Making Tax Digital for ITSA: why quarterly reporting needs better records
For many Self Assessment clients, the annual tax return process has always followed a familiar pattern.
Records are gathered after the tax year ends. Bank statements, spreadsheets, receipts and explanations are sent to the accountant. Questions are answered during the tax return process. The final return is reviewed once a year and then submitted.
Making Tax Digital for Income Tax Self Assessment changes that rhythm.
Under MTD for ITSA, the challenge is not simply that information must be submitted more often. The real change is that records need to be kept up to date throughout the year.
For clients used to paper bank statements, annual catch-up bookkeeping, mixed personal accounts or incomplete spreadsheets, this can be a much bigger adjustment than expected.
MTD is not just another tax return deadline
MTD for ITSA requires qualifying sole traders and landlords to keep digital records and send quarterly updates to HMRC using compatible software.
HMRC’s current timetable introduces MTD for ITSA in phases. It applies from 6 April 2026 for individuals with qualifying income over £50,000, from 6 April 2027 for qualifying income over £30,000, and from 6 April 2028 for qualifying income over £20,000. Qualifying income broadly means gross income from self-employment and property before expenses.
You can check the current timetable on the GOV.UK Making Tax Digital for Income Tax page.
The important point is that MTD changes the working process.
The annual Self Assessment model allowed many clients to deal with their records after the event. MTD moves the process closer to real-time record keeping. That means better habits, better systems and more regular cooperation.
Annual tax return habits do not always work under MTD
Many self-employed individuals and landlords are used to working in a fairly informal way.
For example, they may:
- use several bank accounts
- pay business expenses from personal accounts
- use personal credit cards for business costs
- send paper or PDF bank statements once a year
- keep partial spreadsheets
- gather receipts after the tax year has ended
- rely on the accountant to reconstruct the records
This may have been manageable under a traditional annual tax return process, although it was never ideal.
Under MTD, it becomes much harder.
Quarterly reporting depends on having timely, reliable records. If the records are incomplete, spread across different accounts, or provided in manual formats, the time needed to prepare each quarterly update can increase significantly.
The more time is spent sorting, scanning, data entering and reconciling, the more expensive and error-prone the process becomes.
MTD needs better banking hygiene
For MTD to work properly, clients need cleaner banking habits.
This does not necessarily mean every business must have a complex finance system. But it does mean the records need to be consistent and accessible.
Good banking hygiene usually means:
- using a dedicated business bank account
- keeping business and personal spending separate where possible
- minimising business payments from personal credit cards
- connecting bank feeds to bookkeeping software
- keeping bank feeds active
- using a consistent process for receipts and invoices
- responding promptly to bookkeeping queries
If business income and expenses are mixed across personal accounts, credit cards, cash payments and incomplete statements, quarterly reporting becomes much harder to manage.
The accountant can help maintain the records, but cannot make incomplete or inaccessible records reliable without extra work.
For this reason, CooperFaure does not see MTD as a process that can sensibly be built around paper statements, manual scanning, repeated data entry and annual catch-up habits. That approach is likely to become costly, inefficient and unreliable.
Software is part of the client’s digital record
MTD requires compatible software.
This can sometimes cause confusion.
Some clients see the software as something the accountant owns or uses internally. They may feel that if they do not personally log in every day, they are paying for software they do not use.
That is not the right way to think about it.
The software is the client’s digital record-keeping system. It holds the bookkeeping data, connected bank feeds, transaction history, digital ledger and supporting records used to prepare quarterly updates and year-end submissions.
The accountant may help set it up, manage the bookkeeping and maintain the records within it. But the underlying data belongs to the client. The accountant is helping to tend and report from those records.
The software cost is therefore part of the cost of maintaining digital records for MTD. It is separate from the professional time needed to review, reconcile, correct and submit the information.
Bank feeds and access need to be maintained
Using software is not a one-time setup task.
Bank feeds may need to be authorised and reauthorised. Credit card feeds may disconnect. New accounts may need to be added. Clients may need to provide access, approve connections or answer software-related questions.
If bank feeds disconnect and no one notices, records can quickly fall behind.
If access is not maintained, the accountant may be forced back into manual work, such as requesting statements, importing data, checking missing periods and reconciling gaps.
That additional work takes time and can increase the cost of support.
For MTD, keeping the software connected and the records accessible is part of the ongoing compliance process.
Catch-up bookkeeping is not the same as ongoing bookkeeping
A common misunderstanding is that providing bank statements is the same as having bookkeeping records.
It is not.
If a client starts MTD support part way through a tax year, there will usually be catch-up work before quarterly reporting can be brought properly up to date.
This may involve:
- collecting missing bank records
- importing bank transactions
- mapping spreadsheet or statement data into software
- reviewing credit card activity
- identifying business and personal transactions
- requesting missing receipts
- reconciling bank accounts
- correcting historic entries
- preparing the records for quarterly reporting
This catch-up work is separate from routine quarterly reporting and is normally billed based on the time required.
