Panellists

• Lindsey Wicks, Senior Technical Manager, Tax Policy, ICAEW
• Caroline Miskin, Senior Technical Manager, Digital Taxation, ICAEW
• Rebecca Benneyworth MBE FCA, founder, Rebecca Benneyworth & Co, tax speaker, writer and consultant, and deputy chair of the Tax Faculty’s Technical and Oversight Committee

Producer

Ed Adams

Transcript

Lindsey Wicks: Hello and welcome to The Tax Track, the podcast series from ICAEW where we explore the latest developments in the world of tax and what they mean for our members and tax professionals alike. In this episode, we’ll be talking about Making Tax Digital, and what agents need to do now to ensure that their practice and their clients are ready.

[Rebecca Benneyworth: How am I actually going to make this work for me and my clients? How am I going to deliver it?]

[Caroline Miskin: I think it’s important that listeners are aware that that is happening so you’re ready to deal with it.]

Lindsey Wicks: I’m Lindsey wicks, Senior Technical Manager for Tax Policy at ICAEW. I’m joined this month by Caroline Miskin, Senior Technical Manager, Digital Taxation at ICAEW, and we’re lucky enough to be joined by a special guest, Rebecca Benneyworth, MBE FCA, sole practitioner and tax speaker. Welcome to you both.

Making Tax Digital income tax self assessment, or MTD ITSA, will start in April 2026 for the self-employed and those with income from property where the combined amount is more than £50,000. The self-employed and landlords with income of more than £30,000 pounds will join MTD ITSA in April 2027. No date has been set for extending MTD ITSA to partnerships or companies. Today, we’re going to focus on what taxpayers and agents need to do to get ready for MTD ITSA, as this is described as the biggest change to affect tax agents and their clients since 1996/1997 when self assessment was introduced. Caroline, can you explain why?

Caroline Miskin: Making Tax Digital for income tax brings two particular changes. The first thing is that the self-employed and those with income from property will be required to keep digital accounting records in a commercial software product or a spreadsheet. Paper records are not going to be sufficient anymore. This is the first time that HMRC has actually mandated how people keep their records.

LW: And they’re also going to have to submit quarterly updates, aren’t they?

CM: Yes, the self-employed and landlords will be required to submit information to HMRC from the digital records on a quarterly basis. So that is very different from the current situation, where the only submission is 10 months after the end of the tax year.

LW: Rebecca, do you think that firms are ready for the change?

Rebecca Benneyworth: Not at all. I don’t think so, Lindsey. I think because MTD has been beset by delays – and we all know, there’s no secret about this, that it’s been put back several times – and I think largely firms are busy, up to their eyes with normal work, not to mention basis period reform, and they’re thinking well, this is probably never going to happen. In fact, the question I’ve been most asked over the early summer was, do I think a new government will actually throw it in the bin – to which my reply has been no, and they haven’t. It is notable that we haven’t got a minister coming forward and saying it’s definitely going ahead. But I think ministers are really busy with lots and lots of things. From everything I can see, now is the time. There is an alarmingly short period of time, given that – a bit like with self assessment – we have got to completely re-engineer what we’re doing. So I am worried that firms not even aren’t ready, but aren’t yet engaging with it, and that’s scary.

LW: And Caroline, does that fit with what you’re hearing as well?

CM: It certainly does. I’m getting such different reactions, again, from people who are still thinking “Oh, it’ll never happen, or the scope of it will change” to practitioners who would actually love to be having a go, but are frustrated because the software product that they use isn’t actually yet ready to deal with it. So a huge range of reactions from different people.

LW: So Rebecca, 19 months out from the first mandation date, what should firms be thinking about?

RB: There are two areas to look at. One is preparing your clients. And to be honest, Lindsey, over the last three or four years, there’ve been – with all the false starts – there’ve been lots of things around, you know, get your list ready and all that sort of thing. But I think actually the more important, bigger job – and more challenging – is thinking about how you as a firm are actually going to achieve this, how you’re going to deliver this for your clients. Or as somebody said to me, am I going to retire? Because it is a massive change, exactly the same as with self assessment, that brought in the horrible January rush. But we all know, those have been in practice for a number of years, we all know that January can be a very challenging time: getting clients to reply, giving answers to queries. Is this going to be for January as a year? Well, it can’t possibly be. We’ll all crack under the strains. So it is about thinking about how you get information from clients and how you process that information through your firm. And that’s a big change. There is also lots you can do with talking to clients and saying, you know, you need digital records and all that. But it’s the in-firm engineering that I think hasn’t had really enough air time yet.

