4 reasons MTD for Income Tax will be a benefit, not a headache
Many advisors see Making Tax Digital (MTD) for income tax as something of a headache and they’ll tell you that it’s not going to positively affect their bottom line. The fear is that clients won’t see the point of it, and advisors could inevitably spend more time and effort with clients who don’t necessarily have the capability to pay them more than they’re currently paying.
However, if you dig a little deeper and flip the idea of MTD for income tax on its head, several tangible benefits emerge for practices, and these could lead to significant business growth and development opportunities.
Dean Shepherd, tax digitalisation lead at Wolters Kluwer Tax and Accounting UK, shares four reasons why MTD for Income Tax presents real opportunities for advisors.
Reason 1: Five million strong opportunities
At the moment, about five million people file their own tax return through the HMRC website, but once MTD for income tax is fully in place, that website will no longer function. So, in terms of a sizeable market, that’s five million taxpayers who may suddenly need assistance from an advisor. That’s five million opportunities for immediate revenue streams.
The obvious prospects are the clients who already use the services of an advisor for annual filing, but there will undoubtedly be others for whom filing four times a year is simply too much work in addition to their day jobs. With increased interaction, perhaps clients will also feel encouraged to grow the relationship and invest in more sophisticated services.
Reason 2: Building new services in an advisory portfolio
MTD for income tax may also be an opportunity to pull in more services. Advisors don’t often offer bookkeeping services as they aren’t always a lucrative line of business. If more frequent filing means clients start to use digital tools to take care of bookkeeping requirements themselves, firms may decide to take bookkeeping back in-house.
Reason 3: Increased visibility
MTD for income tax will encourage more checkpoints throughout the year, and more visibility. With more checkpoints, advisors will have a better idea of how those clients are performing and may be able to offer them services such as wealth management. It’s about becoming a more effective business advisor.
Reason 4: Adding greater value
With more frequent contact, advisors are in a great position to build closer relationships with their clients. The best clients are those that you communicate with most frequently, and MTD for income tax is going to organically help to build closer relationships, which may mean that clients stay loyal for longer.
The accumulation of data is also going to help with this – MTD for income tax will mean we have more data, which can drive better business insight. Understanding a client’s position perfectly is the best possible foundation to offering them better value-add services over time.
The deadline for MTD for income tax has seen many delays, so what are the latest HMRC timelines? What is the most recent advice for MTD? Register for our latest on-demand webinar with Dean Shepherd for an update on where HMRC is at with MTD across all taxes. Click here to watch this must-see session.