MTD for Income Tax: Tips and tricks for accountants to segment clients (KYC)
Introducing Making Tax Digital for Income Tax to clients means having some difficult conversations. In this article we look at the things you can discuss to get the best MTDÂ outcome for everybody.
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This article was published in 2022 and was updated in March 2025 for relevance and with the latest details.
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Accountants and bookkeepers need to prepare now for the start of Making Tax Digital for Income Tax which starts in April 2026.
This means segmenting clients into lists to assign practice resources, and also delivering the very best client experience. For example, there will be those who are technically savvy, as well as those to whom Making Tax Digital for Income Tax will be a shock to the system. What each requires from you could vary considerably.
But what do we really know of client attitudes and behaviours towards technology, and specifically how comfortable they might be in using tech to help with their financial admin?
Here’s what we cover in this article:
- Making Tax Digital for Income Tax: The basics for clients
- Initial segmentation: Who it applies to and when
- Forming a view: Who will need what kind of help
- Making Tax Digital for Income Tax: Three questions to ask clients
- Making Tax Digital for Income Tax: Unpacking what the answers mean
MTD for Income Tax: The basics for clients
Here’s a reminder of which clients will be impacted and when.
From April 2026, Making Tax Digital for Income Tax becomes a legal requirement for sole traders and landlords with income over ÂŁ50,000.
Those earning over ÂŁ30,000 join from April 2027, with those earning over ÂŁ20,000 joining at some point in the future.
The primary requirement is for them to keep records digitally using compatible third party software, which can also be used to file updates to HMRC on a quarterly basis.
At the end of the tax year, the additional information required on the normal tax return is added and filed and signed off with a Confirmation Statement. The tax due needs to be paid by the 31st of January following that tax year.
Initial segmentation: Who MTD applies to and when
The first aspect of segmentation needs to be on who is impacted and when. Taking the total qualifying income from the last tax return for all self employed and landlord clients is the perfect place to start.
Qualifying income is all business and property income, and excludes things like pensions, savings, and dividends.
This list of clients and income can then be used to understand who will come into scope, and to see the size and scale of the task at hand.
Forming a view: Who will need what kind of help
The next stage will be to form a quick view of what kind of help each individual client may need.
Break this down into two distinct options:
- Do It With Me - in other words clients that will need some support and input from you
- Do It For Me - those clients who will want you to do everything for them (including the digital record keeping, which is effectively a bookkeeping service)
Every accountant will be able to flick through their mental rolodex of clients and pick out those that are very tech savvy and will be able to handle most of the requirements quite comfortably. And, those clients that will need a considerable amount of hand holding, or would prefer you to just deal with it on their behalf.
Either way, knowing what your clients are prepared and able to do on their own is going to be important so that you can target the right services to them in the not-too-distant future.
As a note of caution, we shouldn’t underestimate how used to technology many small business owners are. And while it is clear that there will be a proportion of our client base who will need a lot of support, there will equally be many who will be able to do much for themselves providing the tools are simple enough to use and are given the right encouragement and training.
MTD for Income Tax: Three questions to ask clients
To help verify your assumptions, tell your clients about the new rules and regulations and ask them to respond to questions such as:
- How comfortable are you with keeping your bookkeeping records digitally, so that updates can be submitted each quarter to HMRC?
- Would you be happy to use your phone or computer to record or to send us your receipts and invoices with an easy to use app?
- Our fees will be increasing to meet the extra work that Making Tax Digital for Income Tax will create. Can I show you how we might minimise the impact on your bill?
You could even consider using something like a simple online form and link it from a general Making Tax Digital for Income Tax email. Or, alternatively call them individually and ask.
Use the responses to confirm whether or not they will want you to Do It With Me or Do It For Me.
Making Tax Digital for Income Tax: Unpacking what the answers mean
The first of those three questions should establish if the client feels comfortable and confident enough already. If they are, then it could be that you are pushing on an open door, and helping them make the move to being Making Tax Digital-ready is something that you can prioritise now.
A negative answer is probably an indicator that they will need more help and assistance, perhaps because they don’t know what it entails. Or, it might be a lack of confidence.
The second question is designed to see what technology they have to hand, and if they are willing and able to use it. By framing it as an easy-to-do task it allows you to position the effort as being something taken on by the software or you, rather than themselves. Â
A negative response here will allow you to dig further as to what might be holding them back. For example, they may not have either kind of device, or have another reason that prevents them from doing this easily—perhaps a disability, for example.
A positive response on the other hand should be taken as an opportunity to present your solution. You can also already hear those who will answer with, “Depends on how much it costs!”. So, the next question here should help.
The third question above takes on board the hard reality of Making Tax Digital for Income Tax.
In order for you to provide a scalable and sustainable service it is very likely that your fees will need to increase. Helping clients to minimise those costs will largely be down to them doing more of the work themselves, or working in the most efficient way.
Taking the opportunity to frame potential cost increases now (without having to be too specific) will reduce any shock further down the line, while the offer to reduce their own personal impact should appeal to many.
Those who are positive when answering are giving you permission to show them how doing some of the work themselves will reduce the reliance and cost of doing the full bookkeeping service.
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Conclusion: Getting a head start with clients and MTD for Income Tax
Taking action is only really effective when we can make informed decisions. For your practice that means understanding the size and scale of the opportunity and challenge of implementing Making Tax Digital for Income Tax through segmentation.
The process of segmentation will also have a direct impact on your clients, as it will allow you to ensure that you are able to match the service and technology required to meet their specific needs.
Regardless of what they choose, at the heart of Making Tax Digital for Income Tax is the need for good, clean, regularly added income and expenditure data and this is where AutoEntry comes in.
AutoEntry is the key tool that will help each of your impacted clients on their Making Tax Digital for Income Tax journey, and allow you to build up a consistent and scalable service offering.
Doing the segmentation work now puts you ahead of the game and allows you to build the very foundations of how you, your practice and your clients will make a success of Making Tax Digital for Income Tax.
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