Accountants’ PI guide
Making Tax Digital for Income Tax: what it means for accountants’ PI
Making Tax Digital (MTD) for Income Tax adds no new professional indemnity rule for accountants, but it changes the work you do for sole trader and landlord clients. Since 6 April 2026, those with qualifying income over £50,000 must keep digital records and send quarterly updates. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. It is worth checking that your PI cover and engagement terms reflect the new work.
Part of: Accountants’ PI insurance
In short
MTD for Income Tax applies to sole traders and landlords whose self-employment and property income before expenses exceeds £50,000 (from 6 April 2026), £30,000 (from 6 April 2027) or £20,000 (from 6 April 2028). They keep digital records, send quarterly updates by 7 August, 7 November, 7 February and 7 May, and file a tax return by 31 January. MTD sets no insurance requirement. Your professional body’s PI rules still apply, and HMRC’s tax adviser registration does not require PI.
Who has to use MTD for Income Tax, and when?
| Qualifying income over | In the tax year | Must use MTD from |
|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
Qualifying income is total income from self-employment and property before expenses, based on the previous tax return. Employment income, a partner’s share of partnership profit, dividends and pensions do not count (HMRC guidance). Partnerships will join later, on a timetable HMRC has not yet set (HMRC). HMRC also says that from September 2026 it will start to sign up anyone who needs to use MTD for 2026 to 2027 and has not signed up. Once a client is using MTD, they can choose to opt out if their qualifying income stays below the relevant threshold for three tax years in a row.
What changes for accountants who act for MTD clients?
- Agent services account. To sign clients up you need an agent services account and your client’s authorisation (HMRC). The same account is now how paid tax advisers register with HMRC: see HMRC tax adviser registration and PI.
- Digital records. Income and expenses are kept in compatible software.
- Quarterly updates. These are summaries, not tax returns, sent for each business every three months, by 7 August, 7 November, 7 February and 7 May (HMRC).
- Tax return. Submitted through MTD software by 31 January after the tax year. HMRC adds some information, such as PAYE income, and says it must be checked before submission (HMRC).
Penalties change too. For MTD users, late submission penalties are points-based: a point for each missed quarterly update or return deadline and, at 4 points, a £200 penalty, then £200 for each further missed deadline. There are no penalties for missing quarterly update deadlines in 2026 to 2027, but late returns and late payment are still penalised (HMRC penalties guidance).
Does MTD change your PI requirements?
No. HMRC’s MTD guidance sets no insurance requirement, and neither do HMRC’s tax adviser registration conditions. Your PI obligations still come from your professional body:
- ICAEW. A firm must “take all reasonable steps to meet claims arising from being in public practice” and hold qualifying insurance of at least £2 million, or, with gross fee income under £800,000, 2.5 times fee income with a minimum of £250,000 (ICAEW PII Regulations, regulations 3.1 to 3.3).
- CIOT and ATT. Members in practice must hold PII covering civil liability from “taxation services”, which the regulations define to include “the preparation and submission of tax returns”. The minimum is £1 million each and every claim, or, with gross fee income under £400,000, the greater of 2.5 times fee income and £100,000 (CIOT PII Regulations).
ICAEW adds that its figure “is only the minimum amount”, and that you should always consider whether it is adequate for your firm.
What should you check in your PI cover?
- Describe the work accurately. If you now keep clients’ digital records, send quarterly updates or manage their software, say so when you arrange or renew cover. The Insurance Act 2015 requires a fair presentation of the risk before a policy is entered into (section 3).
- Agree who does what. Set out in your engagement letter who keeps the records, who sends each quarterly update and who checks the information HMRC adds. A clear split helps if a client later says a missed deadline was your fault.
- Know how your policy treats penalty claims. If a client asks you to reimburse an HMRC penalty, whether your PI policy responds depends on its wording. Do not assume it does, and notify your insurer as the policy requires.
