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Making Tax Digital for Agents: What Your Practice Needs to Do
A practical guide for accountants, bookkeepers and tax agents - covering the Agent Services Account, client communication, pricing, software decisions, and workflow planning. Based on official HMRC, ICAEW and ACCA sources.
The opportunity nobody's talking about.
MTD for Income Tax moves filing from once a year to five times a year. That's more checking, more chasing, more client contact - and a legitimate basis for reviewing your fees. Many accountants see MTD as as much an opportunity as a challenge: the practices that treat it as a pricing and service design exercise, not just a compliance one, will come out ahead.
Who's in scope - and when
MTD for Income Tax applies to individual sole traders and landlords - not limited companies, not partnerships (yet). The threshold is based on qualifying income: total gross income from self-employment and property combined, before expenses. Employment income, pensions, savings and dividends don't count. GOV.UK
| Start date | Qualifying income threshold | Reference tax year | Approx. numbers |
|---|---|---|---|
| 6 April 2026 | Over £50,000 | 2024-25 return | ~780,000 |
| 6 April 2027 | Over £30,000 | 2025-26 return | ~970,000 |
| 6 April 2028 | Over £20,000 | 2026-27 return | ~900,000 |
Around 60% of the first cohort have an accountant. If you haven't identified which clients are in scope, now is the time - HMRC uses qualifying income from the most recent filed SA return. ICAEW
Once in, they stay in. A client mandated into MTD remains in the regime even if their income drops below the threshold, unless they opt out after three consecutive tax years below the threshold. GOV.UK
Setting up your Agent Services Account
You need an Agent Services Account (ASA). This is separate from your existing Online Services for Agents (OSA). GOV.UK
- One per firm. Each practice has a single ASA, linked to the firm's UTR. Multiple OSA accounts all link to the same ASA. ICAEW
- Separate Government Gateway ID. New credentials issued. Different from OSA credentials. Note them down carefully. ATT
- You may already have one. If your firm uses Trust Registration Service, handles MTD for VAT, or files 60-day CGT reports, you likely already have an ASA. GOV.UK
- The OSA keeps working. Existing OSA accounts continue for non-MTD services. ICAEW
Common login confusion. Agents log into ASA using old OSA credentials (or vice versa). The screens look similar. Keep ASA credentials clearly labelled and separate. Once your practice account is ready, the first-login guide for accountants walks through the aligned.tax setup. ATT
Adding existing client authorisations
If you already hold Self Assessment authorisations in your HMRC online services account, you can add them to your Agent Services Account using the relevant Self Assessment agent code. This usually does not require the client to authorise you again, but it does not sign the client up for Making Tax Digital. GOV.UK
How it works
Sign in to your Agent Services Account and select "Add existing Self Assessment authorisations to your agent services account." Add the Self Assessment agent code linked to those clients. HMRC adds all authorisations linked to that code; repeat the process for any other Self Assessment agent codes. GOV.UK
Added authorisations make you the main agent for those clients. A main agent can submit quarterly updates and tax returns and view tax calculations. You or the client must still sign up each eligible client for Making Tax Digital. GOV.UK
The link stays active: adding or updating Self Assessment clients in your HMRC online services account updates the permissions in your Agent Services Account. Adding authorisations does not remove access from your HMRC online services account. GOV.UK
Clients without an existing authorisation
A client who has not already authorised you for Self Assessment uses the digital handshake. Send the HMRC authorisation link and ask the client to sign in using the correct tax account. The link expires after 21 days. Choose main agent or supporting agent when creating the relationship. GOV.UK
Main agent vs supporting agent. A main agent can submit the client's tax return and view tax calculations. A supporting agent can submit quarterly updates but cannot submit the tax return or view calculations. A client can have one main agent and multiple supporting agents. See agent authorisation explained for the aligned.tax steps. GOV.UK
Segmenting your client base
Not every client needs the same approach. ICAEW research shows segmented approaches report smoother onboarding. ICAEW
Over 40% of accountants report more than half their affected clients not yet digitally prepared. Start with straightforward clients. ICAEW
Software decisions: full accounting vs bridging
A practice-level decision with client-level variation. You'll likely use a mix.
Full accounting software
Xero, FreeAgent, Sage, QuickBooks. Best for high transaction volumes, multiple income sources.
Bridging software
Reads data from spreadsheets and submits to HMRC. HMRC explicitly supports this. Best for simple, predictable affairs. GOV.UK
You don't have to change your templates. If your practice already has spreadsheet templates that work, bridging software like aligned.tax connects to them directly. No reformatting. No migration.
Switching isn't complex - even mid-year
Quarterly updates are cumulative, so each replaces the last. If a client switches part-way through the year, the next submission covers the full period from 6 April. GOV.UK
HMRC allows multiple compatible software products together. GOV.UK
Communicating with clients
What clients need to hear
- It's not extra tax
- Quarterly updates are not tax payments
- They don't need to do everything from 6 April
- Year one is forgiving (no penalty points for late quarterly updates in 2026-27). GOV.UK
- Spreadsheets are fine
- They need to agree their role
Engagement letters
Update engagement letters to reflect new scope. An annual SA engagement doesn't cover quarterly submissions. ICAEW
Discuss penalties before sign-up. HMRC's agent toolkit explicitly states agents must discuss the penalty regime with clients before signing them up. GOV.UK
Workflow: who does what
The biggest question: who records the transactions, and who submits them?
