Strategy, Legal & Operations

Why MTD is the next big opportunity for UK banks, fintechs, and SaaS

By embedding compliant record-keeping into existing workflows, banks, fintechs, and SaaS providers can boost daily engagement, reduce churn, and accelerate time-to-market.

3 March, 20266 min read Share

Before now, not many would have considered tax compliance an opportunity to better serve UK small businesses. Making Tax Digital for Income Tax (MTD) is spearheading the shift.

MTD for Income Tax means small businesses and sole traders have to make digital record-keeping an everyday behaviour. Whether your platform offers a banking app, a payments workflow, or an adjacent SaaS, your customers now need a way to make tax compliance admin lighter and more convenient. Helping your customers to complete their quarterly and year-end reporting will increase engagement and boost retention.

This article explains why MTD for Income Tax is a regulatory obligation and market shift you can turn into a product advantage:

• The essentials of an MTD for Income Tax-ready experience
• The beneficial outcomes you can quantify
• How a trusted partner, such as Sage, can increase trust and accelerate time-to-market

Here’s what we discuss:

Tax compliance is moving the market forward

MTD for Income Tax is moving digital record-keeping from a nice-to-have to a regulatory requirement.

It’s HMRC’s programme to shift Self Assessment for individuals who run businesses to digital record-keeping and more frequent reporting. Instead of keeping paper or spreadsheet records and filing once a year, eligible taxpayers must keep digital records and send quarterly updates through compatible software, followed by an end-of-year statement to finalise allowances and adjustments, and then a final declaration.

These changes primarily impact sole traders and property landlords who complete Self Assessment for business or rental income. Millions of Self Assessment customers will change their reporting patterns from a single, annual scramble to a “little-and-often” pattern.

Operationally, customer records will need to be captured and categorised as transactions happen. Impacted small businesses and sole traders will need to digitally compile an update from their records to submit to HMRC. Then, at the end of the tax year, they will need support in organising their records to apply reliefs and adjustments before the final declaration. 

Small businesses and sole traders already send invoices, take payments, and check cash flow in the tools you provide. When those same tools keep records organised, quarter-end becomes a tidy-up rather than a rebuild. This is an opportunity to win daily attention.

The first providers to make record-keeping effortless will set the new standard. Once customers experience receipts filed at the point of spend, invoices marked as paid on arrival, and a clear view of what to set aside for tax, going back won’t be an option. The cost of waiting to adapt allows habits to form elsewhere, making it difficult to win those customers back.

Embedded accounting through Sage Embedded Services

Embedded accounting is the solution to bring the MTD for Income Tax requirements into your platform. Instead of sending customers to separate software, their core record-keeping sits inside their existing money-in, money-out journey. Customers can capture receipts at the time of spend and reconcile invoices when funds arrive.

Sage Embedded Services provides the building blocks to make this possible. You keep your brand and UX, while Sage supplies the trusted technology behind it:

• MTD-ready digital records. Categorisation, reconciliation, and compliant record structures aligned to HMRC expectations for quarterly updates and end-of-period statements.
• Composable headless APIs. Add receipt capture, invoice matching, and accountant sharing where they fit naturally, without redesigning your product.
• Credibility and trust. A brand customers recognise, explicit consent and permissioning, and security practices that small businesses and accountants already know.
• Operational confidence. Proven workflows reduce edge-case noise for service teams and provide consistent data for reporting and insights.

The essentials of an MTD-ready experience

An effective first release focuses on a few every day jobs that reduce effort and error. Keep the surface simple and make the records reliable underneath. The foundations are the same regardless of where the customer starts their journey:

• Receipt capture tied to the latest transactions, with sensible category suggestions and quick corrections.
• Invoices issued cleanly and then automatically marked as paid when matching funds arrive.
• A live quarter-to-date view that shows money in, money out, and what to set aside for tax.
• Permissioned accountant access so information is shared without chasing.
  

These design principles are the strategy to keep this usable at scale:

• Meet customers in their existing flows:Place entry points beside spend and payment moments.
• Offer clear controls: Show what was captured, why it was categorised, and how to edit it.
• Learn quietly: Improve suggestions from corrections without asking users to retrain the system.
• Keep language plain: Explain outcomes in terms of time saved, fewer mistakes, and smoother filings.

Beneficial outcomes within tax compliance

When record-keeping accompanies money in and out, engagement increases. Customers return to complete small jobs, not just to check a balance. That shift shows up quickly in critical areas:

• Higher daily active use occurs as receipts are captured and payments are matched in the moment.
• Fewer unreconciled items because automatic matching and consistent categories do more of the work.
• Lower support contact volume around statement and quarter-end periods as questions are resolved earlier.
• Reduced churn as the product becomes the operational home for everyday admin.

These improvements reverberate through to cost-to-serve and retention, creating a stronger foundation for future features and partnerships.

Trust, privacy, and control

Record-keeping is most effective when customers feel in control. Here’s how to build confidence into the flow:

• Be explicit about what is captured and why. Show the source of each record and the category applied.
• Make corrections simple—one tap to change a category, with the option to apply it to similar items.
• Keep consent clear. Let customers grant and revoke accountant access in a click, with an audit trail.
• Provide visibility. A concise activity view should show receipts captured, invoices matched, and changes made.

Partnerships can reinforce trust and make credibility automatic. Working with a reputable provider such as Sage provides proven categorisation, reconciliation, and digital records workflows that align with HMRC requirements. It also signals maturity in security and data handling, from recognised certifications to tested controls and monitoring. You keep your front end and brand, and the underlying technology comes from a brand customers and accountants already know. Co-branding the most sensitive steps, like consent and account sharing, helps customers see familiar standards sitting behind the experience.

What this means for your roadmap

Speed and credibility are critical to own the opportunity in the current market. 

Instead of building everything in-house, pair your UX with the tax and compliance experts to reduce complexity and accelerate time-to-market. A partner such as Sage provides the embedded accounting and HMRC-aligned digital records while you retain your brand, design, and customer relationships. That combination lets you meet the MTD moment quickly, reduce operational noise, and focus on the experience customers see.

Starting your journey

Making Tax Digital for Income Tax resets what small businesses expect from the tools they already use to manage their finances and run their business. When record-keeping sits alongside spend and payment moments, compliance becomes a simple habit that drives daily engagement, cleaner data, and a calmer quarter-end.

Sage turns that expectation into something you can ship with confidence. For banks, fintechs, and SaaS platforms, the opportunity lies in becoming the place where admin tasks get done.

Pair your UX with Sage’s embedded accounting, make the core jobs effortless, and differentiate yourself from your competitors. That is how you use MTD for Income Tax to embed more value and unlock more growth.