Apex arranges professional indemnity insurance for accountants and tax advisers. Cover is always subject to the policy terms. See our accountants’ PI guide.
Sources
- gov.uk: Thresholds and start dates (£50,000 for 2024–25 from 6 April 2026; £30,000 for 2025–26 from 6 April 2027; £20,000 for 2026–27 from 6 April 2028); sole traders and landlords; partnerships in future, timeline to be set; exemption example (digitally excluded) and exempt taxpayers still file a Self Assessment return.
- gov.uk: Qualifying income is total self-employment and property income before expenses, based on the previous tax return; employment, partnership profit shares, dividends and pensions excluded; option to opt out after qualifying income is below the threshold for 3 tax years in a row.
- gov.uk: Agents need an agent services account (different from HMRC online services for agents) and client authorisation; existing Self Assessment authorisations recognised but may need adding; from September 2026 HMRC will start to sign up those who need to use MTD for 2026–27 and have not signed up; no penalty points for late quarterly updates in 2026–27.
- gov.uk: Agent services account is how tax advisers access HMRC’s online services; guidance updated 18 May 2026 for the legal requirement for tax advisers to register for an agent services account.
- gov.uk: Quarterly updates are summaries, not tax returns, sent every three months for each self-employment and property business.
- gov.uk: Tax return by 31 January after the tax year via MTD software; HMRC adds information such as PAYE income, which must be checked before submission.
- gov.uk: Quarterly deadlines 7 August, 7 November, 7 February, 7 May; no penalties for missed quarterly update deadlines for 2026–27; points-based late submission penalties with a 4-point threshold, £200 penalty and £200 for each further missed deadline; late payment penalties.
- gov.uk: HMRC tax adviser registration conditions do not include PII.
- icaew.com: ICAEW PII Regulations effective 1 September 2024: reg 3.1 (take all reasonable steps to meet claims from public practice; qualifying insurance); 3.2 (£2m); 3.3 (under £800,000: 2.5x fee income, minimum £250,000); “This is only the minimum amount”.
- tax.org.uk: Current CIOT/ATT PII Regulations are those effective 1 January 2023.
- assets-eu-01.kc-usercontent.com: CIOT/ATT PII Regulations: “taxation services” include the preparation and submission of tax returns; cover for all civil liability in connection with taxation services; £1m each and every claim; under £400,000 fee income the greater of 2.5x and £100,000.
- legislation.gov.uk: Insurance Act 2015 s.3: duty of fair presentation before a contract of insurance is entered into.
Frequently asked
Does MTD for Income Tax mean accountants need more PI cover?
Not automatically. MTD sets no insurance requirement, and your minimum cover still comes from your professional body’s rules. ICAEW says its minimum is only a minimum, so review your limit if MTD work changes your clients, services or fee income.
When do penalty points for late quarterly updates start?
Not in the 2026 to 2027 tax year: HMRC says there are no penalties for missing a quarterly update deadline for that year. Points apply to quarterly updates for later tax years, and to tax returns from the year you join MTD.
Do I need an agent services account to act for MTD clients?
Yes. HMRC’s guidance says you need an agent services account, which is different from the HMRC online services for agents account, and your client’s authorisation. Existing Self Assessment authorisations are recognised but may need adding to the account.
Can a client be exempt from MTD for Income Tax?
Yes, in some cases. HMRC gives being digitally excluded as an example of a reason for exemption. An exempt client does not need to use MTD for Income Tax but must still report income and gains in a Self Assessment tax return.
Do partnerships have to use MTD for Income Tax?
Not yet. HMRC says partnerships will need to use it in the future and that it will set out the timeline later. An individual partner’s share of partnership profit does not count towards qualifying income.
PI for accountants
Apex arranges professional indemnity insurance for accountancy practices. Tell us about your practice and we’ll find cover that fits. Or call 0117 325 0027.
Get a quote Call 0117 325 0027Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not legal or tax advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
