How Accounted Keeps You MTD Compliant

Making Tax Digital Is Here

If you're a sole trader earning above £50,000, Making Tax Digital for Income Tax is no longer something you can put off. From April 2026, you're required to keep digital records and submit quarterly updates to HMRC. If you earn above £30,000, you'll follow from April 2027.

That's a significant change. Until now, most sole traders dealt with HMRC once a year -- filing a self-assessment return by 31 January. Under MTD, you'll need to submit income and expense summaries every quarter, maintain digital records throughout the year, and file a final end-of-period statement.

The good news: Accounted was built from the ground up to make MTD compliance effortless. You don't need to think about it. Penny handles your digital record-keeping, prepares your quarterly submissions, and files them with HMRC -- all through WhatsApp.

Here's exactly how it works.

What MTD Requires (In Plain English)

HMRC's MTD for Income Tax requirements boil down to three things:

1. Digital Record-Keeping

You must keep digital records of all your business income and expenses. "Digital" means in software -- not spreadsheets connected to bridging software (though that's technically permitted, it's cumbersome). The records must include the date, amount, and category of each transaction.

2. Quarterly Updates

Four times a year, you must submit a summary of your income and expenses to HMRC through MTD-compatible software. The deadlines are:

• Quarter 1 (6 April - 5 July): Submit by 7 August
• Quarter 2 (6 July - 5 October): Submit by 7 November
• Quarter 3 (6 October - 5 January): Submit by 7 February
• Quarter 4 (6 January - 5 April): Submit by 7 May

3. End-of-Period Statement

After the tax year ends, you submit a final statement confirming your full-year figures and any accounting adjustments. This replaces the self-assessment return for your business income.

Miss a deadline and you'll enter HMRC's new points-based penalty system. Accumulate enough points and you'll face financial penalties. The details are in our MTD penalties guide.

How Accounted Handles Digital Record-Keeping

Accounted's digital record-keeping isn't something you need to actively manage. It happens automatically as part of your normal interaction with Penny.

Automatic Transaction Import

When you connect your bank account through Open Banking, Accounted imports your transactions daily. Each transaction is recorded with the date, amount, merchant, and description -- satisfying HMRC's digital record-keeping requirements from the moment your bank is connected.

AI-Powered Categorisation

Every transaction is categorised against HMRC-recognised expense categories using Accounted's three-tier reasoning engine. The categories align with the self-employment and property income categories that HMRC expects:

• Turnover (income)
• Cost of goods sold
• Advertising and marketing
• Car, van, and travel expenses
• Clothing costs
• Legal and financial costs
• Office costs (including stationery and phone)
• Rent, rates, power, and insurance
• Repairs and maintenance
• Staff costs
• Accountancy fees
• Interest on bank and business loans
• Other allowable expenses

Penny maps every transaction to the correct category. You don't need to know HMRC's category structure -- Penny handles the mapping behind the scenes.

Receipt Storage

Every receipt you send to Penny via WhatsApp is stored digitally, linked to the corresponding transaction. This creates the audit trail HMRC expects -- each expense backed by its source document.

Real-Time Accuracy

Because categorisation happens as transactions arrive (not in a batch before the deadline), your records are always up to date. There's no backlog to clear before a quarterly submission. Your books are ready when the deadline arrives.

How Quarterly Submissions Work

This is where Accounted really saves you time and stress. When a quarterly deadline approaches, Penny handles the entire submission process via WhatsApp.

Step 1: Penny Prepares the Submission

A few days before the deadline, Penny reviews your records for the quarter. She checks for:

• Uncategorised transactions that need your input
• Unusual patterns that might indicate errors
• Missing receipt matches
• Any transactions flagged for review that you haven't addressed

If everything is in order, she prepares the quarterly summary. If anything needs attention, she reaches out:

Penny: Your Q3 submission is nearly ready. I just need your help with 2 uncategorised transactions before I can finalise it. Quick one:

£67.00 to "D. Patel" on 12 Dec -- is this:

1. Subcontractor payment
2. Professional services
3. Something else?

Step 2: Penny Sends You a Summary

Once all transactions are categorised, Penny sends your quarterly summary:

Penny: Here's your Q3 summary (6 Oct - 5 Jan 2026):

Income: £12,450 Expenses: £3,820 Net profit for quarter: £8,630

Key expense breakdown:

• Stock and materials: £1,240
• Travel: £890
• Phone and internet: £180
• Office supplies: £310
• Other: £1,200

This looks consistent with your previous quarters. Ready for me to submit to HMRC?

Step 3: You Confirm

You: Yes, looks good

Penny: Submitting now...

Penny: Done! HMRC has accepted your Q3 submission. Reference: MTD-2026-Q3-XXXXX. Your next quarterly update is due by 7 May 2026.

That's it. Your quarterly MTD obligation fulfilled through a WhatsApp conversation.

Step 4: HMRC Confirmation

Accounted submits directly to HMRC through their official Making Tax Digital API. You receive confirmation of acceptance immediately through Penny, and a record of every submission is stored in your Accounted account.

Deadline Management

Forgetting a deadline is one of the easiest ways to accumulate penalty points under the new MTD system. Accounted ensures you never miss one:

• 30 days before: Penny mentions the upcoming deadline in your regular conversation
• 14 days before: A clear reminder with the status of your records
• 7 days before: Penny starts preparing the submission and flags anything that needs attention
• 3 days before: If you haven't confirmed, Penny follows up
• Deadline day: Final reminder if submission hasn't been made

The reminders aren't annoying push notifications from an app you've stopped checking. They're WhatsApp messages from Penny, integrated into a conversation you're already having about your transactions and expenses.

The End-of-Period Statement

After the final quarter of the tax year, you need to submit an end-of-period statement (EOPS) confirming your full-year figures. Penny prepares this too:

• She compiles the full-year summary across all four quarters
• She identifies any adjustments needed (capital allowances, for example)
• She presents the final figures for your review
• She submits to HMRC on your confirmation

If you have an accountant, they can review the EOPS through Accounted's accountant portal before you submit. This gives them oversight without requiring you to use separate software or attend additional meetings.

What Makes Accounted Different from Other MTD Software

Several products offer MTD compliance. What makes Accounted's approach different?

No Dashboard Required

Other MTD software requires you to log in, navigate to a submissions screen, review figures in a dashboard, and click submit. Accounted handles the entire process in WhatsApp. You never need to log in to anything.

AI-Powered Accuracy

Other MTD tools rely on your manual categorisation being correct. Accounted's categorisation engine ensures your records are accurate before submission, with confidence scoring that flags uncertain categorisations for review.

Proactive, Not Reactive

Other tools wait for you to initiate the submission. Penny proactively prepares your submissions, flags issues, and guides you through the process. You don't need to remember deadlines or initiate anything.

Plain English Throughout

HMRC's MTD interface uses accounting terminology that many sole traders find confusing. Penny translates everything into plain English. You never need to understand HMRC's category codes or submission formats.

Already Using Other Software?

If you're currently using Xero, QuickBooks, or another bookkeeping tool for MTD, switching to Accounted is straightforward. Connect your bank to Accounted, and Penny starts categorising from that point forward. Your historical data remains with your previous provider.

For a detailed comparison, read our guide on Accounted vs Xero.

Get MTD-Ready Now

Don't wait until the deadline to sort your MTD compliance. The earlier you start, the more transaction history Penny has to learn from, and the more accurate her categorisations become.

View pricing or start your free trial -- 14 days free, no credit card required. Penny will have your books in order within a week.