In August 2025, HMRC reported 7.0 million individuals in Income Tax Self-Assessment with landlord or self-employment businesses for 2023-2024. Of those earning over £50,000, a significant portion had an authorised agent. It’s expected that agents will continue to play a crucial role in the enforcement of MTD Income Tax (MTD IT), which will be in effect on April 6, 2026.
For Accounting Practices authorised as HMRC MTD agents on behalf of their clients, the in-between period serves as a preparatory period. However, many accountants can attest to the tedious process of taking a client’s receipts, bills, and financial statements, recording all that data in an Excel Sheet, and then transferring it onto software.
The solution many accounting practices turn to is outsourcing. The process of managing digital records, from creating them to submitting quarterly updates to HMRC, can be outsourced. The benefit of outsourcing as an agent for HMRC MTD agent goes beyond cost-effectiveness; a reliable outsourcing partner serves as a core resource for the accounting practice, taking on additional burdens and providing specialised expertise.
This blog is for accounting practices authorised by clients to represent them, interested in outsourcing MTD for efficient digital records without the hassle of creation or maintenance.
Where do MTD IT Agents stand on preparedness?
Based on various reports and government data, it’s clear that MTD agents are not prepared for the changes that are going to take effect. The reasons are fairly complex and involve issues at various ends. Let’s look at five that we’ve narrowed down.
Lack of detailed information
Research shows that although an impressive 99.6% of agents were aware of the upcoming Making Tax Digital (MTD) IT requirements, only 71% were able to identify the specific requirements involved. More concerning is the fact that only a small proportion of those agents mentioned digital record-keeping as a core requirement. This data reveals a significant knowledge gap among professionals who are responsible for advising and managing client records, indicating a potential blind spot in fully understanding the scope of the new regulations.
Client preparedness and digital capabilities
According to research in July 2025, of the 99.6% of agents aware of the upcoming implementation of MTD IT, 80% communicated with their clients. However, agents with clients relying on paper records or a do-it-for-me approach often struggle due to clients’ lack of digital capabilities. Agents frequently find themselves scrambling to gather paper documents, which often have missing information, in an attempt to create a digital record for their clients.
Improper communication from HMRC
In recent years, HMRC’s communications have continued to improve; however, they still fall short. In July 2025, about 38% of agents received no direct communication from HMRC. Many agents rely on external sources such as professional bodies or software developers. Concerning HMRC support, many agents still feel they lack sufficient support or information to effectively prepare their clients, and they express dissatisfaction with the current HMRC telephone and webchat services.
Increased workload for agents without much return for the client
The start date for MTD IT is 06/04/2026. Agents preparing for this milestone will likely face increased demands, as MTD IT is expected to significantly increase the time and effort needed for agents to assist clients with compliance. One survey indicates that 86% of agents anticipate taking on extra responsibilities. However, many agents simply lack the time to engage in pre-deadline testing or preparation because of their current workloads. With all that additional workload and effort, around 49% of agents express a lack of perceived benefits for MTD IT. Other than improved record keeping with software, many agents feel that the efforts do not seem to outweigh the benefits for their clients.
Software and integration issues
HMRC has published a list of software compatible with its Making Tax Digital (MTD) initiative; however, concerns are growing around software compatibility and the ability of new systems to integrate smoothly with existing workflows. MTD agents frequently face challenges in managing multiple software tools or incorporating legacy systems, such as complex spreadsheets, which require meticulous oversight and testing to ensure ongoing compliance. Agents must also verify that their software can establish automatic digital links, making careful planning, thorough testing, and correct implementation essential for seamless operation.
Outsourcing benefits for agents
Effective incorporation of client’s data
The outsourcing partner brings considerable experience with a wide variety of MTD-compatible software platforms, enabling them to digitise clients’ entire account information. The whole process involves converting traditional, physically maintained information into precise digital form, thereby making account management much more efficient. All in all, the outsourced partner must ensure that the data is correctly integrated into the relevant software, resulting in no errors and significant time savings.
The importance is that the process will no longer require intensive in-house training and investment in client software to affect a smooth transition to digital record management systems. Eventually, it will make the process more accessible, reliable, and scalable to its clients who aim to improve their record management systems.
Evaluate client readiness and confirm HMRC request compliance
Outsourcing agencies help HMRC MTD agent evaluate clients’ readiness for MTD. The agencies assist in understanding the possible difficulties the clients might encounter while undergoing the process and work together to prepare a special plan to make the entire process smooth and effective for the clients to adjust to the digital process seamlessly. The agencies remain up to date with the latest HMRC rules and regulations to perform the tax submission process accurately and within the timeline.
By ensuring that the rules are followed, they minimise the risk of penalties and fines that clients might incur due to discrepancies and delays in the submission process. Besides adding value to the process of following the rules, their experience provides a sense of comfort to agents and clients because the MTD implementation is handled efficiently by the experts.
Higher accuracy and data security measures
Outsourced teams play a vital role in an organisation’s financial health by implementing robust internal controls designed to prevent errors and fraud. They establish comprehensive quality assurance processes that regularly review and verify financial data, ensuring accuracy and compliance with relevant standards. Additionally, these teams implement advanced data security measures, such as encryption and access controls, to protect sensitive financial information from cyber threats and unauthorised access.
Their specialised expertise enables them to identify and proactively address potential issues, reducing the likelihood of manual errors and data breaches. By utilising advanced software and technology, outsourced teams improve the accuracy and consistency of financial reports, which are essential for informed decision-making, regulatory compliance, and stakeholder trust.
Preparation of final returns
Routine, compliance-based tasks, including monthly data collection, quarterly updates, and final return preparation, can be fully outsourced. This allows the in-house team of agents to redirect their efforts towards higher-value activities, such as providing strategic advisory services and complex tax planning. By offloading these routine processes, the organisation can improve overall operational efficiency, reduce potential errors, and ensure compliance with regulatory standards.
As a result, clients benefit from more personalised and expert guidance, leading to increased satisfaction and stronger overall relationships. This strategic outsourcing approach enables the organisation to optimise resource allocation, foster innovation in service delivery, and maintain a competitive edge in the marketplace.
Better workload management
MTD IT requires firms to submit quarterly reports, substantially boosting their workload and causing peak periods during the year. These busy times often overlap with other deadlines like year-end accounts and self-assessment submissions, adding extra pressure on staff and resources. To handle this increased workload more efficiently, many firms are increasingly relying on outsourcing services.
Outsourcing provides the flexibility to scale capacity up or down in response to fluctuating demands without the need for lengthy hiring processes or committing to permanent staff. This approach ensures that firms can meet all reporting deadlines efficiently, maintain compliance with regulations, and focus their internal resources on core business activities without overextending their teams.
Key Takeaways
As the MTD thresholds continue to decrease, the number of individuals who qualify for MTD standards is expected to rise significantly. This increase will likely lead to more people authorising HMRC MTD agent to act on their behalf, thereby increasing the workload of accounting practices. To manage this growing demand and the associated administrative burden, outsourcing emerges as a particularly logical and practical solution.
By delegating the complex and time-consuming task of maintaining digital records to specialised experts, accounting firms can improve efficiency, reduce errors, and focus on providing higher-value services to their clients.
