilot)
• Don’t wait for perfect clarity—test and adapt ahead of time

“You’ll get access to HMRC’s best support teams—no wait times, direct help lines—if you join the MTD pilot. We want testing firms to shape the system with us, not just comply with it.”

Craig Ogilvie, HMRC

Final thoughts

HMRC’s vision is accelerating, but transformation doesn’t happen through policy alone. It happens through the choices accountants and bookkeepers make now.

You’re not adapting to change. You’re shaping it.

The move to MTD for Income Tax is your signal to go beyond compliance.

It’s a chance to modernise workflows, rebalance advisory versus admin, and lead clients into a smarter, more seamless tax experience.

“MTD is just the beginning. The real goal is a simpler, smarter tax experience—for clients and firms alike.”

Jonathan Athow, HMRC

• Start testing software tools to stay ahead of the curve
• Visit our MTD for accountants hub page for advice and guidance