Recent data published by Accountex Insights shows that 45% of UK sole traders say they feel unprepared for the upcoming tax reporting changes, with 29% saying an accountant already handles their taxes.
So let’s take a look at what you can do to help your clients prepare for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).
Who needs to sign up for MTD for ITSA?
First, you need to understand who needs to sign up and when they need to be signed up by. Once you understand whether your clients are affected, you can enter into the conversation with them.
MTD for ITSA concerns sole traders and landlords whose business or property income exceeds set thresholds.
- Clients with an income exceeding £50,000 must switch from April 2026
- Clients with an income between £30,000 and £50,000 must switch from April 2027
- Clients with an income between £20,000 and £30,000 must switch from April 2028
Clients can choose to voluntarily follow the scheme, even if not legally required to. This means it could be worth having the conversation with them, even if they don’t yet meet the threshold.
Sign the client up for MTD
Before signing your client up, you need to create an HMRC Agent Services Account (ASA). Different from Government Gateway, the ASA allows tax agents to access certain HMRC online services, including MTD and income tax pilots.
Once you’ve signed your client up for MTD through the HMRC website, you need to enter your ASA account user ID and password, allowing the two accounts to connect and interact with HMRC.
After this has been completed, you’ll be able to retrieve the quarterly submissions/obligations that you need to complete for your client.
What does your client need to do?
This depends on what your client is currently doing and whether they need to change their processes.
| Client currently… | Future actions |
|---|---|
| Competently uses software to keep digital records using MTD compliant software | Agree with your client on who will be responsible for creating the quarterly submissions |
| Competently uses software to keep digital records, but the software is not MTD compliant | Confirm whether the client is happy to move to a compliant software, or whether submissions will be made through bridging software |
| Competently uses spreadsheets to keep records | Discuss whether the client will be moving to MTD compliant software, or whether submissions will be made through bridging software |
| Uses technology, but record keeping is inaccurate and requires extensive corrections | Review whether the client will need to hire an additional bookkeeper to keep accurate records, and highlight the importance of needing accurate records |
| Doesn’t use technology, but is open to the idea | Discuss which software options are relevant to their needs and how the software will be implemented |
| Doesn’t use technology and doesn’t want to | Discuss with the client that digital records are needed to keep them compliant and that they may need additional help and support to stay compliant |
This post is for information purposes only. You should seek professional advice from your accountant or bookkeeper to ensure compliance.