At a glance
- Mandatory software filing for company accounts begins 1 April 2027.
- The changes aim to increase transparency.
- Small companies will no longer be able to file abridged accounts.
- Some firms face new software costs.
Making Tax Digital (MTD) for Income Tax (IT) is now less than 100 days away for self-employed individuals and landlords with qualifying income over £50,000. Preparations have been uneven: in September 2025, Wolters Kluwer said 42% of accountants had reported more than half their clients were not yet submitting tax data digitally or using accounting software. Many accountants are still working on the transition to MTD.
Last year’s Budget announced a soft landing for the rollout, with first-year penalty relief for quarterly updates. This should make the transition easier while clients and their advisers adjust to the new legislation.
But many accountants are likely to be cautious about how they communicate these changes to their client base. The timeline for the MTD for IT regime remains unchanged, and the soft landing will only apply for 2026/27 – not subsequent years. Even with the soft landing in place, clients need to act soon.
What are the changes?
There will be no penalties for quarterly updates in the first year of the mandate. Landlords and sole traders mandated for MTD for IT from April 2026 will not receive penalty points for their first four quarterly returns.
This covers the following periods:
- 6 April 2026 to 5 July 2026 (due on 7 August 2026);
- 6 July 2026 to 5 October 2026 (due on 7 November 2026);
- 6 October 2026 to 5 January 2027 (due on 7 February 2027); and
- 6 January 2027 to 5 April 2027 (due on 7 May 2027).
The penalty points system for MTD for IT is similar to that for VAT. Those who exceed a threshold face a £200 penalty.
Mandated clients will still need to submit their MTD for IT tax return on time, which for 2026/27 is due on 31 January 2028.
A moral victory
Robyn Milstead is director of tax at LKA Chartered Accountants and founder of the Accountants Therapy community for sharing Making Tax Digital information. She thinks the soft landing is a “moral victory” for accountants and mandated businesses, due to the significance of the changes and work associated with moving across to new systems:
“With current levels of readiness – particularly amongst the unrepresented – being low, it would not have been right to launch with the potential for financial penalties accruing,” she says.
However, Milstead points out accountants who have taken the time to communicate non-compliance implications to clients will now need to update and correct them.
“It puts agents in a difficult position where they have been taking the time to educate their clients and now find the playing field altered,” she says.
Potential pushback from clients
A potential implication from the soft landing is pushback from a subset of mandated clients.
Sole trader and landlord clients are often price-sensitive, because they have relatively straightforward financial affairs. So they often shop around to find the cheapest compliance service from accountants.
MTD for IT will require more work by accountants, including more timely data, quarterly submissions, and potentially a move to new software. So many firms will likely increase their prices.
“It puts agents in a difficult position where they have been taking the time to educate their clients …”
– Robyn Milstead
It’s possible price-resistant clients will push back on paying higher fees during the soft landing period if they don’t believe there is a requirement to make the quarterly filings.
Milstead thinks this could result in “awkward conversation” about “paying for something that doesn’t result in a penalty.”
Communication strategy
Firms may choose to be cautious about how they communicate the new soft landing, because they don’t want to raise the risk of client non-compliance.
Richard Hepburn, managing director at Gorilla Accounting, says this isn’t something they will “shout about” to clients. His practice is part of the MTD for IT pilot and has well-defined quarterly processes. A fair proportion of its client base is already taking part in the beta trial.
Hepburn’s practice won’t include news about the soft landing in their emails or marketing materials. But they will discuss it with clients on a case-by-case basis, he says, letting them know the pros and cons.
Easing client concerns
Hepburn thinks that some mandated landlords and sole traders were fearful of falling foul of the mandate and receiving penalties. Now, he suggests, they may now be more enthusiastic due to the soft landing timeline. “It might encourage clients to jump on board, knowing that there’s not going to be any penalties,” he says. He adds that the soft landing will give clients “breathing room to get used to the new way of working with quarterly submissions”.
But he doesn’t think this will result in voluntarily early adoption from self-assessment clients who fall below the 2026/27 income threshold of £50,000. If these lower-income clients are going to switch to MTD for IT sooner, he says, that move will be led by their accountants:
“I couldn’t see anyone come onto [MTD for IT] sooner than they are required to,” he says. But he adds: “I can foresee how some accountants who take a proactive approach could have conversations about clients below the threshold joining sooner due to the soft landing“.
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