LW: Using spreadsheets and digital accounting software are both acceptable forms of maintaining accounting records. But what’s your view on spreadsheets?

RB: Well, I started out my journey towards MTD quite a long time ago, because as everyone knows, I’ve been a big backer of this, and I’ve taken some stick for that but I make no apologies. I thought this was going to happen, and I wanted to get ready early, and I started the journey out saying, right, I’m putting them all on product X. Everyone’s going on product X, whether they like it or not. I’ve had to revisit that, and I’ve revisited that choice a couple of times. On spreadsheets, I can see that I’ve got clients who are going to be mandated into MTD, but who don’t have the financial capability of paying for a licence for one of the well-known products, and I have to accept that some of those will be using spreadsheets. And what I’m really doing now is I’m going through my client base, looking at everyone who’ll be mandated either in 2026 or 2027 and thinking about what is the right solution for them. I’m not going to go for a proliferation of 98 different products, but what I am doing is trying, on an individual client basis, to design a solution that they can cope with. That is a manageable cost, and that will certainly include spreadsheets.

LW: And what else should practitioners be thinking about?

RB: Well, I think from a client-facing point of view, the big one is separate bank accounts, and that is absolutely essential. I’ve tried to do that over the, well, probably three or four years, and with mixed success. But I am really pushing that now, and that’s really my job for the next few months, making sure – and certainly, as I’m taking clients on, new businesses, I am absolutely firm with them – they must have a separate bank account for their business transactions, and they must try and use that all the time for business. Now I know sometimes they’ll pick up the wrong card. I do it. But if they’ve at least got a separate account and maybe a separate credit card, if they use credit card a lot, then at least we’re at a starting point.

LW: And what sort of reaction are you getting from your clients?

RB: I had one hilarious response from a client, a very substantial business, absolute shambles of a bank account, all connected to a cloud-based product. But I’m seeing also Tesco, Morrisons, the pub – everything in there. And I emailed him and said: “Look, I know you’re busy. I know you’re ever so busy, but I’m really going to have to put my foot down. And if you can’t upload receipts, and if you can’t separate out transactions, then I’m just going to put anything I don’t recognise straight to drawings.” And he came back: “Sorry, sorry, sorry, Rebecca, we lost the card to our family bank account about eight months ago, and so we just used this one because we’ve both got a card on it. I have ordered a new card today, and I promise I’ll try very hard.”

So that’s quite good, but I’ve got another client with a reasonably sizeable business who says: “Well, I don’t see why I should have two bank accounts. I don’t want to pay for two bank accounts.” And I say: “I don’t want to see your shopping and your pub and your Christmas presents.” And he said: “Oh, well, I don’t mind that.” I thought, “He’s missed the point completely.” But I am looking at now quoting clients extra fees if they won’t have a separate bank account because, you know, the amount of time it takes wading through everything that I shouldn’t be dealing with, or my bookkeeper shouldn’t be dealing with – I hope that will prove something of a success.

LW: Thank you for sharing your thoughts on that. And HMRC has a private beta to pilot MTD this year. Is it worth joining?

RB: Well, I’m in, but then I’m a big supporter. The thing I learned when self assessment came in, to harp back to the 90s – I was going around teaching self assessment and the change in basis periods for about three years before it came in – and at the time, I was doing a huge number of lectures for all the professional bodies, all sorts of organisations. When I actually sat down in my office and did it, it wasn’t quite what I thought it was going to be. Up close and personal, actually putting your hands on the steering wheel, it was different. And that was a really valuable lesson, because I know that if I’m going to talk on my courses, if I’m going to share my experiences, I’ve actually got to do it. It’s not enough to know what the legislation says, what the guidance says. You’ve got to get in behind the steering wheel, get your hands on and put it in first gear and find out what happens when you put the accelerator down. So that’s really the main reason, you know – and that reflects both, it reflects for my practice, so that I can actually find out at the sharp end, what does it feel like? What do I need to do? How do I need to change things? But it also works for my lecturing – I can share with other people. So I think probably later this year, it is worth firms maybe putting in one client, maximum two, into the beta, just to have a look at it and see what’s involved. I wouldn’t recommend putting more than that in, and then maybe next year, a few more. And I quite understand if firms want to hold off and let idiots like me break it and then fix it again before they join, because it is quite a time-consuming thing. But I honestly think anybody who arrives in February 2026, two months out from mandation, who hasn’t actually had a little bit of a feel of it, a little bit of a dabble, is playing with fire.

