Skip to main content How to navigate MTD pricing at your practice
The countdown to Making Tax Digital (MTD) for Income Tax is on, and practices are starting to think about how they’ll tackle those quarterly submissions. With this increase in workload, it's only natural to reassess pricing and consider the best way to share those changes with clients.
Here are a few ways to get started, without jeopardising client relationships.
An increasing workload
Instead of submitting a Self Assessment tax return to HMRC once a year, your affected clients will need to submit four quarterly updates about their business income and expenses. At the end of the tax year, they’ll also have to send a final declaration.
Adding to the complexity, practices are likely to face a period where the old and new submission methods overlap, potentially doubling the workload in the short term. With this spike in requirements, it's a good time for practices to take another look at their pricing.
You’ll also need to think about your clients’ different needs. Some will adapt quickly, while others will require more hand-holding, especially when it comes to digitalisation. This means providing comprehensive training and onboarding for new software, which will inevitably increase demand on your practice’s time. Every client is unique, with different business setups and tech skills, so a one-size-fits-all approach won’t always work - you’ll likely need to tailor your approach. For example, think about clients still using personal bank accounts for their business finances; transitioning them to a designated business bank account can lighten your workload and ensure prompt data collection.
Not sure where to start when assessing the impact of workload on your pricing strategy? Here are some thought starters to consider.
- What sort of clients (e.g. landlords, small or large businesses…) are you currently serving and what is your practice’s ambition for the future?
- Are your staff and clients prepared for an increase in workload? Is further training required?
- Could you automate some of your processes to speed up work internally?
If you’re looking to gain clarity on the impact of MTD for Income Tax in your practice, book a free MTD consultation with one of our experts. It’s a great opportunity to assess your readiness and develop personalised next steps.
Getting your pricing structure right
Practices are still exploring a range of options when it comes to MTD pricing, and there's no single, universally adopted strategy yet. Some are considering a straightforward flat percentage increase, aiming for simplicity across their client base. Others are leaning towards a 'per submission' model, directly reflecting the increased workload. And finally, some are experimenting with different pricing models for different cohorts of clients (for example a fixed model for landlord clients), even a year ahead of the deadline.
However, many are finding that a one-size-fits-all approach just won't cut it. Client-specific pricing is emerging as a potential strategy, recognising the unique needs and complexities of each business. Public-facing pricing plans might serve as a starting point, but flexibility is key. This flexibility must also address clients resistant to software adoption, as it leads to a substantial increase in your practice’s workload, requiring adjusted pricing.
Since many practices are still in the process of determining what is best for them, there’s time to start looking at this if you haven’t already. You’ll be in a great position to adapt as the landscape evolves.
When asked about the specific challenges of pricing MTD services, Johann Goree Co-Founder at Engager.app, explained: “The industry often struggles to price new services. Clients’ perceived value only becomes clear after a few deliveries of the work.”
He then added that the majority of people he’s speaking to about this issue are planning to maintain the annual filing fee and treat the quarterly filing similarly to VAT returns, charging a similar amount to the VAT service fee.
Not sure where to start when exploring MTD pricing strategies? Here are some thought starters to consider.
- What service bundles will optimise client engagement and revenue?
- What innovative packages can attract new clients and deepen relationships with existing ones?
- How are you tackling this challenge against competitors?
Communicating changes to your clients
Let's be honest, MTD pricing changes bring anxieties. Managing potential client pushback and even the fear of losing clients are real concerns. The key to tackling these worries lies in clear, proactive communication.
Don't wait for clients to question the changes; explain the 'why' behind them, emphasising the need for compliance and the added value of your services. Highlight how your expertise simplifies the process.
And remember, your accounting software is a powerful ally. Showcase how it streamlines record-keeping, reduces errors, and saves your clients time – all of which contributes to a smoother MTD transition.
In fact, accounting software (like FreeAgent) can give your clients a clearer view of their finances and a better way to work with you. And if they have an eligible business bank account, they can even access it for free.
When clients see the benefits, they're more likely to embrace the changes. Happy clients mean a happy and thriving practice, especially ahead of MTD for Income Tax.
“In the last 18 months, we’ve onboarded 80 new clients to FreeAgent and we haven’t lost one. It’s such a good tool, it’s so easy to use and our clients just love it. Some clients are taking on staff and growing up to the half-million-pound mark, but FreeAgent is still beefy enough to cope with that.” - Zoe Simmons (Kernow Accountancy)
FreeAgent isn’t just a tool; it’s a catalyst for growth, efficiency, and enduring partnerships. See how FreeAgent could help your practice on its path to MTD for Income Tax.