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Aipedia: Tax advisers
Advisers can use AI bookkeeping to feed Making Tax Digital quarterly updates, but someone must review the figures, because the PCRT bodies warn against tax software running without human review. Quarterly filing multiplies the chances for an automated error.
Part of: AI in Tax advisers
In short
Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, dropping to £30,000 from April 2027 and £20,000 from April 2028. Quarterly updates are sent every three months. Some practices may rely on AI categorisation in bookkeeping software to produce them, with little review. The PCRT AI guidance includes a scenario on tax software running without human review. Errors in updates can usually be corrected in the next update, but wrong figures that flow into the year-end return can cause losses, which PI usually covers subject to terms.
Under MTD for Income Tax, people in scope keep digital records and send quarterly updates to HMRC every three months for each self-employment and property business. Bookkeeping software increasingly uses AI to match bank feeds, read receipts and assign transactions to categories. For agents handling dozens of MTD clients, it is tempting to let the software categorise and submit with minimal review, and to check properly only at year end.
Agents who submit on a client's behalf must also be registered with HMRC; see HMRC adviser registration.
Illustrative scenario: a landlord client's bank feed includes the purchase of a new property and a large repair bill. The AI categorises both as repairs. Quarterly updates go to HMRC unreviewed, and the year-end figures are carried forward without the capital item being picked up. HMRC later queries the return. The client faces extra tax, interest and a penalty, and says the agent was engaged to handle MTD and should have spotted it.
The volume of submissions changes the risk profile. A practice that used to file one return a year for a client now files four updates plus the year-end position, often from data the client enters through an app. Each submission is a point where an unreviewed AI categorisation goes to HMRC in the client's name.
Other risks: a rule set up wrongly in the software repeating across every client who uses the same template, or an update submitted for the wrong business when a client has several.
HMRC's guidance says each update shows totals for the tax year so far, so errors can be fixed in the next update. That reduces the harm from a single quarter's mistake, but only if someone notices. The final year-end position is what usually determines the tax.
A claim that the agent negligently submitted wrong figures is a civil liability claim, which the CIOT/ATT PII Regulations require cover for. PI usually responds subject to the excess and terms. Many MTD errors will be small and within the excess, but a systematic error across a client base could lead to many similar claims, where aggregation wording matters. Firms whose bookkeeping clients are covered under ICAEW, ACCA or AAT rules should check those requirements too. The engagement letter scope is central: if the firm agreed to review quarterly figures and did not, the defence is weaker. See MTD for Income Tax and PI and how aggregation affects limit and excess.
Related: AI in Self Assessment returns, AI for CGT and property and the AI in tax advice hub.
Apex arranges PI for tax and bookkeeping practices taking on MTD clients. A broker can check how your wording handles repeated errors across many clients and AI-driven bookkeeping.
From 6 April 2026 for sole traders and landlords with qualifying income over £50,000 in the 2024 to 2025 tax year. The threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028, according to GOV.UK.
Yes. HMRC guidance says each update shows year-to-date totals, so errors can be corrected in the next update, and the fourth update can be resent before year-end adjustments. Errors still need to be spotted, which is where human review matters.
The PCRT AI guidance recommends an appropriate engagement letter statement about AI use (para 1.3). For MTD clients, it also helps to say what the firm reviews each quarter and what the client must check, so responsibility is clear if an error appears.
As far as the client is concerned, usually the agent's. The PCRT AI guidance says members remain accountable for work produced and includes a scenario on software running without human review. Any recovery against a software provider depends on its contract terms.
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