Your guide to Making Tax Digital for Income Tax

From April 2026, income tax reporting is set for one of the biggest shake-ups in a long time. The arrival of Making Tax Digital for Income Tax (MTD for IT) regime will bring the curtain down on the annual end-of-year tax return for nearly three million sole traders, small businesses, and landlords.  

It’s a major shift – not just for clients but for you and your team. Yet our recent research of over 1000 sole traders and landlords shows that one in five (19%) have still not even heard of MTD for IT.* This suggests many have some way to go in preparing for the transition. So how can you help clients get ahead of the regulatory curve?   

Start with your team 

Change can be daunting, especially when you’re already juggling different demands and deadlines. Before you begin preparing clients, take a step back and consider if everyone in your practice is confident about the upcoming changes. Are they clear on what to expect? Do they understand how success will be measured or how to share feedback? Do they need more training or time to adjust? 

The shift to digital record keeping, quarterly reporting and a final end of year declaration is a whole new process. And for a while, clients will have two tax years in progress at the same time which will create more complexity. By planning early and bringing your team into the conversation, you can build confidence, manage resources, and shape how your practice adapts.  

Prepare your practice   

For many of you, MTD for IT will mean that client relationships will move from a once a year engagement to every few months but with finite time and resources available, the shift to quarterly submissions will also put new pressure on time and workflows. Now is the time to ask key questions and work out how your team is going to service the change. As part of this, evaluate whether you will have the capacity to support new clients, or if you will concentrate on existing relationships.  

It’s also worth appointing an executive MTD for IT lead in your team – someone that can stay on top of new guidance from HMRC, keep everyone informed, and influence or resolve issues quickly. That way, you have a point person responsible for overseeing the transformation who can instill a sense of confidence within your practice.  

Educate your clients  

The good news is that MTD for IT is being rolled out in phases which gives you an opportunity to segment your clients into manageable chunks and ease the transition. Start by identifying which of your clients will be impacted first and evaluate how they operate. For instance, do they still rely on spreadsheets or shoe boxes for their record keeping or are they already handling their own bookkeeping using digital tools.  

Onboarding one client for MTD for IT can take up to half a day and that time adds up fast when you have multiple clients, daily demands and deadlines. Understanding each client’s starting point  will allow you to stagger onboarding, make sure they are comfortable with new digital processes and ease them into a new way of working.  

Define your MTD for IT services 

As you transition towards MTD for IT, your services are likely to evolve alongside it. Map out the end-to-end process for MTD for IT – everything from the initial data collection through to the final submission – and identify where there are opportunities to optimise workflows or encourage clients to adapt.  

More than two in five (42%) of practices recognise that adopting the right tools or software has been one of the most significant changes in their practice in the past year and MTD for IT is likely to accelerate the shift towards other tech-driven processes.  

Expect more collaborative ways of working to emerge, where clients do some of the tasks themselves, and you support them with more of the technical, complex tasks that require expert skill and knowledge. With this, you’ll need platforms that make client collaboration easy, use automation and AI to create efficiencies and generate powerful insights that help clients run their business better.   

Get ready for the future  

We know there’s still some nervousness around MTD for IT, but it’s coming round fast and preparation is key.  

Encouragingly, three quarters of you are positive about the move towards digital tax – seeing the benefits for both your clients and your practice as you take what seems like an administrative heavy burden and turn it into something that increases productivity, deepens client relationships and even grows your practice.  

You’re also not alone in navigating the changes. As a trusted partner and platform, we have got you and your clients covered for MTD for IT and are here to support you in confidently mastering the new regulation.  

Our step-by-step action plan breaks down the journey to MTD for IT into clear tasks and phases and includes practical tips so you can know exactly what to do and when.  

You can also take a closer look at our range of MTD-ready plans, which provide comprehensive support and offer accuracy and insights, while automating the admin. Or become a Xero partner and join over 250,000 accountants and bookkeepers that are benefiting from free software, training and dedicated support in their practice.  

* Based on an online survey of 1000 UK Senior Decision Makers in SMEs (including sole traders) run by Opinium Research on behalf of Xero between 29 June 2025 and 11 July 2025.