Agentic AI: The Future of Accounting & MTD

Agentic AI is software that doesn’t just analyse data. It can plan actions, make decisions, and carry them out within limits that people set. For Making Tax Digital (MTD) for Income Tax, that means AI agents can help with repeatable, rules-based work—such as preparing data, flagging issues for review, and prompting client follow-ups—while accountants review and approve what is sent to HMRC, so they and bookkeepers have more time for judgement and advice.

Here’s what this article discusses:

Why does agentic AI matter for MTD for Income Tax?

Agentic AI matters for MTD for Income Tax because quarterly updates and continuous record-keeping add work that most practices don’t have the capacity for, and AI agents can take on the routine parts of it.

Agentic AI is transforming accounting and bookkeeping right now.

Across Sage, intelligent agents are already planning, reasoning, and acting alongside professionals—amplifying their expertise and unlocking new capacity.

The launch of the MTD for Income Tax Agent marks a decisive step change: routine preparation supported in the background, with accountants reviewing and approving the results, and more time for strategy, clients, and growth.

MTD is exposing a truth the profession already knows: accountants are running out of capacity.

Quarterly updates, digital record-keeping, and client demands are stretching firms further than ever before.

Practices are already under immense pressure. Rising client expectations, increased regulatory complexity, and squeezed margins leave little room for error. Finding enough time to maintain service levels is a daily challenge.

MTD for Income Tax brings a step change in workload: quarterly submissions, continuous data capture, and tighter reporting timelines. Practices must rethink how they manage client data, ensure accuracy, and deliver advice, at scale and speed.

And 2026 is only the start.

From April 2027, employers must report some benefits in kind—company cars, car fuel, vans, van fuel, and employer-provided medical benefits—through payroll in real time, with most other benefits following from April 2028 (GOV.UK). Companies House has also confirmed that, from April 2028, all companies must file their annual accounts using commercial software (GOV.UK).

Practices will face an unprecedented surge in client queries and additional admin, all while talent remains tight and margins thin.

That surge has already started. Since September 2026, HMRC has been signing up sole traders and landlords it believes should already be using MTD for Income Tax but haven’t registered. HMRC writes to these taxpayers directly and doesn’t copy in their agents, so practices are fielding questions about letters they haven’t seen. HMRC’s records are based on historic tax returns, so some letters will relate to businesses that have stopped trading or clients who may be exempt (ATT).

Without automation and AI support, many small and mid-sized firms risk reaching breaking point.

This is where agentic AI makes the difference.

It can support the repeatable, rules-based work—preparing reconciliations, flagging issues, and prompting follow-ups—freeing up human capacity for judgement and strategy, while accountants stay responsible for checking and approving what is submitted.

As Chris Downing, Director for accountants and bookkeepers at Sage, said at Accountex North in 2025, before MTD for Income Tax began:

AI agents for MTD matter because they lay the groundwork for an AI-first future, helping firms build confidence in automation, spot anomalies faster, and create capacity when they’ll need it most.

What changes are coming for accounting practices?

Emma Rawson, Director of Public Policy at the Association of Taxation Technicians, also speaking at a keynote at Accountex North, said that 12 months earlier, the profession was still being convinced MTD was happening.

Accounting and bookkeeping face key collision points on the horizon:

Downing calls out the “hidden work” that clients never see—the chasing, corrections, and compliance housekeeping that consume hours every week.

These aren’t side issues. They’re the silent drain on growth and service quality.

What is the Sage MTD for Income Tax Agent?

The Sage MTD for Income Tax Agent supports set-up and quarterly update preparation for MTD for Income Tax, while accountants review and approve what is submitted.

The MTD for Income Tax Agent was announced at Accountex North.

Accountants decide where the review points sit, and anything ambiguous is routed to a person for review. The exact configuration options depend on the current release.

Here, AI thinks in workflows rather than single tasks:

• Preparation and authorisation: The agent anticipates what needs doing and prompts action, such as reminding you to move client authorisations into the HMRC Agent Services Account (ASA), linking organisations to individuals, and verifying authority. Authorisation with HMRC is then completed manually through the official ASA.
• Guardrails by design: You decide where review points sit, and anything ambiguous is routed for human review. Nothing is submitted to HMRC until the accountant approves it.
• Quarterly updates with context: Instead of repetitive data entry, the MTD for Income Tax Agent reviews incoming information, highlights anomalies, requests missing items, and can submit updates once the accountant gives the green light.
• A guided client experience: For do-it-for-me clients who won’t adopt software, the agent provides simple, repeatable approval and upload flows, while your default motion remains bringing clients into software for full visibility.

As Georgina Timothy, Director of Product Management, Sage for Accountants, explained: “We’ll automate the end-to-end workflow, but you stay in control. The agent takes care of the heavy lifting so you can focus on your clients.”

This isn’t testing the waters. It’s a real leap into agentic workflows purpose-built for MTD, a signal of what the next decade will look like.

Intelligent systems can support background processes such as authorisation prompts, data checks, and preparing submissions for approval, while accountants move up a layer into proactive, insight-driven work.

The shift goes deeper. As HMRC redefines how tax is calculated and reported, automation will change not just how work gets done, but what “doing the work” really means.

The May 2026 release of the MTD for Income Tax Agent takes on more of the quarterly set-up work. It:

• flags which sole trader clients are in scope for quarterly reporting
• matches HMRC income sources to client records using National Insurance numbers
• sets up quarterly reporting jobs in advance, so work starts before each deadline
• shows data checks before anything is submitted
• keeps the whole MTD workflow in one hub

The agent isn’t fully autonomous. Accountants stay in control of review and submission.