The cost will depend on how late in the year the process starts, how good the digital records are, how many accounts or credit cards are involved, how much business and personal spending is mixed together, and how quickly the client can answer questions.
A client who starts early with clean digital records will usually be much easier to onboard than a client who starts late in the year with PDF statements, spreadsheets, missing receipts or mixed personal accounts.
The later you start, the more catch-up may be needed
Timing matters.
If records are reviewed early, there is time to set up software properly, connect bank feeds, agree the bookkeeping process and deal with any gaps before the quarterly reporting cycle becomes urgent.
If the process starts late in the year, the accountant may need to reconstruct several months of records before the current quarter can be reviewed.
This can make the transition more expensive and more stressful than it needed to be.
For this reason, we recommend preparing before MTD obligations begin, not after the first deadline is already approaching.
Quarterly reporting requires more regular cooperation
MTD changes the rhythm of the relationship between the client and accountant.
Under the traditional Self Assessment model, there may have been only one or two major touchpoints each year. Under MTD, there will be more frequent review points.
Records need to be maintained during the year. Queries need to be answered promptly. Missing information needs to be dealt with while it is still fresh.
The accountant can provide the systems, process and support, but the client still needs to cooperate.
That may mean:
- maintaining access to bank feeds
- providing missing statements or receipts
- answering transaction queries
- confirming whether costs are business or personal
- reviewing quarterly information
- approving or acknowledging submissions
- telling the accountant about new income sources or accounts
Without timely cooperation, the process can fail.
The responsibility for the accuracy and completeness of the tax record ultimately remains with the taxpayer. MTD does not remove that responsibility. It makes timely cooperation more important.
Quarterly updates still need client awareness and sign-off
Under the annual Self Assessment model, the main client approval point was usually the annual tax return.
MTD introduces quarterly updates during the year, followed by the final declaration.
Quarterly updates are not the same as a full tax return. However, the client still needs to be aware of what is being submitted.
We will therefore need clients to review and confirm the quarterly position, or at least confirm that the records provided are complete and that they are happy for the update to be filed.
This is important because the accountant can prepare, review and submit the information, but the client must still engage with the process and confirm that the records are complete.
The final declaration remains the more formal year-end approval point. At that stage, the full tax position is reviewed, final adjustments are made and the client approves the final submission.
In practical terms, MTD creates several approval points during the year rather than one annual approval point.
What good MTD preparation looks like
A good MTD process is not complicated for the sake of it. It is designed to make quarterly reporting manageable.
A sensible setup usually includes:
- compatible bookkeeping software
- a dedicated business bank account
- connected bank feeds
- clear separation between business and personal spending
- a receipt capture process
- agreed quarterly review dates
- prompt responses to bookkeeping queries
- clear sign-off before submissions
- an understanding of what is included in routine support and what is catch-up work
The aim is to reduce manual processing and improve the reliability of the records.
The cleaner the process, the more time can be spent reviewing and advising rather than reconstructing basic data.
What happens if records are late or incomplete?
If records are late, incomplete or provided in manual formats, the quarterly process becomes more difficult.
This may lead to:
- additional bookkeeping time
- higher costs
- delayed submissions
- more queries
- increased risk of errors
- more pressure near deadlines
- less useful management information
Where catch-up or reconstruction work is needed, this is usually charged separately based on the time required.
This is not intended to be punitive. It reflects the reality that manual or incomplete records take longer to process.
MTD is an opportunity to improve the process
Although MTD may feel like an extra burden, it can also be an opportunity.
For clients who move to proper digital records, MTD can lead to better visibility during the year. Instead of waiting until after the tax year ends, the client can have more up-to-date information about income, expenses and potential tax exposure.
That is only possible if the underlying records are reliable.
Used properly, MTD can help move the process from annual reconstruction to ongoing record keeping.
But that requires the right setup and the right working habits.
Practical checklist for clients preparing for MTD
If you may be affected by MTD for ITSA, it is worth asking:
- Do I have a dedicated business bank account?
- Are business and personal transactions clearly separated?
- Are my bank feeds connected to bookkeeping software?
- Do I have a process for receipts and invoices?
- Do I use personal credit cards for business expenses?
- Are my records up to date?
- Could my accountant review the current quarter without major catch-up work?
- Do I respond promptly to bookkeeping queries?
- Do I understand the software cost and what it is used for?
- Am I prepared to review and approve quarterly submissions?
- Have I allowed for catch-up work if starting part way through the year?
If several of these answers are unclear, it is better to review the position early.
How CooperFaure can help
CooperFaure can help sole traders and landlords prepare for Making Tax Digital for ITSA.
We can support with:
- reviewing whether MTD may apply
- setting up compatible software
- connecting bank feeds
- reviewing banking and record-keeping habits
- bringing records up to date
- ongoing bookkeeping support
- quarterly update preparation
- final declaration support
- identifying where catch-up work may be needed
- helping clients understand what will be required each quarter
Our approach is built around reliable digital records, regular cooperation and clear expectations.
If you are used to providing records once a year, now is the time to review whether that process will still work under MTD.