Strategy, Legal & Operations

MTD for Income Tax: How to switch your practice from Self Assessment

Practices have until the end of the decade to transition largely from Self Assessment clients, to MTD for Income Tax. This is a profound change, as we explore in this article.

Published 15 October, 202612 min read Share

Switching your practice from Self Assessment to Making Tax Digital (MTD) for Income Tax means moving from one annual tax return to year-round digital records, quarterly updates, and a digital tax return, for every client above the MTD threshold. Because the threshold falls from £50,000 to £30,000 in April 2027 and £20,000 in April 2028, most practices will run both systems side by side for several years.

Key takeaways

• MTD for Income Tax makes tax a continuous, year-round process rather than a year-end project.
• Practices will run Self Assessment and MTD side by side until at least April 2028, as the threshold falls to £30,000 and then £20,000.
• Support clients in the way they prefer to work: do it for me, do it with me, or show me.
• Build a digital record-keeping stack that suits each client. Suitable spreadsheets used with compatible bridging software can remain a compliant option.
• Client management software and agentic AI can take on routine admin, so your team can focus on reviewing data and advising clients.

The era of MTD for Income Tax is upon us. But Self Assessment isn’t going away anytime soon.

The goal moving forward for practices is to find a way to support all sole traders and landlords, regardless of which HM Revenue and Customs (HMRC) path they’re following—while also supporting client growth.

Practices need to find a way to somehow deliver what clients require: from a light touch, collaborative approach for those more confident in business finances, to a full-service offering for those who have traditionally relied heavily upon their accountant. Even in the MTD era, the latter is still entirely possible—and still desired by some clients, of course.

This article explains how to provide that support.

Here’s what this article discusses:

How should you redesign your practice workflows for MTD for Income Tax?

Redesign your workflows to be digital-first and continuous: MTD for Income Tax turns tax from a year-end project into a year-round process. The change is technology-driven.

Not only is the clue right there in the title with MTD—it’s about digitalising tax, after all—but applied and smart use of technology is the only way accountants and bookkeepers are going to get through without serious stress.

This means deploying the right software and going digital-first to transition from Self Assessment to MTD as the decade progresses—and as the April 2027 and April 2028 milestones approach (and possibly beyond).

To identify which clients are in scope, check each client’s Self Assessment position and their combined gross income from self-employment and property, before expenses, on the relevant earlier return: more than £50,000 on the 2024/25 return for April 2026, more than £30,000 on the 2025/26 return for April 2027, and more than £20,000 on the 2026/27 return for April 2028. Then check whether any exemptions apply.

Meanwhile, as an accountant, you’ll also have to help many of your clients along the same journey. Their success is your success. Their growth is your growth.

Your overarching digital strategy needs to be able to deliver for the “do-it-with-me” clients, who need a partner, and a full service “do-it-for-me” approach for clients who need that, too.

Others will prefer support based on “show me”, in which you’ll offer them guidance but, essentially, they’ll do the majority of work themselves.

Most practices will need to offer all three:

Support model	Who it suits	What you provide
Do it for me	Clients who have always relied on their accountant	A full service: you maintain records and submit quarterly updates. For the annual return, as main agent you check it, share it with the client, and get their written confirmation before you submit it
Do it with me	Clients who want a partner	Shared software and regular collaboration through the year
Show me	Clients confident with their finances	Guidance and checks, while they do most of the work themselves

To price each model, read Pricing for MTD: How to charge more, and prove it’s worth it.

You need to support MTD’s quarterly check-ins, bearing in mind these can (and maybe should) be more frequent if clients desire it. You need to support the MTD tax return, as well as traditional yearly tax return checkpoints for Self Assessment happening at the same time. All while meeting ongoing quarterly and monthly VAT deadlines, of course.

The fundamental truth is this: MTD for Income Tax shifts accountancy to a continuous process rather than one that leads up to the final end of year calculations. This is a monumental shift, and it needs to form the basis of any changes.

Here’s how the two systems compare:

	Self Assessment	MTD for Income Tax
Who it applies to	Sole traders and landlords below the MTD threshold, and other Self Assessment taxpayers	Individuals in Self Assessment whose combined gross self-employment and property income on the relevant earlier return is more than £50,000 (from April 2026), £30,000 (from April 2027), or £20,000 (from April 2028), unless exempt
Records	Can be kept on paper or spreadsheets	Must be kept digitally in MTD-compatible software, with digital links
Submissions	One tax return a year	Four quarterly updates, plus a digital tax return
Deadlines	31 January after the tax year	Quarterly updates by 7 August, 7 November, 7 February, and 7 May; tax return by 31 January
Practice workflow	Work peaks before 31 January	Continuous, with a checkpoint every quarter

For the quarterly process, read MTD quarterly updates: A practice guide for accountants and bookkeepers.