LW: And you’ve alluded to the fact that you might sign up a couple more clients later in the year, and it is possible to join, even though quarter one’s passed?

RB: Yes, so you can join at any time. And, you know, Caroline’s mentioned, there is a leading software product [coming] but not yet. And lots of people will find their products maybe aren’t ready yet. And I think joining in maybe October, November might be a good idea. Don’t be put off. You can still try it out. It doesn’t matter if you’re late, it’s just getting a feel of what’s involved and how your software is going to deal with it. And you know, that starts all the thoughts running about? How am I actually going to make this work for me and my clients? How am I going to deliver it in a way that is going to be cost-effective for me, not too expensive for my clients, and give me a thriving business into the future – because this is how it’s going to be, folks.

CM: So just to reiterate, it is still now possible to join. You do have to go back and submit the quarterly updates right back from the beginning of the tax year, but it’s still entirely possible to join. It is worth just remembering, too, that the first step in the sign-up journey is an eligibility checker. We’re hearing that a lot of people are using the beginning of the sign-up journey just to check whether clients can go in. So that is something worth considering. Obviously, HMRC is slightly wondering why people aren’t then carrying on, but remember that it’s there. I think the eligibility criteria and the availability of software are the key barriers though, in fact, HMRC has a dedicated customer service team. Once you sign up for the pilot, you get a magic phone number and you can phone a team who are absolutely ring-fenced to MTD, and they will also deal with any self assessment or any other queries for the taxpayers who are in the private beta. So you know, the support that’s available this year is much better than, probably, what it will be when it’s ‘business as usual’.

RB: I would recommend that if firms are thinking of putting one person in a private beta, before you talk to your client, you get yourself an idea of people who are up to date with their bookkeeping, or you’re doing it in-house. Don’t have an external bookkeeper, because that’s going to cause problems. Don’t have a year end other than 31 March or 5 April, because that’s going to cause problems until we get a bit further down the line. And then with maybe four or five that you’re thinking of, go on the eligibility checker – that might whittle it down to two or three, because one or two might not be eligible; one of the obvious ones is the high income child benefit charge isn’t billed yet, so you can’t put people in with it. Then make your decision. Go back to your client, talk about it, get their agreement – that’s really important; don’t shove them in without them knowing. And then you can actually go and sign people up.

LW: And you mentioned before that HMRC would like more people in the private beta. What is HMRC doing to encourage taxpayers and agents to join?

CM: Yeah, the HMRC has been sending out, I think there’s been a series of three emails that have gone out to agents to encourage them to dip their toe in the water and sign up a client. I think the one to be aware of at the moment is that HMRC is contacting VAT-registered traders who are in MTD VAT, to encourage them to join MTD ITSA. I’m not exactly thrilled by that, because agents aren’t getting those messages, and also the messages are going to traders who might not be eligible or who may be using a software product that isn’t ready yet. So not best pleased by that, but I think it’s important that listeners are aware that that is happening, so you’re ready to deal with it.

RB: I was actually pretty concerned by that. I can see that it’s a good idea. But I think, given that at the moment really agents need to manage this, if you’ve got represented taxpayers the contact really should go through the agent. Having said that, I did have sight of the letter that’s going out, and suggested that the bit about talking to your agent first should be at the top, not the bottom of the letter, which it now is. And I’ve actually emailed those clients that I think will receive one of these ahead of it to say you’re going to get a letter, this is what it’s about and, you know, if you really want to join, talk to me.

LW: Now Rebecca, you’ve already alluded to the fact that you’ve opened your eyes to other software products. Will practitioners need to be open to using different packages? Or could we see clients choosing their accountant based on the software that the accountant supports?

RB: I want my staff to be quick and accurate, and I think that comes from lots and lots of experience using a package. So what I’ve done is I’ve said predominantly, if we’re doing the bookkeeping, then it’s either spreadsheets, which they can both use, or our chosen package. Where a client is doing their own bookkeeping and has a different package, provided they’re reasonably competent – and I’ve only got two or three doing this – then I will accept them and I won’t ask them to change. I think the risk in a client who is, for example, using product X in saying, well, I want you to go on to product Y, is that they’re familiar with product X, and they will make mistakes in the changeover. And I don’t want to introduce more mistakes. Now, if I find that when actually using product X, they’re an absolute disaster anyway, I may well say look, you know, I think actually we need to address this.

