MTD for income tax: 5 tips on how accountants and bookkeepers need to prepare
Making Tax Digital (MTD) is part of the government’s ongoing plan to ensure all taxpayers are using software for accounting and reporting that relates to tax. MTD for Income Tax, for the self-employed and those with income from property, is set to be mandated from 6 April 2023.
The impact on the accounting accountancy profession will be profound. Although it’s several years away, accountancy practices with income tax clients that fall under the scope of MTD for Income Tax need to start planning today.
To help your clients with their MTD journey you need to prepare sooner than later. Here are five tips to help get you started:
1. Highlight the importance of MTD for Income Tax
Ensure your clients understand the importance of moving to MTD for Income Tax sooner rather than later – move now and the price stays the same, but moving later is likely to incur higher fees.
Encourage your clients to take advantage of the MTD for Income Tax pilot scheme.
In April 2023, getting support from HMRC, the software vendor or even your practice will likely be very difficult because of the sheer quantity of people adopting MTD for Income Tax all of a sudden.
Get started early, however, and it will be much easier.
2. Put your clients needs at the forefront
Prioritise clients based on ‘skill’ and ‘will’ – and aim to determine the best MTD for Income Tax package for them based on this, such as mobile tools, cloud accounting, and so on.
There’s likely to be a generational divide here that you may already be aware of, with younger individuals more likely to be willing to embrace technology (perhaps to the extent that their requirement for assistance will be very minimal).
The MTD for Income Tax requirement may inspire older businesses people to bring forward their retirement date (or the time at which they sell up), and there are obvious opportunities to assist via service offerings there too.
3. Offer additional advisory services
You can do this around training, or simply offer some content resources such as webinars, email newsletters, or even in-face roundtables to discuss MTD for Income Tax’s impact on client businesses.
4. Set conversion targets
Set a target for MTD conversion in your practice, such as having 80% of eligible clients switched to MTD for Income Tax within 360 days – while acknowledging that 20% of businesses won’t move.
Decide the best path for this 20% – will they simply require more persuading, or is it time to ask them to make alternative arrangements for their accounting?
5. Review unprofitable clients
Use MTD as an opportunity to acknowledge any unprofitable clients and aim to change the situation. Design new service offerings with this in mind.
If your practice dealt with the implementation of MTD for VAT ahead of it being mandated in April 2019, you’ll be well aware that starting early with preparations will put you and your clients in good stead. If it didn’t, the best advice is to start now.
Look at your processes, start talking to your clients and take the steps now to not only meet the requirements for MTD for Income Tax but use it as an opportunity to help your practice and your clients really flourish.
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