What is the latest with MTD income tax self-assessment?

As we head into 2025, Making Tax Digital (MTD) for income tax inches closer to becoming a reality in April 2026. What can accountants expect in the coming months, and how should they best prepare their clients?

by | 5 Feb, 2025


At a glance

  • Next stage of the MTD ITSA rollout is expected in April next year
  • The initiative has previously experienced delays – but accountants shouldn’t rest on their laurels
  • The new rules require planning for clients, including embracing software services

The Self Assessment tax gap currently stands at around 18.5%, or £5 billion. There’s a good reason for this: for many freelancers and small businesses Self Assessment is regarded as a complex and opaque process, with an Intuit QuickBooks study finding that 63% of consumers find doing tax returns stressful.

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a UK government initiative aimed at digitalising the tax system to reduce errors, simplify compliance, and create a more efficient tax system. In a nutshell, the new rules make it necessary for businesses to use software to keep digital records and make regular updates, thereby reducing the potential for tax lost to error.

In principle, the update should relieve some of the uncertainty around Self Assessment. But what do accountants need to do to get their clients compliant?

MTD rollout has experienced some teething problems

MTD for ITSA is expected to be introduced in phases. From April 2026 it will be introduced for self-employed businesses and landlords with income over £50,000; and in April 2027 it will be extended to those with income over £30,000. In the Autumn Budget, it was also announced that the initiative will be extended further to sole traders and landlords with income over £20,000, by the end of this parliament.

So far each phase of the MTD rollout has seen delays, which HMRC has put down to giving businesses more time to prepare for the change in the face of economic challenges. 

Headshot of Adam Craggs
Adam Craggs, Partner and Head of Tax Disputes, RPC

Adam Craggs, Partner and Head of Tax Disputes at RPC, says there is still much to be done to ensure the project is delivered on time.

However, the government is making it clear that MTD for ITSA will launch as scheduled, with HMRC continuing to provide guidance and host MTD-themed roadshows.

In response to a request for comment, an HMRC spokesperson said: “Making Tax Digital for Income Tax is on track and will help sole traders and self-employed customers to stay on top of their tax affairs and business planning. It will also reduce the potential for error, so more money can go towards funding the public services we all rely on.”

Craggs adds that it will be important for accountants to keep a close eye on developments as the implementation plan is progressed, however, in case there are last minute delays. 

What impacts will the new rules have?

Under MTD ITSA, taxpayers will be expected to keep their records digitally, prepare and plan processes to meet new requirements such as sending quarterly updates, and invest in MTD-compliant software. 

Cameron Ford, Chief Operating Officer at Silverfin, says MTD is a: “Wake-up call for firms relying on legacy systems and manual workflows, exposing their limitations in an increasingly digital and fast-paced world.”

He adds that MTD underscores the growing need for digital transformation and greater transparency in accounting processes: “With its focus on complete and accurate reporting, data standardisation becomes essential, and built-in validation checks will play a key role in reducing errors and ensuring compliance.”

Headshot of Cameron Ford
Cameron Ford, Chief Operating Officer, Silverfin

Craggs expects accountants to need to sink significant time and investment into preparing for the new changes, and keeping abreast of the latest developments will be necessary to mitigate the risks. He adds that the danger of leaving their preparations too late is that taxpayers may not be able to meet their compliance obligations under MTD.

How can accountants prepare?

Despite the potential for delays, it’s important for accountants not to rest on their laurels. Craggs says it may now be appropriate to freshly consider the planned changes in order to properly prepare and plan for them.

To the extent they have not already done so, it will be necessary for accountants to familiarise themselves with MTD-compliant software, educate clients on the new requirements and assist clients with their new obligations under MTD.

Ford says it will be key to embrace the software services available to accountants. He says: “Cloud-based accounting software can help to minimise the reliance on manual processes, and access real-time insights.” He adds that centralising data on unified platforms can eliminate silos and establish a single source of truth that benefits teams and clients alike.”

“MTD is a wake-up call for firms relying on legacy systems and manual workflows, exposing their limitations in an increasingly digital and fast-paced world.”

Cameron Ford, Chief Operating Officer, Silverfin

HMRC recommends a number of compatible software services for MTD, which let taxpayers create digital records of their business income and expenses. Under MTD ITSA, taxpayers’ annual tax returns will have to be submitted via a software service.

As the new rules take effect, clients will be looking for tax professionals who understand the implications of MTD. Being up to date will help tax professionals support their clients and stay competitive.

MTD ITSA has been a long time coming, and marks a significant shift in tax reporting. Theoretically, the new initiative should make the Self Assessment process smoother for the self employed and small businesses, and preparing early will help taxpayers avoid penalties and benefit from a more efficient, transparent tax system.


More information on the IFA Tax Series 2025 here.

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