Code red for MTD: Catching up if your practice is behind

As an accountant or bookkeeper, Making Tax Digital (MTD) for Income Tax represents something fundamental: a shift in how your work is organised, priced, and delivered throughout the year.

Conversations with practitioners over the past year—at events run by ICAEW, ICB, and others—suggest that most firms have spent time getting ready for MTD in some way. So far, so good.

Now MTD for Income Tax is live, the picture is uneven.

Perhaps you’re still absorbing the rules. Perhaps you’ve selected software and started testing. Or perhaps you’re still rethinking how your practice actually operates.

But one thing is sure: if any of these apply to you then, effectively, your practice should be in crisis mode. We’ve moved from the education phase, and into the operational phase.

In this article we look at ways to address this crisis, but you can also use the article to check your own MTD readiness against the curve.

Here’s what we discuss:

The MTD readiness model

The first quarterly update deadline falls on 7 August. While work right now should be focusing on ensuring digital recordkeeping processes are in place, this deadline means the window to prepare isn’t closed—but it needs urgent, immediate attention.

Thinking about readiness as a progression, rather than a single moment of being ready, can help clarify where your firm stands and what needs to happen before that date.

Most firms move through a progression—from understanding the rules, to putting the right technology in place, to adapting how the practice operates day to day.

The four stages below offer a way to assess where your firm currently sits. Many practices will find they sit somewhere between stages, but the model highlights the areas that may need attention.

Stage 1: Awareness

At the earliest stage, the priority is understanding the fundamentals of MTD for Income Tax—following HMRC updates and timelines, learning how digital records will work, identifying which clients will be affected, and starting internal conversations about preparation.

Some firms are still here, and that’s more understandable than it might appear—detail in the final regulations only landed in late March, leaving little time to absorb the full picture before the start date.

Following HMRC guidance isn’t a one-off task. Expect the picture to keep developing.

But the timelines have been concrete for some time: for clients above the £50,000 threshold, the first quarterly deadline falls on 7 August 2026. For those brought into scope from April 2027, the equivalent date is 7 August 2027. Most practices will have clients across both groups, which means managing two timelines simultaneously—not waiting on a single distant deadline.

But awareness is only informational. At this stage, it’s unlikely you’ve considered the deeper changes MTD for Income Tax will make to the way you work with clients, or the way you price that work.

Stage 2: Technology preparation

The next stage focuses on technology: selecting MTD-compatible accounting software, testing integrations and digital record systems, exploring tools that support quarterly submissions, and experimenting with digital bookkeeping workflows with clients.

For many firms, this stage feels like meaningful progress. Choosing the right software and building the technical foundation is important work. But as several practitioners pointed out at recent ICAEW and ICB events, technology decisions are often the easier part of the transition. The harder challenges emerge when you start adapting your processes and client relationships.

For firms that are still at this stage now MTD is live, the priority isn’t careful testing—it’s getting to operational readiness before 7 August and ensuring the digital recordkeeping rules are implemented—both for the practice, and its clients.

Stage 3: Operational change

This is where MTD for Income Tax starts to reshape how your firm works—not just what tools you use, but how the practice operates between submissions.

Instead of focusing on software, you’re now confronting the operational reality of a more continuous compliance model: designing quarterly reporting workflows, setting expectations for when and how clients provide records, onboarding clients to digital bookkeeping tools, and defining where the firm’s responsibility ends and the client’s begins.

This is also where a lot of friction appears, according to practitioners. The challenge is rarely understanding the legislation. It comes down to practical questions: How regularly will clients provide information? How will internal workflows change? How will teams manage the increased rhythm of reporting across the year?

In other words, the focus shifts from technical readiness to operational readiness. And that shift is where the economics start to change.

There’s another dimension to this that’s easy to miss. The more frequently a firm interacts with clients, the greater the opportunity to expand the practitioner’s role beyond accounting.

