The AI-MTD advantage: Why accountants must act now
The AI-MTD advantage: Why accountants must act now
AI isn’t replacing accountants. It’s showing up just in time to help them manage the complexity of MTD - and shift how firms operate.
Why AI and MTD Arrived Together at the Perfect Time
The convergence wasn’t planned, but it’s proving useful. As the next stage of Making Tax Digital forces firms into a faster, more structured reporting cycle, AI is emerging at just the right time to absorb the friction.
One increases the pace; the other reduces the pressure. Together, they are redrawing the boundaries of what accountancy work looks like.
While regulators focus on compliance and software companies on features, accounting firms are left with the logistics: how to keep submissions on time, how to maintain quality, and how to do it without hiring more staff.
That’s where AI is beginning to change the equation, not by replacing accountants, but by rebalancing the work.
This shift is already underway. The question now is how firms choose to respond.
Understanding MTD in 2025: Where We Stand Today
The timetable is no longer in flux. From April 2026, digital reporting will apply to self-employed individuals and landlords with income above £50,000. A year later, the threshold drops to £30,000, and then to £20,000 in 2028. These are not projections. They are confirmed.
Compliance means quarterly updates, year-end submissions, and keeping all records digital. The penalty system is already live. Late filings accumulate points. Repeat offences trigger automatic fines. Payment delays come with interest — 2% after 15 days, 4% after 30, and an annualised rate above 10% after that.
The filing rules are simple. The operational load is not. Firms must move from annual clean-ups to continuous oversight. That requires systems built for volume. Many still aren’t.
Why MTD and AI Have Become Intertwined
The timing isn’t accidental. Just as MTD forces firms to increase reporting frequency, AI tools are becoming good enough to handle the load.
Quarterly updates multiply admin. For a firm with 300 clients, that’s 1,200 submissions a year, not counting follow-ups, corrections, or late entries. Even well-organised practices struggle to scale without automation. Chasing records and checking files is labour-intensive, and the costs rise faster than the revenue.
What AI does that humans alone can’t:
Automates routine follow-ups: AI tools identify which clients haven’t submitted their records and trigger personalised, timely reminders.
Filters noise from risk: Not every late upload is a crisis. AI highlights the exceptions that need action and lets the rest wait.
Surfaces patterns: Over time, AI learns which clients are chronically late, which sectors pose accuracy challenges, and which behaviours predict penalties.
Turns compliance data into advisory triggers: Accountants can spot where to step in, not just reactively, but strategically.
AI doesn’t just help with throughput. It changes the shape of the work. When fewer hours are spent on admin, more are available for advice or for simply keeping pace with everything else MTD is beginning to touch.
The profession isn’t short on technical knowledge. What it needs, increasingly, is capacity. And that’s where AI is starting to earn its place.
How AI Is Reshaping Everyday Accounting Workflows
In firms that have adopted AI tools, the change is less about disruption and more about speed. Workflows look familiar. They just move faster and involve fewer reminders, rework, or missed steps.
Quarterly reporting, without the scramble
Instead of treating submission windows as crunch time, AI-enabled systems run checks in the background. When something’s missing, the client is notified. When something looks off, it’s flagged. Staff no longer have to sift through inboxes or manually match receipts to accounts.
Client insights, surfaced early
Where firms once relied on end-of-year reviews to spot issues, AI now highlights problems as they emerge – unusual expense patterns, gaps in income, or declining margins. That information gives accountants the ability to advise in real time, not retrospectively.
Headcount, held steady
Automation doesn’t eliminate jobs, but it does change how firms allocate their time. Teams focused on data entry or follow-ups are moving into client support, onboarding, and advisory roles. Firms are growing, but without adding layers of administration.
Better internal visibility
AI dashboards offer real-time views of client readiness, compliance status, and team workload. Partners and managers no longer wait for end-of-month reports. They can see what’s happening now and decide what to do next.
How Sage’s AI Copilot Is Changing Tax Compliance
Sage Copilot, the generative AI assistant built into Sage’s accounting platforms, is one example of how these tools are being deployed in practice.
It’s designed to anticipate the needs of accountants handling MTD compliance. When clients haven’t submitted records, Copilot flags it. When a submission is due, it can draft the reminder. When an accountant asks a question (about clients, records, or reports) it responds with relevant, structured answers.
What distinguishes Copilot is that it doesn’t sit outside the workflow. It’s built into it. Users don’t have to switch systems or copy data. They work as usual, and the AI responds in context.
Its underlying strength is the dataset. Sage has decades of accounting history, and Copilot is trained on that material, not on generic online content. That gives it an edge in understanding accounting-specific tasks and reduces the risk of hallucinated outputs.
Copilot isn’t there to make decisions but to reduce the time between intent and action. In an MTD environment where the margin for error is shrinking, that speed matters.
Preparing for AI-Enhanced MTD Compliance: A Practical Framework
Software alone isn’t the answer. Firms need a structured approach to change. That means aligning people, processes, and systems with clear priorities.
Start with the infrastructure
Are records consistently digitised? Are cloud systems in place? Is client communication tracked and centralised? AI can’t help where the foundations are missing.
Reassess the client base
Segment clients by readiness. Who needs more support? Who can self-serve? Use these groups to allocate time, automate selectively, and reduce avoidable effort.
Train for context, not just clicks
Staff need to know how to work with AI tools — not just how to run them. That means interpreting outputs, reviewing suggestions, and knowing when to step in.
Update the client proposition
The shift to AI-enabled compliance is not just internal. It’s something clients feel. Position it accordingly — faster turnaround times, fewer errors, more visibility. This isn’t about replacing human service. It’s about delivering more of it.
Build in review cycles
What works now might not work next quarter. Track performance: accuracy, timing, satisfaction. Use that data to refine processes and make improvements before problems surface.
Beyond MTD ITSA: The Bigger Transformation in Play
MTD is not a one-off project. It’s the start of a broader shift toward continuous reporting and real-time tax visibility.
Corporation tax is the next likely candidate. HMRC is also exploring further automation and integration, possibly including real-time calculation models for certain categories of taxpayers.
At the same time, regulators are beginning to examine the use of AI in regulated professions. That includes transparency, governance, and auditability, meaning that the systems firms rely on today may soon need to meet new reporting standards of their own.
Firms that treat MTD as the end goal will find themselves adapting again within a year or two. Those building for flexibility now will be better placed when the next shift comes.
This article is sourced from the following link:
https://www.accountancyage.com/2025/05/19/the-ai-mtd-advantage-why-accountants-must-act-now/
