Your timeline to getting ready for MTD 2024
When MTD ITSA was delayed last year, many accountants and clients breathed a sigh of relief. However, while April 2024 may seem far away, many firms still have a significant amount of work ahead of them.
We recently conducted an onsite poll at our Accountex Demo Day and the results were revealing: only 7% of practices were prepared for Making Tax Digital for Income Tax, while 63% have either not started preparing or are just starting to think about it. These figures are reflective of what’s going on in the market based on our conversations with practices, big and small – with everything that’s been going on the last few years, MTD ITSA has fallen further and further down the to-do list.
Why proactive change matters
As much as MTD ITSA is designed to make life easier for accountants and their clients, transitioning your clients to new systems can be an effort. However, the sooner you make the change, the more control you have over the process.
With two years to go, any new clients brought into your practice on non-digital processes from now are costing your practice money. This is because you’re going to have to move them – and change is hard. The sooner you adapt your processes to the upcoming-new-normal, the sooner you can reap the benefits and turn MTD ITSA from an obligation into an opportunity.
The move to digital offers the chance to drastically increase efficiency and reduce manual workflows, while offering clients more useful information, faster payments, and tailored advice. That’s why even though 2024 is the deadline, the most forward-thinking practices are getting their sole traders digitised by April 2023.
Here’s how to be one of them.
What you need to do now – as in, right now
The hardest part of change management isn’t changing systems. It’s changing people. That’s why the earlier you lay the groundwork with your clients, the more you can build the momentum for change before it becomes a panic.
Build client awareness
Your clients rely on you to keep them abreast of what they need to know about their finances. Most are buried in their own businesses and not inclined to do their own financial research in their limited spare time.
Proactively launching your own information campaign to ensure that clients are aware of MTD and what they need to do can create new opportunities to engage with them about how you can help them in their processes, or even offer new services. This can also be used as a marketing campaign to gain new business, especially if other firms in your area are dragging their feet on the transition.
Sell the service, not the form
While compliance and tax are largely focused on process, the value accountants add goes way beyond just ticking a box.
For MTD ITSA, you have the chance to help clients embed digital practices in their businesses and get more value out of their data. That means not wasting your time on data entry and document chasing, so work out what solutions you need to automate the work that doesn't add value, so you can support clients where it matters.
What you need to do by April 2023
While the overall deadline is in 2024, getting processes in place before gives you the chance to troubleshoot any client issues, as well as giving your team and your customers a year to practice and build good habits.
Choose software that works for your clients
While accounting software has been around for years, the majority of it fails to meet the needs of sole traders and landlords. That’s why you need to introduce simple software that can do all the basics for small, simple businesses. This starts with thinking about what they need to be compliant, and then what could add value for them.
For example, while MTD may be the driver for change, there are other potential benefits for business owners.
- Helping them invoice promptly and get paid quickly will give them more cash and fewer bad debts.
- Providing a simpler way to store their receipts online helps them to claim all their business expenses and legitimately minimise their tax bill.
Coconut is accounting and tax software that’s built specifically for sole traders and their accountants. That means no overcomplicated features, no unnecessary costs, and no confusing interfaces.
Coconut’s mobile app helps your sole traders stay on top of their bookkeeping by allowing them to connect their bank accounts, categorise their transactions, and capture receipts, bills, and invoices, all in one place. And through the Coconut Portal, you’ll have instant access to all of that real-time accounting information, all year round—without having to ask for it.
Decide how you will update your pricing
With the shift to quarterly reporting for MTD ITSA, the old model of annual fees is no longer the best one. Since work will be done on a more regular basis with more frequent touchpoints, we recommend charging monthly, to provide smoother cashflow for you and the client and remove one of the barriers for late Self Assessment tax returns.
Monthly recurring invoices can be raised automatically from your own accounting software and payment collected by direct debit for a small fee that will save you admin time, credit control time, and the horrible task of chasing payments.
Since clients can be especially sensitive to changes in pricing, it’s important to lead with value and education. Possibilities include:
- Creating a webinar or literature to explain the benefits of having an accountant on your team in the new system.
- Creating a range of pricing packages and bundles and letting clients choose the one that best suits their needs.
- Re-explaining your services in the light of new software and promoting the value you add alongside these tools.
What you need to do by April 2024
The last thing to do is more of an ongoing task, but an essential one for succeeding in your MTD ITSA transition.
You need to train your clients into good habits, and this may well take time. A process we recommend:
- Provide training to ensure good quality DIY bookkeeping from your clients, matched with appropriate tools to make it easier.
- Roll this out efficiently through one-to-many group webinars and support it with help sheets and videos.
- Offer your expertise through helpsheets and videos so that your team can answer the common questions and minimise your individual advice as much as practical.
To compensate for the time required, consider charging for this hand-holding service and allow people to book monthly or weekly time slots to ask questions. Or perhaps host a free public Q&A session to share information, then you can refer people to a paid service for individual tax advice.
The important thing is to start this early, as people take time to change and, even with two years to go, your time is limited.
Kickstart your MTD ITSA timeline
Getting your firm on track for MTD ITSA doesn’t have to be a last minute panic. By taking the right steps to educate and empower your clients, you can make the change on your terms.
At Coconut, we know that with the right software solution, you can simplify the move to MTD ITSA while retaining and growing profitable relationships with your sole trader clients. That’s why we’ve built software with exactly those clients in mind.
Find out more about how to get your practice ready for MTD ITSA and how you can make the most of the change in this guide we’ve put together with Della Hudson: A sledgehammer to crack a nut?.
You might also be interested in
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them stay organised and top of their books all year round. Your sole trader clients can connect bank accounts in seconds, and capture receipts, bills and invoices as they happen. Using the Coconut Partner Portal, you’ll have real-time access to all of...