MTD for ITSA 2026: A Practical Guide to Software and Compliance for Accountants

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is finally happening. After years of delays and revised timelines, the first phase goes live in April 2026. If you manage sole traders, freelancers, or landlords, this directly affects your practice.

This guide covers what you need to know: the deadlines, who is affected, what the quarterly submission process looks like, what software you need, and how to prepare your practice for the additional workload without drowning in it.

The timeline: who needs to comply and when

MTD for ITSA is being rolled out in phases based on qualifying income (self-employment and/or property income, before expenses):

• April 2026: Sole traders and landlords with qualifying income over £50,000
• April 2027: Threshold drops to £30,000
• April 2028: Threshold drops to £20,000

Partnerships are not included in the initial rollout. HMRC has indicated they will be brought in later, but no firm date has been set.

For context, HMRC estimates that around 780,000 individuals fall into the first phase (£50,000+). By the time the £20,000 threshold kicks in, approximately 4.2 million taxpayers will be within scope. That is a lot of additional quarterly work for accounting practices.

What MTD for ITSA actually requires

The obligations are straightforward in concept, if not in practice:

Digital record keeping

All income and expense records must be maintained digitally using MTD-compatible software. This does not mean you need to go paperless — clients can still have paper invoices and receipts. But the records in your software must be the primary record, not a paper ledger or a spreadsheet (unless bridged through compliant software).

Quarterly updates

Four times a year, you must submit a summary of income and expenses to HMRC through your software. These are not tax returns — they are updates that give HMRC a running picture of the client’s tax position. The quarterly deadlines follow the tax year:

• Q1: 6 April – 5 July, due by 7 August
• Q2: 6 April – 5 October, due by 7 November
• Q3: 6 April – 5 January, due by 7 February
• Q4: 6 April – 5 April, due by 7 May

Tax return

After the tax year, you make any accounting and tax adjustments, add other income, claim reliefs and submit your tax return using compatible software. The return and any tax owed are due by 31 January following the tax year.

The practical impact on your practice

The shift from annual Self Assessment to quarterly MTD submissions changes the economics of managing sole trader and landlord clients.

More touchpoints per client

Instead of one annual engagement per client, you now have at least five filing touchpoints: four quarterly updates and one tax return. For a practice managing 200 sole trader clients, that is at least 1,000 submission events per year instead of 200. Even if each submission is quick, the scheduling, communication, and quality review overhead is substantial.

Continuous bookkeeping becomes essential

Many practices currently handle sole trader bookkeeping as an annual catch-up: the client drops off a bag of receipts in January, and you process a year’s worth of transactions before the Self Assessment deadline. MTD makes this unsustainable. Books need to be up to date at least quarterly, which means either clients keep their own records (unlikely for most) or your practice does ongoing bookkeeping throughout the year.

Pricing needs to change

If you currently charge a fixed annual fee for sole trader compliance, that fee needs to reflect the additional work. Four quarterly submissions plus year-end filings is fundamentally more work than a single annual return. Practices that do not reprice will absorb the additional cost and see margins erode.

The firms that will do well under MTD for ITSA are those that automate the bookkeeping and submission process, freeing up capacity to serve more clients without proportionally increasing headcount.

Choosing MTD for ITSA software

HMRC maintains a list of recognised MTD-compatible software. The key requirements are:

• Digital record keeping: The software must store income and expense records digitally
• API submission: It must connect to HMRC’s MTD API to submit quarterly updates
• Multi-source support: For clients with both self-employment and property income, the software must handle multiple income sources

Current options

Xero, QuickBooks, FreeAgent: The major cloud accounting platforms are all MTD for ITSA compatible. If your sole trader clients already use one of these, the software side is sorted. The challenge is the bookkeeping volume — someone still needs to enter and categorise transactions four times a year.

Bridging software: Some tools act as a bridge, letting you maintain records in spreadsheets and submit through the software. This works but adds a manual step and does not solve the underlying bookkeeping challenge.