Whatever support your clients require, you should already be redesigning your own procedures and workflows, your data processing, and the way you interact with your clients to make them all digital-first.

How can technology cut reconciliation work under MTD?

Technology can cut reconciliation work by suggesting matches and flagging exceptions, although your team still needs to reconcile, check for missing information, confirm tax categories, and review the results.

Technology increasingly allows for light-touch reconciliations.

Whereas under the old systems, you would typically review and match every item manually, many matches can now be suggested automatically for your team to check.

This is particularly true for your clients whose businesses include high transaction volumes and those who produce simple, clear, consistent data. It works well for data sets such as bank account and credit card statements.

While technology suggests matches for many transactions, your teams still review them, and look out for exceptions and anything that might raise a red flag.

However, agentic AI, such as Sage Copilot, can even handle this element.

It’s worth adding, though, that light-touch reconciliations require high-quality, accurately collated data—via technology that can easily and correctly identify these anomalies. Human review remains essential.

The decades-old mantra of technology has always been “garbage in, garbage out”, and so it’s essential that your clients record and submit data correctly.

Direct bank feeds from clients can help here, by importing transactions as timely digital records, as can data capture tools like AutoEntry, which can read receipts or bills and pass the data to you for processing. These tools import, suggest, or flag information. They don’t replace reconciliation, checks for missing information, or a review of tax categories.

You can use technology like this to help automate processes and reduce the chance of manual data entry errors that can occur when human beings have to copy from one statement or spreadsheet to another.

You can then set up this software to suggest categories for the various items that pop up on a bank feed, for your team to check, for your HMRC submissions and interactions.

For instance, you’ll need to strip out your clients’ non-taxable income and any personal expenditure they might have. You should also adjust any items of income that are net of fees, commissions, or charges before doing clients’ tax returns to ensure that you’re declaring gross income but then netting off these expenses.

What is a digital record-keeping stack, and why do you need one?

A digital record-keeping stack is a set of integrated tools that captures client income and expenditure digitally and carries it through to quarterly updates and the final tax return, with no rekeying.

The fundamentals are that you need to build an end-to-end digital record keeping stack.

If you’ve already got one in place, you’ll need to ensure not only that it’s fit for purpose in the age of MTD, but that it’s allowing your practice to run at optimal efficiency. There simply isn’t likely to be any spare human capacity.

This end-to-end digital outlook is important. It’s one step beyond traditional, stand-alone technologies, and the end of processes to which paperwork is fundamental.

Instead, you’ll need to ensure that you’ve got technologies in place that are integrated with each other. This means that they can work together as a single system to manage and process your digital records and those of your clients efficiently and in ways that comply with regulations and cybersecurity protocols. Digital linking is as important as it ever was!

As a result, client income and expenditure can be recorded fully digitally, from the start to the finish.

Your technology stack should ensure that these records of income and outgoings are automatically ingested into quarterly updates before going through to the final year end declaration.

You’ll need to ensure that this happens automatically and seamlessly. Manually typing in figures and details and even copying and pasting them from one source or spreadsheet to another is not only inefficient—it also breaks the digital linking rule: enter once, and use digital links after. That means no copy and paste, and no rekeying, of the core tax records.

Instead, you should be deploying software that is fully integrated and offers an end-to-end solution for you and your clients so that there are no messy transfers or transitions between your systems and those of your clients.

For more on rebuilding your practice around MTD, read MTD for Income Tax is an operational reset—and the best reason to rebuild your firm’s foundations.

Should clients use bridging software for MTD?

Bridging software lets clients who keep suitable spreadsheets meet MTD rules, and it can remain a compliant option for the long term. Whether a client would benefit from moving to bookkeeping software depends on how they work.

You might find that some clients on spreadsheets are struggling with the transition, in which case you could consider using bridging software.

This provides a link between old-style record-keeping, such as spreadsheets, on one side and HMRC’s systems on the other.