Quarterly touch points create opportunities for clients to ask about business decisions, technology problems, and personal financial anxieties that have nothing to do with the engagement.

Most practitioners absorb this work instinctively because there is no one else to do it. But it is rarely scoped, rarely priced, and it can quietly consume capacity that digital MTD preparation is supposed to free up.

Stage 4: Continuous responsibility

The final stage represents something bigger than operational adjustment. It’s a structural shift in how your firm carries—and is compensated for—ongoing responsibility.

Under the traditional annual compliance model, the rhythm was familiar: you prepare clients, submit records, they review and file, you move on. Work was annual and priced accordingly. MTD’s quarterly update requirement changes that equation. You now carry responsibility for client records on a rolling basis—whether or not you’ve priced for it.

This creates what you might call a visibility gap. Clients see the quarterly submissions. What they don’t see is the ongoing monitoring, record chasing, and quality assurance that sits behind them. Firms absorb that work, and unless engagement terms and pricing reflect it, the result is margin erosion—gradual enough that it’s not obvious until it’s already built into the way you operate.

The parallel is the SaaS transition that reshaped the software industry 15–20 years ago. Annual licences gave way to recurring revenue, and the businesses that adapted their pricing and delivery models survived. Those that didn’t fell behind and became structurally unprofitable.

Firms that recognise this shift will rebuild around tiered pricing, retainer models, clear responsibility clauses, and regular review cycles tied to client behaviour. Firms that don’t will keep doing the work while slowly losing margin.

Some practices are already operating this way—particularly those that have embraced digital bookkeeping and regular client interaction. They’re doing continuous work. They just haven’t always named it or priced for it. This stage gives that reality a frame.

Where is your firm today?

Going into the April start date, some firms were located between technology preparation and operational change. MTD being live doesn’t close that gap automatically—many practices are still working through the implications of running a more continuous model, with the 7 August quarterly deadline providing the real forcing function.

The questions that keep coming up are revealing: how to get clients to maintain digital records consistently, how to manage quarterly workflows internally without overwhelming existing capacity, how to balance new workloads against current compliance commitments, and—increasingly—how to price services that are delivered more regularly throughout the year.

In most cases, the technology is ready. The operating and commercial model is where the work remains.

How your firm can move forward

MTD for Income Tax is live, so if you think you’re behind, the priority is closing the gap quickly—and in the right order.

• Pricing and engagement terms first. If your firm hasn’t updated its commercial terms to reflect continuous responsibility, this is the most urgent conversation. Every week that passes with quarterly work being done under annual pricing is margin that won’t be recovered. Some firms are already moving to retainer-style pricing and behaviour-linked review clauses. The ones that wait will find the conversation harder to have once the work is already being done for free.
• Set expectations with clients now. Establishing a rhythm for how and when clients provide records can’t wait for the next engagement review. For clients already in scope, that conversation needs to happen immediately. For those coming into scope in 2027, you still have time to establish the right pattern before obligation arrives.
• Segment clients by readiness and urgency. Some clients are already using digital systems and will transition smoothly. Others will need significant support. With the 7 August deadline approaching, trying to move everyone at once is a route to bottlenecks. Prioritise clients above the £50,000 threshold first, and use what you learn to prepare for the second cohort.
• Use the first quarterly submissions as a calibration exercise. The window for low-stakes testing has closed, but the first round of live quarterly updates will reveal process gaps before they become embedded. Treat it as a structured learning exercise.

Final thoughts: Making the real transition

Navigating MTD smoothly might not be about having the latest and greatest software. It’ll be more about recognising how MTD for Income Tax changes the economic relationship between practice and client.

Annual compliance was annual and bounded. Quarterly reporting is continuous. And continuous work, delivered without continuous pricing, is a business model problem—not a technology problem. You may understand the rules behind MTD for Income Tax. The harder question is whether your firm is ready for what those rules do to the way you operate—and how you get paid.