While Making Tax Digital is nothing new for modern accountancy firms, the government continues to roll it out with new deadlines quickly approaching.
Making Tax Digital aims to reduce the tax gap by ensuring businesses use MTD-compatible software to file VAT, income and soon corporation tax returns. The current tax gap stands at approximately £31 billion or 4.7% of tax liabilities, causing a significant issue for HMRC.
As a result of this new legislation, accountancy firms will need to digitise current processes and ways of working. Accountancy firms will also need to look at how they onboard new clients, teach small businesses about accounting software and ensure their firm is ready to fully support businesses with Making Tax Digital.
Keep reading to learn more about:
- Upcoming Making Tax Digital deadlines
- How Making Tax Digital impacts accountants
- How you can prepare your firm for the approaching MTD deadlines
Making Tax Digital deadlines
Making Tax Digital came into force for larger firms in April 2019, but the deadline was extended for small businesses.
- April 2022. By the 1st of April 2022, all VAT-registered companies will need to use MTD-compatible software to file VAT returns.
- April 2023. From the 1st of April 2023, self-employed individuals and landlords with an annual turnover of over £10,000 will need to comply with Making Tax Digital for Income Tax.
- TBD. The UK government has recently finished a consultation on how to roll out Making Tax Digital for Corporation Tax. A pilot scheme is expected to become available from April 2024 and come into force from April 2026.
How Making Tax Digital impacts accountants
Accountants play an essential role in helping clients prepare for Making Tax Digital and making sure they have the suitable systems to remain compliant. Accountants will need to educate clients on digital processes, accounting software and the new legislation.
You’ll also need to work more closely with their clients, which will probably change how you deliver your services, how often you meet with clients and how you plan your workload.
You may also need to provide clients with technology advice, help them find MTD-compliant software and get set up. As such, you’ll need to stay up-to-date on the latest practices, innovations and act as an advisor throughout the process.
How you can prepare your firm for Making Tax Digital
Embracing MTD-compliant accounting software will require some planning. After all, you don’t want to leave it last minute and have to scramble to get your clients onto digital accounting software. With some forward-thinking, Making Tax Digital should ultimately benefit your firm.
Upskill your team
Your team will need to act as strategic advisors to guide clients throughout the process. You’ll need to become familiar with Making Tax Digital rules so you can explain the change to clients and answer any questions they may have.
Streamline your processes
You’ll also need to review your processes to make sure they’re compliant with the new ways of working. If you haven’t already, you’ll need to implement digital accounting software and make sure you’re ready. Since you may have greater involvement with clients going forward, it’s crucial to streamline these processes to give you as much time as possible to spend with clients and on more value-adding tasks.
Update your packages
With Making Tax Digital in force, you may find a greater demand for your tax services. After all, small businesses may not feel comfortable handling digital accounting independently and will naturally turn to accountancy firms for advice and support. As such, you may want to review your current offerings and create an MTD tax package for these prospective clients.
Review your workflow
Making Tax Digital changes how accountancy firms traditionally worked. Rather than peak periods leading up to tax deadlines, submissions are made more regularly, and clients accounts are kept in better order. As such, this may change your resources as you may not need contractors during peak periods to handle overflow work and can instead invest in more permanent employees who work throughout the year.
You want to make sure clients are aware of the changes and can begin onboarding to the new accounting software as soon as possible. Clients will also need to know how they can remain compliant, what they’ll need to do under the new rules and how Making Tax Digital will ultimately benefit them.
As the old saying goes, “fail to prepare, prepare to fail.” Take the time to sit down and draw a roadmap of how you’ll transition all your clients onto the accounting software, where you might hit snags and how you can overcome these challenges. Registering your clients for Making Tax Digital takes some preparation as you’ll need to go through registrations, set up your accounts and gather various paperwork and information.
Starting early and planning ahead can go a long way towards easing internal stress levels and making sure you’re ready for the approaching deadline.
Get MTD-ready with Countingup
Save your practice time on MTD admin and help your clients keep organised records with Countingup’s unique free accounting software, built specifically to help you manage your self-employed and sole trader clients. Our software is MTD-compatible and full of features for accountants to review and manage client accounts efficiently, prepare journals and client taxes accurately with direct access to their real-time organised data. Find out more here.