Briefcase Ledger: We are building Briefcase Ledger specifically for MTD for ITSA, launching March 2026. It handles end-to-end bookkeeping for sole traders and landlords: AI-powered transaction categorisation, automated VAT where applicable, quarterly submission to HMRC, and year-end filing. The goal is to make each quarterly submission take minutes, not hours. If you are interested in early access, sign up for a trial.

What to look for

• Automation of bookkeeping: The quarterly submission itself is simple. The hard part is having the books up to date and accurate. Software that automates categorisation, VAT treatment, and bank reconciliation saves the most time.
• Multi-client management: You need to manage quarterly deadlines across dozens or hundreds of clients. Look for a dashboard that shows submission status across your client base, with deadline tracking and completion status.
• Bank feed integration: Automatic bank feeds reduce the need for clients to provide transaction data manually. The software should pull transactions from Open Banking and categorise them automatically.
• Bulk operations: The ability to review and submit multiple clients efficiently, rather than one at a time.

How to prepare your practice now

If you have not started preparing for MTD for ITSA, here is a practical roadmap.

1. Identify affected clients

Review your client base and flag everyone with qualifying income above £50,000 from self-employment or property. These are your first-wave clients starting April 2026. Then identify those in the £30,000–50,000 range for the second wave, and £20,000–30,000 for the third.

2. Communicate early

Many sole traders and landlords are not aware of MTD for ITSA or assume it does not affect them. Proactive communication builds trust and gives you time to agree on the service model (and pricing) before the deadline arrives.

3. Choose and test your software

Do not wait until April. Set up your chosen MTD software now and test it with a handful of clients. Process a quarter’s worth of transactions, submit to HMRC’s sandbox environment if available, and identify any issues in your workflow before it matters.

4. Build your quarterly workflow

Map out how you will handle the quarterly cycle: how clients provide documents, how bookkeeping gets done, who reviews, who submits, how you track deadlines across clients. The practices that struggle will be those that try to figure this out on the fly.

5. Reprice for the new reality

Four quarterly engagements plus year-end is fundamentally different from one annual return. Review your pricing and communicate changes to clients. Most will understand — the service is genuinely more work. Frame it as improved compliance and real-time tax visibility, which are genuine benefits.

The opportunity in MTD for ITSA

It is easy to see MTD for ITSA as an unwelcome compliance burden. But for well-prepared practices, it is also an opportunity.

Recurring revenue. Quarterly engagements create a more predictable revenue stream than annual compliance work. Clients who only contacted you once a year now interact four times a year, strengthening the relationship and creating opportunities for advisory work.

Competitive advantage. Many practices are not ready. If you can offer a smooth, automated MTD for ITSA service while others are scrambling, you will attract clients who value competence and reliability.

Automation ROI. The sheer volume of work MTD creates makes the return on investment for bookkeeping automation compelling. A tool that saves 10 minutes per client per quarter across 200 clients saves over 130 hours per year — and the actual savings from AI-powered tools are typically much larger than that.

Frequently asked questions

Getting started

MTD for ITSA is live for the first wave of clients. If you have not finished preparing, identify your affected clients, choose your software, and build your quarterly workflow now.

For a detailed comparison of MTD software options for your clients, read our guide to MTD software for sole traders and landlords. To understand the new penalty regime and what late submissions actually cost, see our guide to MTD penalties.

If you want to automate the bookkeeping behind MTD for ITSA, start a free Briefcase trial. Briefcase Ledger handles unlimited properties and sole trade income on a single licence, with AI agents that process transactions continuously so your clients are always ready to file. For more on how AI is changing bookkeeping workflows, read about AI agents in accounting or month-end close automation.

Further reading

• First MTD for ITSA Quarterly Submission: A Practical Guide
• MTD for ITSA Software Compared
• MTD for ITSA Penalties Explained
• What is MTD for ITSA?
• Briefcase Ledger: MTD for ITSA software