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3 steps to prepare your practice for MTD for ITSA

10th Aug 2022
Brought to you by
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Xero is an easy-to-use platform for businesses and advisors.

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It’s no surprise that something requiring such significant change would be met with a degree of trepidation, but MTD for ITSA is something for practices to embrace, not fear. 

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While this old idiom feels wildly inappropriate for the government’s attempts to digitise the tax process, MTD for ITSA is very much in the post. From April 2024, sole traders and landlords with a total annual income above £10,000 need to use MTD for ITSA compatible software to keep digital records and file returns.

There has been understandable concern around such a monumental change, in particular from sole traders and landlords who will have questions around how this will impact them. 

But for accountants and bookkeepers, MTD for ITSA offers the opportunity to deliver more value to these clients, becoming even more vital to their success as you shepherd them through the process. Meanwhile, those who currently do their own tax return may be looking for an accountant for the first time to help them navigate the new rules, giving you the chance to grow your practice. 

As for longer term benefits, the shift to digital recordkeeping and cloud accounting should help you optimise processes, freeing up time and resources for you to focus on making your practice even more successful. So, how can you get prepared for the upcoming legislation? 

Ensure your team is informed around MTD for ITSA 

It’s vital that your entire team understands and is educated as to what is required for MTD for ITSA, both from a compliance, and technical and practical perspective. Regularly check the gov.uk website to ensure you and your team are on top of any new information.

One way to efficiently ensure your team is up to speed is to appoint a single MTD for ITSA guru in your practice – this person can then learn and share any new information published by HMRC to the wider team, whether as bi-weekly or monthly catch ups on the latest news and developments. 

Segment your client base

While MTD for ITSA will impact many clients, it won’t impact every client. MTD for ITSA does not apply to limited companies or partnerships — though general partnerships are currently planned to join from April 2025. With this in mind, your practice can get ahead of the game by segmenting your client base and identifying the ones that need to comply with MTD for ITSA. 

Then, it’s worth checking how they are currently keeping records — if they’re still relying on shoeboxes full of receipts, it might be time to start transitioning them over to digital records with cloud software. 

There may be some clients who would look to use bridging software, however, you can use this as an opportunity to advise them on the pros and cons of this approach. This is important, as using bridging software for MTD for ITSA will be more complicated than using it for VAT. 

Sign up for an Agent Services Account 

If you’re signing clients up to MTD ITSA, you’ll need an Agent Services Account (ASA). You can manage all your clients through a single account, so each practice only needs one account. You’ll then need to request authorisation from your client, via your ASA. 

You can register your clients in advance of the April 2024 deadline, allowing you to get your ducks in a row early. To learn more about this process, head to the gov.uk website

While MTD for ITSA may seem like a long way away, by preparing now, you can capitalise on an opportunity to better serve your clients and grow your practice. If you want to find out more about MTD for ITSA, head to our resource hub

By Stuart Miller, Head of Industry Engagement, Xero