Budget 2026 and Making Tax Digital: what accounting firms should do before April 2027
The Budget headlines on 28 October were about energy bills. The Making Tax Digital news was in the small print. Sole traders and landlords joining MTD in April 2027 will get a year without late-submission penalty points. Those who joined in April 2026 won’t. From April, your practice will be running MTD at two speeds.
4 min read · For UK accountancy firms
What changes on 6 April 2027
| Change | What it means for your clients |
|---|---|
| MTD threshold falls to £30,000 | Around 1,077,000 more sole traders and landlords must keep digital records and file quarterly updates. |
| New: penalty-free year for the 2027 cohort | No late-submission penalty points on quarterly updates in 2027/28 for those joining in April 2027. They must still send their quarterly updates before they can file their tax return. |
| First cohort moves onto full penalties | Clients who joined in April 2026 get a point for each late update. At 4 points there is a £200 penalty, then £200 for each further late update. |
| Late payment penalties apply to everyone | 4% at day 15, another 4% at day 30, then 10% a year from day 31. The Budget does not ease this. |
| New: higher property income rates | Rental profits taxed at 24%, 44% and 49% (England, Wales and Northern Ireland), four points above the main rates. |
| Then, April 2028 | The threshold falls to £20,000, bringing in around 975,000 more people. |
Further ahead, the Budget confirms that payments on account will be replaced by more regular, automated in-year payments from April 2029.
The real problem is the quarterly chase
Most first-cohort taxpayers who were signed up filed their first update, but many people who should be in MTD aren’t in it yet. In our view, the hard part is usually not the software. It is getting records out of clients four times a year, on time, without the team spending a week chasing before every deadline. A penalty-free year for newcomers removes the fines. It doesn’t remove the chasing.
A six-step plan for the winter
- Split your MTD clients into 2026 and 2027 cohorts. The first group’s penalties go live in April.
- Use 7 November as a dress rehearsal. Find out why first-cohort clients were late in August and fix it while there are still no penalties.
- List and sign up your 2027 cohort now from 2025/26 gross income. The easement removes points, not deadlines.
- Send new engagement letters covering quarterly scope, fees and client responsibilities, and get them signed before April.
- Set up a quarterly collection calendar. Requests go out on fixed dates, reminders are automatic and every upload lands in one place.
- Brief landlord clients on the 24% property rate before their first quarterly estimate shows it.
For the longer version, including what the professional bodies asked for and what they got, read Daniel Stachowiak’s piece on AccountingWEB: Budget 2026: MTD gets a second soft landing, but not for everyone.
How MyDocSafe helps
MyDocSafe gives every client a secure, branded portal, and gives your team the tools to run the quarterly routine:
- Request information from a whole client group at once. Set up one group per cohort, and one form with a file upload reaches every client in it.
- Deadlines and automatic reminders on workflows, so clients get nudged before each quarterly date without anyone on your team having to remember.
- E-signature for engagement letters, with repeat reminders, so the new MTD letters get signed before April.
- Recurring tasks with deadline reminders for your team, so every client’s quarter is tracked. Tasks are included on Business Pro.
- Encrypted storage with UK/EU data residency and a full audit trail for every document a client sends.
Two cohorts, four deadlines a year, one process
Start a free trial, or talk to us about setting up your quarterly collection process this winter.
Sources: HM Treasury and HMRC, Budget 2026: Overview of Tax Legislation and Rates, 28 October 2026 (paragraphs 1.1–1.2 on property income rates, 2.31 on in-year payments, 2.36 on the MTD penalty easement). GOV.UK guidance on Making Tax Digital for Income Tax penalties. HMRC cohort estimates as published on 5 October 2026. Checked 28 October 2026.