MTD for Income Tax: Your Last-Minute Preparation Guide
In 24 days, Making Tax Digital for Income Tax goes live. From 6 April, sole traders and landlords earning over £50,000 must keep digital records and submit quarterly updates to HMRC.
If you've been putting this off, stop. Here's exactly what you and your clients need to do before the deadline.
Who's Affected?
The first wave applies to individuals whose combined gross income from self-employment and/or property exceeded £50,000 in the 2024/25 tax year. That's approximately 900,000 people.
The phased rollout continues: £30,000+ from April 2027, and £20,000+ from April 2028. If your clients aren't caught this year, they will be soon.
Important: This is based on gross income (before expenses), not profit. A sole trader turning over £55,000 with £20,000 of expenses is still in scope.
What Changes for Your Clients
Before MTD: One annual Self Assessment return, filed by 31 January.
After MTD: Digital records kept in HMRC-approved software, with quarterly updates submitted throughout the year, plus a final declaration.
The quarterly submission deadlines for the 2026/27 tax year are:
- Q1 (April–June): Submit by 7 August 2026
- Q2 (July–September): Submit by 7 November 2026
- Q3 (October–December): Submit by 7 February 2027
- Q4 (January–March): Submit by 7 May 2027
Critical clarification: Tax payment dates don't change. Payments on account are still due 31 January and 31 July. Quarterly updates are reporting obligations, not payment obligations. Make sure your clients understand this — it's the number one source of confusion.
Your 10-Point Preparation Checklist
Here's what every practice should be doing right now:
1. Identify affected clients. Pull a list of every sole trader and landlord client with gross income over £50,000 in 2024/25. Don't guess — check the actual figures.
2. Choose MTD-compatible software. If you haven't already, confirm your software is HMRC-approved for MTD ITSA. Xero, Sage, QuickBooks, and FreeAgent all qualify. HMRC maintains a full list of approved software on GOV.UK.
3. Sign clients up. Each affected taxpayer needs to sign up for MTD ITSA through their Government Gateway account. This is a separate sign-up from MTD for VAT — don't assume it carries over.
4. Set up digital record-keeping. Clients must keep digital records of all business income and expenses from 6 April. Paper records fed into a spreadsheet that links to approved software is acceptable, but pure paper records are not.
5. Brief clients on quarterly submissions. These are quick summaries of income and expenses — not full tax returns. Each submission takes minutes if records are kept up to date. Frame this as "a quick check-in, not a mini tax return."
6. Establish a workflow. Build a repeating task in your practice management tool (Senta, Karbon, or whatever you use) for each affected client's quarterly submission. Set reminders 14 days before each deadline.
7. Test the process. Don't wait until August to discover your software doesn't handle something properly. Run a trial submission now using dummy data or a test client.
8. Communicate pricing. If you're charging for quarterly submissions as a new service, tell clients now. Don't surprise them with a fee increase after April.
9. Document your procedures. Write a simple one-page internal guide for your team on how to process MTD ITSA quarterly submissions. Consistency matters when you're doing this across dozens of clients.
10. Know the penalty relief. HMRC has confirmed it will not apply penalty points for late quarterly updates during the first tax year (2026/27). This doesn't mean you should be late — but it does mean a missed deadline in August won't immediately result in fines.
Tool Review: Karbon
Karbon is the practice management platform that commands a premium price and divides opinion. Some firms swear by it. Others find it over-engineered for their needs. Here's where it fits.
What it does: Karbon brings together email, task management, client communication, workflows, billing, and practice analytics in one platform. Its standout feature is "Triage" — an email management system that converts incoming messages into actionable workflow items, so nothing falls through the cracks.
Who it's for: Established firms with 5+ team members who need sophisticated workflow automation, multi-team collaboration, and data-driven practice management.
What's genuinely impressive: The workflow templates are excellent. Karbon ships with hundreds of pre-built templates for common accounting workflows, and you can customise them with branching logic, dependencies, and automated triggers. The Practice Intelligence dashboard gives real-time visibility into team capacity, billing, and client communication patterns. Karbon also claims firms using their billing features get paid an average of nine days earlier.
The downsides: The learning curve is steep. Plan for 2-4 weeks of onboarding. The interface is powerful but busy — if your workflows are straightforward, you'll be paying for complexity you don't need. At $59/user/month for the Team plan, a five-person firm pays approximately £235/month. The Business plan at $89/user/month takes that to roughly £355/month. There's no free tier, and the 14-day trial isn't long enough to properly evaluate the platform.
Pricing: From $59/user/month (Team), $89/user/month (Business), custom pricing for Enterprise. All billed annually.
Integrations: Xero, QuickBooks Online, MYOB, plus 30+ via Zapier.
Our take: Karbon is the best practice management platform for mid-size firms that have outgrown basic tools and need enterprise-grade workflow automation. But it's overkill for sole practitioners or small firms with simple workflows. If you're scaling and drowning in emails, tasks, and deadlines across a growing team — Karbon is worth the investment.
How to Use AI to Draft Client Communications in Half the Time
Let's be practical. You don't need a £500/month AI platform to improve your client communications. Here's how to use the AI tools you probably already have.
The Quick Win: Email Templates with AI
Most accountants spend 30-60 minutes per day on routine client emails — deadline reminders, document requests, fee quotes, engagement letters. AI can cut this dramatically.
Using ChatGPT, Copilot, or Claude:
- Create a master prompt that includes your practice's tone of voice, typical client types, and key information (deadlines, fees, services).
- For each email, give the AI a brief: "Draft a reminder to a sole trader client that their quarterly MTD submission is due in 14 days. Include what they need to provide and a deadline. Professional but approachable tone."
- Review and personalise the output. AI gives you 80% of the email in seconds — you add the personal touches.
Going Further: Batch Communications
Need to send similar emails to 20 clients with different details? Create a template with placeholders and use AI to generate personalised versions. AI tools can populate these variations faster than you can copy-paste.
What to Watch Out For
Accuracy: Always check AI-generated content for factual errors. AI doesn't know your clients' specific circumstances.
Tone: AI tends toward generic corporate language. Setting up a reusable system prompt with your tone preferences helps enormously.
Confidentiality: Never paste client-specific financial data into public AI tools. Use enterprise versions with data protection guarantees, or keep prompts generic and add client details manually.
Tools Worth Trying
- Microsoft Copilot (if you're on Microsoft 365): Drafts emails directly in Outlook with context from previous conversations
- ChatGPT (free or Plus): Best for standalone drafting with custom instructions
- Claude (free or Pro): Strong at longer, more nuanced communications
- Xero's JAX: Can draft client communications within Xero's ecosystem (still early, but improving)
Practical Tip of the Week
Create a "client-ready" MTD explainer. Write a one-page document (or get AI to help you draft one) explaining what MTD for Income Tax means for your sole trader clients in plain English. Cover: what changes, what they need to do, what you'll handle, and how much it costs. Send it to every affected client this week. The practices that communicate proactively will have the smoothest April.
One Number
900,000 — The approximate number of sole traders and landlords who will be swept into MTD for Income Tax from 6 April 2026. If even 10% of them need help from an accountant to get set up, that's 90,000 new service opportunities across the profession.
What's Coming Next Week
- How AI is changing audit and assurance for small practices
- Tool review: Ignition — proposals, payments, and client agreements in one platform
- The hidden costs of free accounting software
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