Bridging software isn’t only a temporary fix: suitable spreadsheets used with compatible bridging software can remain compliant. That said, HMRC notes the trade-off:

“Keep in mind, spreadsheets won’t have the same timesaving, user-friendly features as many all-in-one bookkeeping apps.”

If clients use it, make sure their spreadsheets are set up to keep the required digital records and that data moves through digital links. For some clients, moving to bookkeeping software later may save time, but it isn’t a requirement.

As you implement the digitisation process, you might find that other clients also have their own, specific requirements.

Sole traders and smaller landlords, for instance, will probably find mobile-first bookkeeping most useful. This is entirely feasible. The days of always requiring a desktop PC are gone.

Similarly, you should already be encouraging other clients whose work means that they’re out and about to use apps on their smartphones. This can be useful for making and taking payments that feed directly into the system in real time and, as mentioned earlier, for taking photos of receipts whose amounts, details and dates can be automatically read by the technology and fed into the system.

How does client management software help with MTD?

Client management software automates deadline reminders, client requests, approvals, and document sharing, so more frequent MTD contact doesn’t mean more admin.

As you move to a digital-first way of working, it’s also a good idea to implement client management software.

This can manage tasks and workflows such as notifications for deadlines for submissions as well as automatically recording billable hours.

Increasingly, specialist agentic AI can help with critical tasks. Sage’s MTD for IT Agent can help with many of them, while your team reviews and approves the results.

It’s designed to help with complex, interconnected tasks: for example, it can organise data and highlight anomalies for your team to review. Features include drafting quarterly submission reports and preparing document requests to clients. The time saved varies by practice and client.

Read more in How agentic AI is changing accounting compliance.

Other parts of client management software provide insights into staff workloads and performance as well as revealing the profitability of particular clients. You’ll be able to identify more quickly and accurately whether you’re charging enough—or even overcharging—for each account.

As communication with clients becomes more frequent and data is shared more often, client management systems can take on much of this. Routine emails, requests for permissions and approvals plus notifications can be managed automatically.

Similarly, client management systems can enable you to share documents and data with clients as well as managing e-signatures more quickly and easily. You can also use them to set up client interaction portals so that your clients know how to submit data and share documents as well as signing them digitally.

What do your teams need to know about MTD for Income Tax?

Your teams need to move from inputting data to reviewing it: know your cloud bookkeeping software, spot exceptions, and guide clients through the new deadlines.

As well as implementing these new technologies, you should be training staff and helping them to develop a new mindset.

They need to become familiar now with cloud bookkeeping software and to be ready to review and understand data rather than simply inputting it manually and using it to carry out calculations. They should be ready to identify exceptions to this data and their significance as well as understanding more generally how they should interact with MTD for Income Tax technology.

Your teams need to be ready to answer clients’ questions and to guide them on how to comply with the new deadlines, requirements and ways of working. They should be showing clients how to use the new technologies and checking on their progress as they provide ongoing support.

This is a major change to the way that accountants work and interact with their clients. However, you can lead them through the process and cement your role as business advisers as well as ensuring that you’re compliant with HMRC’s new Making Tax Digital requirements. Better still, reducing repetitive, manual processes will free up your teams to carry out more interesting, fulfilling tasks and to add more value.

Switching to MTD for Income Tax: FAQs

What changes when a client moves from Self Assessment to MTD for Income Tax?

Clients moving to MTD for Income Tax must keep digital records in MTD-compatible software and send four quarterly updates a year, plus an annual Self Assessment return by 31 January, filed through compatible software.

Will practices still need to handle Self Assessment?

Yes. Clients below the MTD threshold stay on Self Assessment, and the threshold falls in stages to £20,000 by April 2028, so most practices will run both systems side by side for several years.

Can clients keep using spreadsheets for MTD for Income Tax?

Yes. Clients can use suitable spreadsheets with compatible bridging software that links the spreadsheet to HMRC digitally, and this can remain compliant. HMRC notes that spreadsheets won’t have the same timesaving features as many bookkeeping apps.

What technology does a practice need for MTD?

A practice needs an integrated, end-to-end digital record-keeping stack: bookkeeping software, bank feeds, data capture tools such as AutoEntry, and client management software, with digital links between them.

How should practices prepare their teams for MTD?

Practices should train staff on cloud bookkeeping software, and help them shift from inputting data to reviewing it, spotting exceptions, and guiding clients through the quarterly cycle.

Browse more topics from this article

• Making Tax Digital for accountants