MTD means more clients need compatible software, and most firms are paying for it without recovering it. This blog covers who is driving that cost, why it compounds, and how to stop absorbing it.
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MTD Is Expanding Your Clients' Software Stack. Here Is Who Should Pay for It
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Making Tax Digital has been talked about for years. It is now here. For UK accounting and bookkeeping firms, it has a practical consequence that does not get discussed enough: more clients need compatible software, and the firm is usually the one who sources it, manages it, and pays for it.
Most of those costs are rarely recovered.
What MTD means for the software your firm carries
MTD requires businesses and landlords to keep digital records and submit tax information using compatible software. For firms that manage this on behalf of clients, that means a growing stack of tools to track, pay for, and keep current.
Xero, Dext and QuickBooks are costs firms have been carrying for years. What MTD adds is a new category of clients who previously had no compatible software requirement and now do. Property clients. Landlords. Self-employed clients who kept records in a spreadsheet and filed an annual return. Each of those clients now needs a tool, and in most cases the firm is the one who sets it up.
Which clients are affected
The firms feeling this most are the ones with a broad client base. A practice serving limited companies, sole traders, and property clients is adding compatible software across a wider range of its client base than it was two years ago.
Property and landlord clients are a specific pressure point. Many of them have never needed cloud accounting software before. They do not particularly want it. The firm explains it, sets it up, and manages the subscription. The client pays their annual fee and rarely thinks about the software sitting underneath.
The cost stays with the firm.
Why the cost keeps landing with the firm
Most firms absorb software costs because it is easier than having the conversation. The subscription goes on the firm's card. It gets managed alongside the client's work. At some point it becomes absorbed into the routine, and nobody questions whether it is being recovered.
MTD is making that more difficult to overlook. The number of clients who need compatible software is increasing. The number of subscriptions the firm manages is increasing. Each one that is not recovered is margin leaving the practice without anyone noticing.
For a firm with 50 property and landlord clients, the monthly software cost across that group alone can be significant. Across 200 clients, it is a meaningful number. Most firms have never added it up.