Option A: Client does bookkeeping, you review and submit
Lightest-touch. Your role is quality assurance and compliance.
Option B: You do the bookkeeping and submit
More hands-on, crosses into bookkeeping territory. Higher fee.
Option C: Mixed approach
Blend based on client capability. Key is clarity upfront.
Digital records don't mean the client must be online. A client could keep handwritten logs. You enter them into a spreadsheet and submit. The requirement is that records exist digitally and are digitally linked. GOV.UK
Bridging software fits naturally here. Whether the client fills in your spreadsheet template or you fill it in, aligned.tax connects to any spreadsheet and handles the HMRC submission. Free, works with existing templates, doesn't require a client account.
Pricing and fees
The conversation many practices have been avoiding. MTD adds four quarterly updates alongside the annual tax return. That's a material increase in workload. ICAEW
What ICAEW says
Move towards value-based rather than time-based pricing. Modular service pricing linking fees to deliverables. ICAEW
Practical approaches
Tiered packaging. Compliance-only, managed, advisory tiers. Priced transparently. ICAEW
Monthly billing. Challenges in the transition year but spreads cost. ICAEW
Software cost decisions. Free bridging software = one less cost. See the current practice pricing when you plan fees and client capacity.
Free software changes the pricing conversation. The fee discussion focuses on time and expertise, not licensing costs.
Don't absorb the cost silently. The biggest risk isn't charging too much - it's charging nothing and building resentment. ICAEW
Key dates at a glance
For clients joining from 6 April 2026:
| Date | What happens |
|---|---|
| 6 April 2026 | MTD starts - clients must begin keeping digital records |
| 5 July 2026 | End of Q1 |
| 7 August 2026 | Q1 quarterly update deadline |
| 5 October 2026 | End of Q2 |
| 7 November 2026 | Q2 quarterly update deadline |
| 5 January 2027 | End of Q3 |
| 31 January 2027 | 2025-26 SA returns due (old system - overlaps with MTD Q3) |
| 7 February 2027 | Q3 quarterly update deadline |
| 5 April 2027 | End of Q4 / end of tax year |
| 7 May 2027 | Q4 quarterly update deadline |
| 31 January 2028 | Tax return deadline for 2026-27 |
The January 2027 crunch. The 2025-26 SA return deadline (31 January 2027) falls right next to the Q3 MTD update deadline (7 February 2027). For any practice doing both, this is a capacity pinch point. Plan ahead. ICAEW
The penalty regime - what to tell clients
Points-based system. Each missed deadline = 1 point. At 4 points, £200 penalty, plus £200 for each subsequent. GOV.UK
2026-27 soft landing. For clients joining in April 2026, HMRC will not apply penalty points for late quarterly updates during the 2026-27 tax year. Penalty points for late tax returns still apply from the start. From 2027-28, quarterly-update penalty points also apply. GOV.UK
Late payment penalties
Separate from submission penalties. For 2026-27 payments, the rates are 3% at day 15, another 3% at day 30 and 10% a year charged daily from day 31 until the tax is paid, or for up to two years. For 2027-28 payments, the day-15 and day-30 rates are 4% each, with the same 10% annual rate from day 31. In a client's first year under the new rules, paying in full or contacting HMRC to arrange a payment plan within 30 days prevents the day-15 penalty. Late payment interest is separate and runs from day one. GOV.UK
Volunteers do not receive penalties for late quarterly updates while volunteering. Penalty points still apply to late tax returns, with a threshold of 2 points. GOV.UK
The commercial opportunity
A compliance obligation but also a structural shift creating opportunity.
More touchpoints. Quarterly submissions mean quarterly engagement. ICAEW
Earlier tax estimates. Proactive advising vs reactive calculating.
Winning new clients. Around 40% of the first cohort don't have an accountant.
Competitive positioning. Keep things simple. "Keep your spreadsheet, we handle the submission."
Fee uplift is legitimate. One annual submission is now five.
The long view. April 2026: 780,000. April 2027: 970,000. April 2028: 900,000. By 2028, up to 2.9 million individuals in MTD.
Keep your templates. We handle the submission.
aligned.tax connects to any spreadsheet, with no client accounts to set up and no software to learn - just your existing workflow, submitted to HMRC in seconds.
Works with Excel, Google Sheets, and any spreadsheet template you already use.
Sources
- GOV.UK - Get ready for MTD: agent toolkit
- GOV.UK - Add your client authorisations for MTD
- GOV.UK - Making Tax Digital for Income Tax: step by step
- GOV.UK - Penalties for Making Tax Digital for Income Tax
- ICAEW - Making Tax Digital guidance hub
- ICAEW - Preparing your practice for MTD: effective pricing strategies
- ICAEW - Prepare for 2026: MTD income tax is here
- ICAEW - MTD for income tax: sign up your clients now
- ICAEW - Agent Services Account guidance
- ACCA - MTD and agent services accounts
- ATT - Agent Services Account: common issues and how to fix them
- HMRC - What accountants, agents and bookkeepers need to know
- HMRC Developer Hub - Income Tax MTD end-to-end service guide
This guide is for information only and does not constitute professional or tax advice. Always check GOV.UK for the latest guidance.
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