MTD for Income Tax: 7 Lessons Accountants Have Learned from the First Quarterly Deadline 

Making Tax Digital for Income Tax has been years in the making. After consultations, pilots, delays, changing thresholds and months of preparation, the first mandatory quarterly update deadline has finally arrived. So, what have accountants and bookkeepers learned from getting clients ready? 

For many practices, the biggest challenge has not been submitting the quarterly update itself. Instead, the experience has highlighted the importance of client communication, digital record keeping, onboarding, software, internal processes and changing the way practices work with clients. 

HMRC says more than 864,000 sole traders and landlords within scope have reached the first MTD for Income Tax deadline, with qualifying income above £50,000. The first quarterly update covers the first three months of the 2026/27 tax year and must be submitted through MTD-compatible software.  

Here are seven of the biggest lessons emerging from the first phase of MTD for Income Tax. 

1. MTD is a workflow change, not simply another tax submission

Perhaps the clearest lesson is that MTD for Income Tax is about much more than submitting four updates a year. 

For years, many sole traders and landlords have operated around an annual tax cycle: gather records, prepare accounts, submit the return and move on. 

MTD changes that rhythm. 

Digital records need to be maintained throughout the year, information needs to be available more regularly and clients need to engage with their finances on an ongoing basis. 

This means practices need to think beyond “How do we submit the quarterly update?” and ask: 

“How will we manage this client throughout the year?” 

Firms that treat MTD as a change to their overall workflow — rather than simply another compliance obligation — are likely to find the transition easier to manage. 

2. Client onboarding can be more important than the submission itself

One of the strongest lessons from the preparation period has been the importance of getting the basics right early. 

Before an agent can submit a client’s quarterly update, several steps need to be completed, including adding the appropriate client authorisation to the Agent Services Account, signing the client up for MTD and connecting the chosen software to HMRC.  

HMRC says that, on average, signing up a client takes less than four minutes. But that is only one part of the process.  

Practices also need to establish: 

• Which clients are actually in scope  
• Which income sources need to be included  
• Which software and workflow are appropriate  
• Whether digital records are ready  
• Who is responsible for maintaining those records  
• How and when information will be provided to the practice  

The lesson? Don’t treat onboarding as an administrative task to complete just before the deadline. 

It is the foundation for everything that follows. 

3. One MTD workflow does not work for every client

Another important lesson is that practices need flexibility. 

A landlord with several properties does not necessarily have the same requirements as a sole trader who sends invoices, receives card payments and has hundreds of transactions each month. 

Some clients are already comfortable with cloud bookkeeping. Others may have relied on spreadsheets, paper records or banking apps for years. 

HMRC’s own agent feedback reflects this variety. Accountants have reported that some traditionally paper-based clients are now being encouraged to digitise, while others are benefiting from more regular financial information and clearer visibility of their potential tax position.  

The takeaway is simple: 

Choose the workflow around the client, rather than forcing every client into the same process. 

That could mean cloud bookkeeping for one client, a bridging solution for another, or a more automated digital record-keeping workflow for a third. 

4. Client communication is a critical part of MTD compliance

Technology can make quarterly reporting easier, but it cannot make clients send their records on time. 

This has arguably been one of the biggest practical challenges for practices. 

Clients who are accustomed to handing everything over once a year now need to think differently about record keeping. 

They need to understand: 

• What information they need to record  
• How often they need to update it  
• What their accountant needs from them  
• Why accurate digital records matter  
• When information needs to be provided  
• What happens if records are incomplete  

HMRC has also highlighted positive experiences from agents whose clients are seeing clearer information about cash flow, business performance and potential tax liabilities as a result of more regular reporting.  

So MTD should not necessarily be presented to clients as “more admin.” 

Done well, it can become a more useful and regular conversation about their business. 

5. Digital record keeping needs to happen throughout the year

The first deadline has reinforced a fundamental MTD principle: you cannot leave digital record keeping until the deadline. 

HMRC guidance says digital records should be created as close to the transaction date as possible. If someone signs up partway through the tax year, they may also need to catch up their records from the beginning of the relevant period.  

Quarterly updates are generated from those digital records. They are summaries of income and expenses — they are not tax returns, and accounting or tax adjustments do not need to be made before sending the update.  

This creates an important operational lesson for practices: 

The quality of the quarterly submission is largely determined by the quality of the records behind it. 

The deadline should therefore be the end point of a process, not the point at which the process begins. 

6. Software needs to support the practice — not just the submission

The first MTD deadline has also highlighted that choosing software based purely on whether it can technically submit to HMRC is not enough. 

The right MTD software should fit the way the practice and its clients actually work. 

Consider: 

• How clients provide information  
• Digital record keeping  
• Bank feeds and transaction imports  
• Receipt and expense capture  
• Multiple income sources  
• Client approvals  
• Quarterly update preparation  
• HMRC connectivity  
• Visibility of submission status  
• How easily the practice can manage multiple clients  

HMRC now lists more than 100 compatible software products and recommends that agents consider their needs when choosing a solution.  

The lesson from the first phase is that MTD software is becoming part of the practice workflow, rather than simply a filing tool. 

7. The first deadline is the start of a new routine — not the finish line

Perhaps the biggest lesson of all is that 7 August is not the end of MTD preparation. 

The next quarterly update deadline is 7 November 2026, followed by 7 February 2027 and 7 May 2027.  

That means practices now have an opportunity to review what worked during the first quarter and improve their processes before the next update. 

Ask: 

• Which clients provided records late?  
• Which clients needed the most support?  
• Where did the practice spend the most time?  
• Which workflows worked well?  
• Where did data need manual intervention?  
• Which clients need additional training?  
• Could any processes be automated?  
• Are fees still appropriate for the increased frequency of work?  

This final question is particularly important. 

Moving from an annual compliance cycle to more regular reporting creates additional client touchpoints. Many practices have therefore been reviewing their pricing and considering monthly or broader advisory packages.  

The first quarter provides valuable data that can help practices build a more sustainable MTD service. 

What happens next? 

The first MTD for Income Tax quarterly deadline represents a significant milestone, but it is only the beginning of the new reporting cycle. 

The good news is that the first year provides practices with an opportunity to learn and refine their processes. HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026/27 tax year, although taxpayers still need to submit their updates and other penalties, including those relating to late tax returns or payments, continue to apply.  

From the second year onwards, the points-based penalty regime for missed quarterly updates will apply. Four points result in a £200 penalty, with further missed deadlines potentially generating additional penalties.  

So the objective should not simply be: 

“How did we get through 7 August?” 

It should be: 

“How can we make the next quarterly update easier, faster and more valuable for both our practice and our clients?” 

MTD is a practice transformation 

After years of preparation, the first MTD for Income Tax deadline has shown that the technology and legislation are only part of the challenge. 

The practices best placed to manage MTD successfully will be those that combine the right software, efficient workflows, strong client communication and consistent digital record keeping. 

The first quarterly update is a milestone. The real opportunity is to use what has been learned to build a more efficient, proactive and scalable way of working. 

Capium’s MTD for Income Tax solution is designed to help practices manage different client needs, from digital record keeping and onboarding through to quarterly updates and ongoing compliance. 

Discover how Capium can help your practice simplify MTD for Income Tax and build a more efficient digital workflow:

Book a demo today.