Image: DDP Law
At a glance
- MTD ITSA is set to roll out for sole traders in April 2026
- Many small businesses aren’t ready, and their accountants need to help them prepare
- We speak to accountancy experts about how they can make the transition a success
MTD ITSA is coming soon. Even now, though, research from IRIS Software Group reveals that 42% of accountants still feel unprepared for the transition.
From April 2026, sole traders and landlords earning over £50,000 must keep digital records and submit quarterly updates to HMRC using compatible software. The aim is to reduce errors and improve tax accuracy.
With the deadline looming, what steps do accountants and businesses need to take to prepare?
1. Educate clients
Firstly, accountants will need to train clients on digital record-keeping. Ryan Alderson, Head of Cloud Advisory at DJH, says: “Preparation will be nine tenths of success, so make sure you plan ahead.”
Together, accountants and clients will need to determine the level of support they require. The first question clients should ask themselves is: “Do you need your accountant to handle the majority of the work, or do you plan to complete most of it yourself?”
Understanding the changes and the implications, as well as ensuring they are proficient with their chosen software, is critical. “There will be plenty of online webinars and training sessions that you can find on LinkedIn or by signing up to the software provider’s mailing list,” he said.
Alderson recommends developing a timeline with clients, allowing time for learning about what’s needed along with the migration and implementation of the software.
2. Be ready to implement the software
MTD ITSA will require investment in compatible software and bridging tools to be compliant. Cameron Ford, UK General Manager at Silverfin, says that while the efficiency gains and potential reduction in errors resulting from the new regulation are clear, MTD will also very quickly expose cracks in firms that are still relying on outdated systems and manual workflows.
Firms will need to review existing workflows to identify inefficiencies, digitise financial records and embrace solutions designed to support MTD requirements. Ford says this data standardisation is essential to ensure that firms can provide complete and accurate reporting.
“At a technology level, cloud-based accounting software can reduce the reliance on manual processes and give access to real-time insights,” he says.
“Centralising data on a unified platform will eliminate silos and establish a single source of truth that benefits teams and their clients.”
“It underscores the need for accountancy firms to embed digital transformation into their long-term strategy.”
3. Prioritise data accuracy and compliance
Under MTD ITSA, sole traders will need to maintain digital records and to avoid penalties, these will need to be accurate and up to date.
Alderson advises businesses to separate business and personal finances to simplify the process and stay on top of compliance. They should also work with their accountant to address complex tax affairs such as multiple income streams and jointly owned properties.
“Whilst many will see [MTD ITSA] as a burden, think positively,” he said. “Digital transformation will give you better visibility of your business and allow you to make more informed choices. It should also encourage you to discuss tax planning at regular intervals.”
4. Optimise tax planning and adjust workflows
Accountants and clients should be working to streamline workflows for efficiency.
Alderson says it will be important to consider any seemingly trivial changes that can have a huge impact, such as ‘auto-forwarding’. “If you teach clients how to effectively auto-forward emails, such as payslips and expenses, to an invoice capturing software, you are reducing the possibility of submission delay for these items,” he said.
He encourages accountants to register at least one client for the Beta Scheme as of April 2025: “This should help them in refining their workflows by gaining a full oversight of the process, a valuable insight into where you may look to make refinements before the official roll-out.”
“Whilst many will see this as a burden, think positively. Digital transformation will give you better visibility of your business and allow you to make more informed choices.”
Ryan Alderson, Head of Cloud Advisory, DJH
5. Best practices for success
Like any significant new regulation, accountants and their clients will likely face challenges along the way.
Ford says selecting and testing the right solutions can be challenging. Firms should prioritise tools that simplify compliance with HMRC tax regulations, offer pre-built templates that align with best practices and reduce risk through automation and standardisation.
Resource management to minimise bottlenecks is another area of concern. There will be a period where accountants are processing the 2025/26 Self-Assessments alongside their first quarterly submissions via the MTD structure.
He says the secret to success is “education, education, education and, by that I mean for the client”. “Explain why this is happening and give plenty of notice about the new structure ahead of the April 2026 introduction,” he says.
MTD ITSA follows the rollout of MTD for all VAT registered businesses in April 2022. If MTD for VAT has taught us anything, it’s that transitioning to digital is a seismic shift for many businesses and requires a lot of work.
Once the new system is in play, however, they should reap the benefits. A spokesperson for HMRC says businesses using MTD for VAT report being able to prepare and submit VAT returns faster and are more confident that they are getting their tax right.
Once MTD ITSA is in place, the next step for HMRC is MTD for corporation tax. There’s no set date for its rollout yet, but it’s another important consideration for accountants to start planning for.
The IFA’s Tax Series 2025 focuses on a number of tax topics and features speakers who are experts within the industry. The webinars run across three weeks and last two hours each. More information here.
