Why the MTD delay isn’t a reason to ignore it
Making Tax Digital (MTD) has been hanging around accounting conversation for what feels like forever, and this year brought further delays to an already long-awaited process. The original April 2024 for MTD ITSA has been postponed due to other challenges, which pushes that deadline to April 2026 for those earning over £50,000 and April 2027 for those with incomes between £30,000 and £50,000.
While some firms may applaud the decision, this is not an excuse for complacency. The MTD agenda is part of a broader shift in accounting that has been gaining steam in recent years. With digital tools becoming more common in accounting practices and businesses, it was only a matter of time until regulators joined the party.
The most recent delay in implementation provides valuable time for accountants to engage with the technology shift on their own terms, with more breathing room to choose the right technology for your practice, educate clients and build new processes, ready for the new changes. However, firms who leave it to the last minute may find that 2026 may come around much faster than they expect.
What’s the latest news on MTD?
While MTD for VAT has been in place since 2019, it has been postponed again for those completing income tax self-assessments. This phase of MTD was initially set to start in 2018 for ITSA but has seen multiple delays.
The latest news is that MTD for ITSA will be introduced in two phases:
- April 2026: Required for businesses, sole traders, and landlords earning above £50,000 annually.
- April 2027: Required for businesses, sole traders, and landlords earning above £30,000 annually.
- General partnerships and those earning less than £30,000 annually are yet to be mandated.
- Businesses in existence just before April 2026 will have to follow the new legislation, regardless of whether their accounting period ends when it comes into force.
- Clients that meet both the VAT and income tax criteria must sign up separately.
How do MTD penalties work?
The MTD penalty system operates on a points system, where non-compliance results in points based on specific MTD rules. If advisors miss deadlines, leading to clients gaining points, they might be held responsible for resulting fines.
- Each late submission earns taxpayers a point, with fines imposed after hitting a set threshold.
- A £200 fine applies upon reaching this threshold, with further fines for each subsequent delay.
- Points expire two years after they're awarded.
Why now is the time to prepare
Despite the 2026 delay, the need for financial professionals to adapt and evolve their processes for the digital age is not going away. Clients still face a range of challenges in the day-to-day running of their businesses, including late payments, limited visibility and bad data.
While it can be debated whether MTD will be the magic bullet to solve these issues, thousands of firms have already shown the huge progress that is possible when working with modern, cloud tools.
- Accuracy and Efficiency: Moving away from physical invoices and receipts – going digital – means saying goodbye to filing cabinets, lost documents and dragging around bags of paper. MTD-compatible software also cuts the human error in data entry and transfer with information that just flows.
- Less processing stress, faster refunds: Digital tax return can be checked, submitted and approved much faster, shortenign the window between providing your clients’ information and that all important refund.
- Value-driving data: The move to digital data gives you real-time insight into your clients’ businesses, helping you build closer relationships that drive tangible value. What’s more, better data can also be used to drive new services such as advisory and forecasting, through Futrli’s Sage-integrated modeling platform.
- Scalability and growth: Ditching the desktop system for a cloud-first paltform means you can add clients from anywhere, without needing to collect receipts or handle face to face meetings, ideal for the new world of remote work. And by automating much of the time consuming work on manual compliance, you can grow your firm without adding headcount.
Make the change on your terms
MTD and the wider digital shift in accounting is coming, delays or not. With more consumers, businesses and authorities adopting online services, accountants need to adapt to the new expectations of the market. By getting in on the change early, you can take the time to understand the needs of your clients and your firm to build a system that works and take full advantage of the possibilities of new technology.
Futrli is the value-extending advisory solution for modern firms, fully integrated into Sage, QuickBooks Online, and Xero enabling you to perform instant three-way forecasts, model new scenarios and connect your data to build a service that drives results for you clients.
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