Making Tax Digital: How open banking can tackle the next challenge for accounting software providers

The UK government’s Making Tax Digital (MTD) initiative is being expanded to include sole traders and landlords with a phased approach from April 2026. While the initiative aims to make tax administration more effective, efficient, and accurate, the increased frequency of reporting will likely disrupt already demanding tax reporting requirements for small businesses and their accountants.

But, this initiative presents a huge opportunity for accounting software providers to solve a pressing problem for accountants and bookkeepers. In this article, we explore how you can use access to real-time data through open banking to automate tax reporting, easing the burden and worry for your customers while building lasting trust in your software.

What is Making Tax Digital?

MTD is a government initiative designed to digitise the UK tax system. It requires businesses and individuals to keep digital records and use compatible software to submit updates to HMRC.

While MTD for VAT-registered businesses has been live since 2019, the next major phase is MTD for Income Tax Self Assessment (ITSA). This will replace the traditional annual tax return with a requirement to keep digital records and send quarterly updates of income and expenses to HMRC.

Here are the key dates you and your customers need to know:

Quarterly reporting deadlines

Once mandated, affected individuals will need to submit quarterly updates of their income and expenses using MTD-compatible software within these deadlines:

Additionally, a final declaration (which replaces the traditional Self Assessment tax return) must be submitted by January 31 after the end of the tax year. The payment deadline for any tax owed will still be January 31. 

Challenges for accountants serving sole traders and SMEs: The burden of increased reporting frequency

Accountants who serve SMEs and sole traders typically rely on your accounting software to streamline their tax reporting once a year. It’s a crucial tool for the profession. However, the shift from a single annual reporting deadline to quarterly reporting means they will now be interacting with and reporting to HMRC four times as often. This means four times the workload. However, this also means they will be interacting with your software four times as often. This shouldn’t be viewed as a workload increase, it should be seen as a four times increase in user engagement opportunities for your business.

The specific challenges accountants face include:

• Tighter time constraints: Manually inputting bank statements or reconciling transactions for quarterly, rather than annual deadlines, will take even more critical time away from running their business.

• Increased chance of errors: More frequent reporting increases the risk of human errors in manual data entry, potentially leading to accountants reporting incorrect tax calculations, which could lead to penalties for their clients.

• Complexities of moving to digital reporting: While most accountants and bookkeepers already report taxes digitally, the requirement to use approved software means those few who don’t will need to make the shift, potentially coming up against a steep learning curve as they do.

To avoid these pitfalls and handle the upcoming tidal wave of reporting requirements, accountants will need software that: 

• Saves significant time by streamlining the process of pulling and populating customer bank account data

• Is highly reliable and up to date to reduce the increased risk of errors

• Is intuitive for new users to grasp from day one.

This is where open banking can enable you to build a solution that eases the burden of MTD.

Integrating open banking data can deliver the solution your customers need to tackle MTD

Open banking data (AIS) offers automated access to bank account data with a user’s approval. By integrating open banking capabilities into your accounting software, you can enable accountants and bookkeepers to gather bank data directly from their clients’ bank accounts into your platform. Using data enrichment, this information can be processed and categorised, enabling it to be automatically entered and populated in the correct format required for MTD. This can significantly reduce manual effort and help minimise errors associated with manual data entry.

Reducing the burden of MTD reporting for your customers can solve a significant pain point for your customers and position your solution as a leader in adapting to the UK government’s tax reporting changes.

Using enriched data to build a better accounting experience

While accessing and populating raw data greatly reduces the workload associated with manual entry, open banking data allows you to go one step further, moving from simple compliance to valuable financial insight.

By enriching and categorising financial data at the point of retrieval, you ensure that the auto-population of records isn't just fast, it’s intelligent. This opens up three distinct opportunities for your product roadmap:

1. The "no surprises" tax calculation 

The biggest fear for sole traders isn't filing the return; it is the unexpected tax bill in January. Because enriched data allows you to instantly distinguish between taxable income, non-taxable transfers, and allowable business expenses, your software can calculate a running live tax estimate. This can transform MTD from a regulatory burden into a tool for financial peace of mind.

2. Cash flow visibility 

MTD requires users to engage with their finances four times a year, but business owners need to survive daily. By leveraging real-time transaction data, you can offer automated cash flow forecasting alongside tax reporting. Enriched data categorisation helps users see exactly where their money is going, for example, separating "business travel" from "recreational travel" automatically. This turns your software from a compliance tickbox tool that users feel obliged to pay for, into a vital forecasting tool they can rely on.

3. Zero-touch categorisation 

For accountants, the bottleneck is often "cleaning" or processing the financial data clients send them. These are often copies of bank statements or even expense receipts in paper form. Enriched data can help automatically tag transactions as "business" or "personal", supporting the creation of digital records aligned to MTD requirements, with reduced manual intervention. This drastically reduces the back-and-forth queries between accountants and clients regarding unidentified transactions, enabling accountants and bookkeepers to reduce any additional workload posed by MTD.

How Yapily can help you take the lead with MTD

At Yapily, we understand that for accounting software to remain competitive, reliability is everything. Our open banking infrastructure is built to give you the freedom to create cutting-edge products that take centre stage by powering applications behind the scenes. 

Our open banking data solution securely pulls clean bank account data in real-time using simple APIs. Our infrastructure approach means we’ve designed a platform that you can integrate directly into your processes and workflows with minimal disruption to your services.

Here’s what makes us a great choice for your accounting software solution:

Unrivalled business coverage

While MTD aims to professionalise tax reporting, the reality is that many sole traders and landlords do not maintain separate business bank accounts. They frequently use personal current accounts for rent collection or personal credit cards for business expenses. If your software only connects to either business bank accounts or personal bank accounts, you risk excluding a significant portion of the MTD demographic.

At Yapily, we offer broad business account coverage across the UK and Europe, as well as extensive personal account coverage. This ensures you can serve the entire market, from the established SME with a dedicated business account to the gig-economy worker operating from their personal phone.

Proven infrastructure trusted by industry giants

You can have confidence in the stability of our open banking platform because we are already powering some of the industry's largest players, including Intuit QuickBooks. Our platform is designed as "infrastructure-first," meaning it integrates directly into your existing data stack and workflows with minimal disruption to your current services. With our comprehensive support packages and deep experience serving accounting providers, you aren't just buying an API key; you are gaining a technical partner dedicated to getting your MTD solution live before the April 2026 deadline.

Deliver enriched data services with Data Plus

While Yapily Data provides secure access to financial information, Data Plus takes it further by enriching that data with smart categorisation. For example, you can categorise data as “business airfare” or “personal airfare”, or “credit card bill repayment” for either personal or business uses. 

This enrichment is the critical layer that allows your software to automatically distinguish between taxable income and non-taxable transfers, or separate allowable business expenses from personal costs. Using our enrichment layer, you can build the "no surprises" tax calculation into your product while improving cash flow visibility and reducing bottlenecks for accountants and bookkeepers.

Get started today

Your customers are looking for a helpful solution to navigate the burden of Making Tax Digital. At Yapily we power one of the most successful accounting software providers with our open banking infrastructure: Intuit QuickBooks. Start providing the secure, automated, and high-quality service your customers need to focus on their business, not their taxes after April 2026.

Speak to one of our open banking experts about integrating open banking data services to build effortless tax reporting into your product roadmap.