As Lisa Ewens, SVP Product, Small Business & Accountants at Sage, explained: “The MTD for Income Tax Agent anticipates the work practices need to complete each quarter and prepares it in advance. It draws on Sage’s deep accounting expertise and trusted financial data to keep accountants firmly in control, handling the administration so they can focus on the judgement work that only they can do.”

For Gary Beeby of Beeby-England, a practice using the agent, the change is in where the work starts: “Instead of starting from scratch, we can focus on reviewing the work and refining it for our clients.”

How does MTD for Income Tax change client tax returns?

Under MTD for Income Tax, HMRC generates estimated tax calculations from the quarterly data submitted through software, and your role shifts from generating the numbers to validating and interpreting them.

MTD digitalises and redefines the tax return.

In the new model, HMRC generates estimated tax calculations based on quarterly data submitted through the software.

However, the annual tax return still needs human checks. Where you act as the client’s main agent, you check the calculation, share the proposed return with your client, get their written confirmation that it’s correct and complete, and then submit it through compatible software. Your client remains responsible for their tax affairs.

You will need to accept your role shifting from generating the numbers to validating and interpreting them.

“The software providers aren’t doing the tax calculation,” explained Downing. “HMRC is. Your job becomes validating and reconciling that information, making sure what HMRC holds matches what your clients have.”

A fundamental change in accountability

Compatible software can help surface missing information, support reconciliation of Pay As You Earn (PAYE), Construction Industry Scheme (CIS), and other data sources, and support end-year adjustments through the business source adjustable summary (BSAS)—the mechanism that ties quarterly updates to final tax adjustments so client records and HMRC’s view stay in sync.

That means less time keying in figures and more time shaping what those figures mean.

The tax return era is evolving into a continuous data exchange—a living process rather than a one-time event.

And that shift sets the stage for the next evolution: agentic workflows that not only automate but anticipate how and when that work gets done.

How can your practice prepare for agentic AI? Five steps

Whether you’re already experimenting with AI assistants or working through MTD for Income Tax, the five steps are the same: segment and sequence your clients, digitise records early, automate the quarterly cycle, price your new service model, and reinvest the capacity you create.

1. Segment and sequence

Start with your £50,000+ sole traders and landlords, who are already using MTD for Income Tax, then plan for clients above £30,000 who join in April 2027:

• Check who HMRC has already signed up. Since September 2026, HMRC has been enrolling taxpayers it believes should be using MTD for Income Tax for 2026/27. Review client records in your Agent Services Account, and flag anyone who has stopped trading or may be exempt. Clients joining from April 2027 or April 2028 still need to sign up themselves or through you.
• Segment clients by their preferred working style.
• This segmentation isn’t only operational. It’s strategic. It determines how far you automate, how you price, and where you’ll free the most capacity.

For a quarter-by-quarter plan, read Help! MTD for Income Tax has started! A practice plan for the year ahead.

For what to do when HMRC signs up a client, read HMRC-led sign-up for MTD for Income Tax: What accountants need to know.

2. Digitise records early

Don’t wait for MTD to force the issue:

• Move laggards onto digital bookkeeping as soon as possible: cloud ledgers for sole traders, bridging or prep tools for CSV and bank-only clients.
• Every early migration compounds the benefit: smoother quarterly updates, fewer manual reconciliations, and a cleaner testing ground for AI-driven workflows.

3. Automate the quarterly cycle

Start shaping how automation will fit into your workflow.

• Identify which tasks your team can safely hand over to automation when available: data reviews, report generation, and client chases.
• Work back from HMRC’s four fixed deadlines (7 August, 7 November, 7 February and 7 May) to flatten peaks and establish a repeatable rhythm.
• Remember, automation isn’t about speed; it’s about flow—turning four mini tax seasons into one.
• Use 2026/27 to get the rhythm right. There are no penalty points for late quarterly updates this tax year, but from 2027/28 missed deadlines count towards the 4-point penalty threshold.

The next quarterly deadline is 7 November 2026. For the 2026/27 tax year, the cycle runs as follows:

Each update is cumulative, covering the tax year to date. Clients who choose calendar quarters (ending 30 June, 30 September, 31 December and 31 March) have the same update deadlines (GOV.UK).

For a step-by-step process, read MTD quarterly updates: A practice guide for accountants and bookkeepers.

4. Price your new service model

MTD isn’t simply a compliance shift. It’s a pricing one:

• Package quarterly reviews and year-end reconciliations into modern, data-driven service tiers.
• Publish clear scope, service levels, and value communication so clients see the benefit of your automation investment.
• Update letters of engagement and schedules of work now, while the transition window allows flexibility.

For example pricing tiers, read Pricing for MTD: How to charge more, and prove it’s worth it.

5. Reinvest the capacity you create

This is where automation pays off:

• Ring-fence the hours you free for cash flow check-ins, tax-planning nudges, and advisory conversations.
• Use quarterly cycles as the backbone for more frequent, proactive engagement, of the kind that builds client trust and long-term revenue.
• Protect that dividend: calendar the time you win back, or it will vanish.

With MTD for Income Tax now under way, and more clients joining in April 2027 and April 2028, you can use it as a test to perfect agentic AI processes.

Start small, document what works, and keep that one principle in mind: capacity creation isn’t a by-product of automation; it’s the goal.

Final thoughts: Authentic Intelligence, in practice

This isn’t AI for AI’s sake.

It’s Authentic Intelligence—people and agents, each doing what they’re best at.

Agents give you back time. You decide how to use it, whether that’s for judgement, relationships, or growth.

That’s the real promise of agentic AI: not replacing accountants and bookkeepers, but expanding what you can achieve.

MTD is the test case. Authentic Intelligence is the destination.