Making Tax Digital: what a practice can automate, and what it can’t

Making Tax Digital for Income Tax is now live. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have had to keep digital records and report to HMRC every quarter. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. For a practice, the first cohort is its highest-earning self-employed and property clients. The next two bring in most of the rest of the book.

The obvious response is to automate MTD. That is half right. One part of it automates almost completely, one part automates only up to the client’s front door, and one part should not be automated at all. Knowing which is which decides whether software saves the practice time or only moves the work to a different stage.

Five deadlines where there used to be one

Each client in MTD now has four quarterly deadlines, 7 August, 7 November, 7 February and 7 May, then the tax return by 31 January. The work was once a single January rush. It is now a steady flow all year, and the second deadline of the first year falls on 7 November 2026.

HMRC has published how the first deadline went. More than 436,000 sole traders and landlords had sent their first quarterly update, out of more than 570,000 who had signed up. The same announcement confirms that no penalty points will be issued for late quarterly updates in the 2026 to 2027 tax year. From April 2027, missing four deadlines leads to a £200 penalty. This year is the one to find out which clients will miss deadlines, while missing one still costs nothing.

The quarterly update is the easy part

Look at what HMRC actually asks for. A quarterly update contains totals for each income and expense category, and it is cumulative: each one covers the tax year to date, so a mistake in the first quarter is corrected in the next update rather than by amending the first. The guidance also says: “You do not need to make any accounting or tax adjustments before sending a quarterly update.”

So a quarterly update is a sum, not a judgement. Once the transactions are in and each one has a category, working out the totals and sending them is mechanical. Recognised software already does it. The part worth building is categorisation. A landlord’s bank feed, or a plumber’s card payments at a builders’ merchant, can be categorised automatically, with a person reviewing only the transactions the system is unsure about. Because updates are cumulative, a wrong category in July costs a correction by November, not an amendment to the return.

The records are the hard part

Everything upstream of the totals depends on the client. HMRC’s record-keeping rules require every transaction to be recorded digitally with an amount, a date and a category, and the original invoices and statements still have to be kept. Once a record is in the software, it cannot be moved to other software by copy and paste or by retyping. Linked spreadsheet cells, CSV import and export, and API transfers are allowed.

That rule matters for how a practice works. The familiar routine of receiving a client’s spreadsheet by email and retyping the totals into the practice’s software is no longer allowed. The data has to arrive in a form that can be imported, which means the practice either gets clients onto something that exports cleanly, or receives the raw material and does the record-keeping itself.

This is where automation earns its keep, and it is not the tax. It is the chase: a client portal that takes a photo of a receipt or a bank export, knows which clients have sent nothing since the last quarter, and sends reminders on a schedule with no one at the practice having to remember. For accountancy practices, the chase was already the most expensive part of the year. MTD makes it happen four times a year instead of once.

The quarterly update is a set of totals. The tax return is a set of judgements. Automate the first, and build tools that support the second.

Some of it cannot be automated. A client who keeps receipts in a carrier bag until December will not become a digital record-keeper because a portal exists. Software can show a practice which clients those are by the end of the first quarter. It cannot make them change, and the fee conversation that follows is not a software problem.

The return still needs an accountant

The tax return is where the accounting and tax adjustments, losses and the client’s other income come together. HMRC’s guidance says only the main agent can submit a client’s return, and that the agent must share a copy with the client and get written confirmation that it is correct and complete. These are the professional decisions the client pays for, and the law assumes a named person makes them.

Software can still do a lot of the groundwork. It can flag a repair that looks like an improvement, a cost that has doubled since last year, or a missing category a similar client always has. It can put together a pack for review, so the accountant starts from a list of questions rather than a pile of transactions. Where it goes wrong is when it makes the judgement quietly and presents the result as if it were a sum.

Buy the filing, build around it

Some practices will consider building their own connection to HMRC. The requirements make the case against. HMRC grants production access only to software that meets its minimum functionality standards, and those cover the whole journey: digital records, quarterly updates, tax estimates, adjustments, losses carried forward, back and sideways, and the tax return itself, or sending the customer to software that can file it.

On top of that, fraud prevention headers are a legal requirement on the MTD for Income Tax APIs, and a provider that keeps sending incorrect data can be fined and blocked. All of that is a product with obligations of its own, and recognised products already cover it.

The better split is to buy recognised software for the filing and build the automation around it: collecting documents, categorising transactions and flagging exceptions, chasing clients, and a dashboard showing every client’s position against the next deadline. Every piece connects to the filing software through an import or an API, so the digital links rule holds, and changing the filing product later does not mean rebuilding everything else.

The question worth asking first

Before choosing any tool, count how many of the practice’s MTD clients have sent a usable record since 6 July. That number shows where the work is. If it is most of them, the quarterly pipeline is worth automating now. If it is a few, the problem is the chase, and a faster way to send totals to HMRC will not solve it.

Common questions

Written by the Voxalone team. If this raised a question about your own systems, get in touch — you will get a straight answer from an engineer, with no obligation attached.