Making Tax Digital for ITSA: What UK accounting firms must do now

This article is a submission by Sapphire Info Solutions, an accounting outsourcing partner with more than 20 years of industry experience. It provides bookkeeping, VAT and tax returns, payroll, management accounts, and audit support to accounting practices and SMEs in the UK, US, and Canada.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is no longer a future deadline on the horizon. It is already here.

Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have been required to keep digital records and submit quarterly updates to HMRC. And the next wave is already approaching: from April 2027, the threshold drops to £30,000, pulling a much larger group of clients into scope.

For UK accounting firms, this isn’t simply a software update. It is a fundamental shift in how client work gets scheduled, resourced, and delivered throughout the year.

Firms that treat MTD for ITSA as a one-off compliance project risk falling behind. Firms that treat it as an opportunity to modernise their workflow are already turning it into a competitive advantage.

This guide breaks down what MTD for Income Tax Self Assessment actually requires, the practical challenges firms are facing right now, and the steps practice owners can take to stay compliant without burning out their teams.

What is MTD for ITSA, in plain English?

MTD for ITSA replaces the traditional annual Self Assessment return with a new reporting cycle:

• Four quarterly updates: digital summaries of income and expenses submitted to HMRC every three months, on a cumulative year-to-date basis.
• One final declaration: submitted by 31 January after the tax year ends, where adjustments, reliefs, and corrections are finalised.

Crucially, quarterly updates are not mini tax returns. They don’t require tax calculations, just accurate digital records submitted through HMRC-recognised software.

The real change is frequency, not necessarily complexity. But for firms managing dozens or hundreds of affected clients, that frequency adds up fast.

Who’s in scope, and when

Qualifying income is based on combined gross income from self-employment and property, not profit.

This catches some clients off guard, particularly landlords with multiple income streams who didn’t realise they were close to the threshold.

Why MTD for ITSA is creating real pressure on UK accounting firms

1. A much heavier filing calendar

Where firms once managed one Self Assessment deadline per client per year, MTD for ITSA introduces five HMRC touchpoints annually for every affected client.

Multiply that across a growing client base, and the admin burden compounds quickly, particularly for small and mid-sized practices without dedicated compliance teams.

2. Clients aren’t all software-ready

Many sole traders and landlords are still working from spreadsheets or, in some cases, paper records. Bridging software exists, but it’s a stopgap, not a long-term fix.

Firms are increasingly being asked to manage the client’s digital transition alongside their own MTD-compliant software rollout, a task that takes time most practices haven’t budgeted for.

3. Staffing hasn’t scaled with the workload

The UK accounting sector is already managing a well-documented skills shortage.

Asking the same in-house team to absorb a four-times-a-year filing cycle, on top of existing compliance and advisory work, is where burnout risk creeps in.

This is fundamentally a question of accounting firm capacity planning, especially during the first few quarterly cycles while everyone, including HMRC’s systems, is still adjusting.

4. The margin question

Quarterly submissions mean more touchpoints, but not necessarily more fee income unless pricing models are revisited.

Firms that don’t adjust how they price ongoing compliance work may find their margins quietly eroding, even as billable hours increase.

Practical steps for accounting firms to prepare

Step 1: Segment your client base by threshold

Before anything else, identify which clients are already in scope (over £50,000), which will join in April 2027 (£30,000 to £50,000), and which fall into the 2028 bracket (£20,000 to £30,000).

This segmentation should drive your communication plan, software rollout, and resourcing decisions, not a one-size-fits-all approach.

Step 2: Audit software compatibility early

Not all MTD for VAT-compliant software is automatically MTD for ITSA-compliant. These are separate HMRC programmes with different technical requirements.

Confirm with each client’s software provider that quarterly ITSA submissions are supported, and don’t leave this check until close to a filing deadline.

Step 3: Build a repeatable quarterly workflow

Rather than treating each quarterly update as a standalone task, firms benefit from building a standard internal process: data collection reminders, a review checklist, and a clear escalation path for clients who fall behind on records.

A repeatable digital record reconciliation process reduces the chance of errors and missed submissions, both of which now carry points-based penalties under HMRC’s updated regime.

Step 4: Reassess pricing for ongoing compliance work

If quarterly reporting means more recurring work, fixed annual fees set under the old Self Assessment model may no longer reflect the actual time involved.

Revisiting pricing structures for affected clients, ideally before the April 2027 threshold change brings in a new wave, protects margins without surprising clients with sudden fee increases.

Step 5: Identify where extra capacity is genuinely needed

This is often the step firms delay longest, and the one with the biggest impact on practice workload stress.

Realistically assess whether your current team has the bandwidth to manage a permanently busier filing calendar, or whether outsourcing the routine, recurring elements of compliance would free up your in-house team for higher-value advisory conversations with clients.

Where outsourced support fits into the picture

Many UK firms are finding that the most resource-intensive parts of MTD for ITSA compliance, quarterly data collection, bookkeeping clean-up, digital record reconciliation, and routine submission preparation, are also the most repeatable.

That makes them well suited to outsourced accounting support, rather than asking already-stretched in-house teams to simply absorb more.

Done well, this kind of back-office model does not replace in-house expertise. A provider trained to UK accounting standards works as an extension of a practice, handling the recurring, process-driven elements of compliance work such as bookkeeping, reconciliations, and quarterly reporting preparation.

That leaves a firm’s own accountants free to focus on client relationships, advisory work, and final review and sign-off.

For firms bracing for the April 2027 threshold change, this kind of scalable support can be put in place well ahead of time, rather than as a rushed reaction once the next wave of clients comes into scope.

MTD for ITSA is reshaping how UK accounting firms structure their compliance work. Firms that plan ahead, rather than reacting threshold by threshold, will be the ones best placed to manage the transition smoothly, for their teams and their clients alike.