A brief overview to help accountants prepare for the Making Tax Digital for Income Tax initiative
Making Tax Digital for Income Tax (MTD IT) aims to modernise tax processes for businesses and individuals. Here are the key points:
- Overview:
- MTD for Income Tax will be mandatory from April 2026 for self-employed individuals and landlords with an annual income over £50,000
- from April 2027, it will extend to those with an annual income between £30,000 and £50,000
- VAT-registered businesses have been subject to MTD regulations since 2019.
- Importance for accountants:
- MTD for Income Tax is not just about compliance but also an opportunity to enhance client services and operational efficiency
- accountants who prepare early can avoid risks such as late submissions, client dissatisfaction and financial penalties.
- Compliance requirements:
- maintain digital records for all income and expenses
- submit quarterly tax updates directly to HMRC via approved platforms
- use MTD-compatible software for managing and submitting records.
- Preparation steps:
- review engagement letters: update them to reflect MTD IT-specific terms and clearly define service scopes
- re-pricing strategies: develop tiered pricing models for varying levels of MTD IT compliance support and introduce advisory services
- client re-engagement: use regular communication, client education and practical resources to ensure clients understand MTD IT requirements.
- Benefits of using GoProposal:
- automates engagement letters and pricing structures
- reduces errors and administrative pressure
- enhances client trust and understanding through clear documentation.
Final thoughts: preparing for MTD for Income Tax is essential for accountants to stay compliant and competitive. It's essential for accountants to review engagement letters, update pricing models, and maintain proactive communication, for firms to position themselves as indispensable to their clients.