Do clients feel strongly about the software they’re using? I think it would be rare that you get somebody who’s so wedded to a product that they’re not willing to change. But what I think firms have got to do is think about the two sides again, internal and external. Is moving a client from a product to another product actually going to introduce inaccuracy and difficulty? But by the same token, is a proliferation of different products going to cause inaccuracies within the firm when you’re dealing with it because staff aren’t familiar with that particular product?

LW: Moving on from software and record-keeping, the other key changes are timing and frequency of submissions. How do practitioners plan for that?

RB: It is scary. I’m absolutely looking at every aspect of what we do and trying to identify ways to streamline it and take delays out of the system. Some of that will be saying to clients sorry, but you know you’re going to have to go on software. Some of it will be writing to clients and saying look, at the moment what you’re doing isn’t going to be right for the future. Here are your options, and here is likely what it’s going to cost you. And I’m telling you this now because if you don’t feel that you can pay that, I’ll support you to go and do it yourself. And I’m trying to give people all the choices that they need, so that my clients, you know, if necessary, they will leave. And I’m quite prepared to lose clients over this. I don’t want to, but it maybe I can’t service them for a price they can pay. I’m not saying fees are going to increase dramatically, but they must increase, because I’m going to be in contact with that client four times a year instead of – well, probably five times a year, four quarters plus finalisation instead of once – and that amount of time has got to be paid for.

CM: Yes, the sheer scale of the transition task. And I think one of the things, even if you really don’t want to dip your toe into the private beta, you know, at least think about getting people onto digital records, more regular bookkeeping. Get those and use those. Get the self assessment returns in early so that you’re ahead of the game on your self assessment returns, so that you’ve got time in January 2026 to be dealing with MTD ITSA because you’ve got a lot of the self assessment returns out of the way.

RB: I mean, one of the things that I didn’t think I would have to think about, but it’s occupying an awful lot of my brain at the moment, is physically how do I get information from clients? It is about that level of detail of what information do I get? I went to a firm local to me, a reasonable-sized firm, quite sophisticated time recording there, and I talked to them about their accounts department. They wanted me to go in and talk about my experiences. And the level of detail in their accounting records meant that one of the partners could sit down and say, in our accounts department – who do the self-employed accounts and VAT returns – every member of staff spends, on average, a whole day every week chasing information, chasing records, chasing responses to queries. And what I’ve said is, you will absolutely not have time to do that. Once all your clients are in MTD ITSA, the volume of work – you will absolutely not have time to do that. So you need to think about how you get information.

LW: And I guess a lot of clients will be doing their VAT returns themselves. Do you see the same happening for MTD ITSA or not?

RB: Yeah, I think if they’re doing their own VAT returns, and they’re competent doing that, there’s absolutely no reason why they won’t be doing MTD ITSA.

CM: But there will be different models for different firms, different models for different clients. But it is all about really thinking through now, who is going to do what, in terms of who’s going to keep the records, who’s going to submit the quarterly updates, but down to the level of detail that you’ve been talking about, Rebecca, yes.

LW: Thank you. I think the key things to do now are ensuring that clients are recording information digitally and have separate bank accounts – that was your top tip, Rebecca. They need to prepare information for the self assessment process well in advance, even if they’re not joining the beta. And they also need to be thinking about the software that you use and your clients use. And if you need any more information on Making Tax Digital, don’t forget, we’ve got a dedicated hub at ICAEW. That’s it for this episode. Many thanks to Caroline and Rebecca for your contributions. And thanks for listening. If you’ve missed anything, we’ve included some links for further reading in the show notes, and if you found it useful, then don’t forget to subscribe so you never miss an episode. You can rate and share the podcast too.

We’ll be back next month with the next Tax Track. In the meantime, why not check out the sister podcasts from ICAEW? Accountancy Insights provides business, finance and accountancy analysis, while each episode of Behind the Numbers offers a deep dive into a selected topic. There’s also the students podcast aimed at young professionals. If you’re not already a member of ICAEW’s Tax Faculty, remember that ICAEW members can join the faculty for no additional cost. Faculty members receive our monthly Taxine bulletin. In addition, anyone can subscribe to receive our weekly Taxwire bulletin containing the latest tax news from ICAEW. Thanks for listening.