MTD ITSA: Transition Choice

Paul Oldridge, Commercial Director of UK Tax and Compliance at Bright, shares his thoughts on how choice can make what feels impossible much simpler when it comes to MTD for ITSA.

With MTD for Income Tax Self-Assessment on the horizon, the stress facing accountants and their clients when it comes to the new challenge is mounting.

It’s more complex than VAT, includes more taxpayers, and is likely to be more time-consuming. So, how can accountants ease the process of switching so many clients to the MTD for ITSA system?

The challenge in numbers

Unlike VAT, where year one saw only those over the VAT threshold joining the scheme, ITSA asks anyone with income from self-employment or property over £10,000 to switch to the system of digital recordkeeping, links and quarterly updates to back up annual returns.

Research last year from QuickBooks (whose bookkeeping software we integrate with) saw an average salary for self-employed people of £33,000. And Behaviour Change Research from Ipsos MORI after the introduction of MTD for VAT found around 25% of their sample were predominantly keeping paper records.

And while those figures are technically unrelated, they indicate that you’ll be rolling out digital recordkeeping to more than just a handful of self-employed clients over the next 18 months.

Add in the fact that BIS research found that the main reported advantage of self-employment was having more time or flexibility, and it’s clear that you’ll have to be flexible and accommodating as a practice to ease your clients into the increase in administration.

So, what can you do to make the transition easier for clients and your practice?

Create a priority system

You and your team know your clients best. And that means that you’re likely to be able to create a priority system for onboarding them to MTD for ITSA. It’s up to you what your priorities look like and who goes to the top of the list. Perhaps you begin with those likely to need the most time to iron out technical kinks those shoebox clients will fit this criteria or maybe you put those with the most complex returns at the top of the list so you can learn from the hardest cases first.

Whichever way you split your client list, having a priority plan will allow you to assess what kind of software will work best for your practice.

Offer choices

No one likes to be restricted in their options. But when it comes to switching your clients to MTD for ITSA, you’ll want to offer as much choice as possible. Why? Because signing up is mandatory. Presenting options elsewhere, therefore, adds to their sense of control when making the switch.

BTCSoftware customers are split in their opinion on how they’ll work with their clients. About 50% want to keep a tight grip on Self-Assessment submissions, and about 50% want to share the workload with their clients.

Where can you support your clients’ sense of self-government to help them feel better about the inevitable?

One way especially for those who are coming to digital recordkeeping for the first time is to avoid forcing them onto a single track for bookkeeping. For the cost-conscious, Excel is a smart choice that will comply with HMRC’s rules when used with bridging software like BTCHub. That bridging software can also accommodate data imported from legacy bookkeeping.

The fight

Or rather, why fight? MTD for ITSA could mean a lot of stress and extra work for everyone (including developers creating software in-line with the complexity of Income Tax is a mammoth task!), so standing alongside your clients will be a powerful method of making the process as painless as possible.

By bringing your clients into the conversation as early as possible, highlighting the benefits to them and empathising with their reservations, you can lead them rather than following behind and frantically trying to tidy up the mess.

It’s human nature to want to stick with things as they are. As creatures of habit, we tend to feel unsettled when changes arrive that feel outside of our control. But with 18 months left on the clock, now is the perfect time to pick up the reins and guide your clients to the easiest switch to MTD possible.

Choose help

Throughout the rollout of MTD for VAT, BTCSoftware’s customers had access to the support they needed. We’ll be offering the same with MTD for ITSA; including webinars and guides alongside the software itself.

BTCSoftware has now been added to HMRC’s in-development list for MTD for ITSA. It’s been a long slog, but that’s partly because we’ve taken a different route one that will give you and your clients the flexibility you need, whatever switch strategy you opt for. We’ve always prided ourselves on listening to what accountants need – and not simply trying to guess what they want – so please reach out if you have specific pain points to address.

Bright is here to help

We understand that getting clients up to speed with MTD requirements can feel like a drain on your time – especially when you’d rather be focusing on profitable, advisory work.

That’s why we’ve created a set of practical, time-saving resources designed to help you educate and onboard your clients for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

Take a look at the MTD Hub to learn more.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.