Making Tax Digital: the firm and its clients
Making Tax Digital is usually filed under "the accountants will deal with it". But it touches the practice management system twice: in how the firm’s own VAT figures reach HMRC, and, for firms with private client tax work, in what their clients now have to do every quarter.
The firm's own VAT
VAT-registered businesses must keep digital records and file VAT returns through compatible software, with digital links between each piece of software involved. Figures should not be retyped from one system into another on the way to the return.
That matters when the office accounts sit in a different system from billing. If bills are raised in the legal system and the VAT return is filed from Xero or another ledger, the VAT on fees and disbursements has to flow between them through an integration or a digital import, not a spreadsheet someone rekeys. A small design decision in the accounts integration becomes a compliance question.
Your clients' income tax
Making Tax Digital for Income Tax began in April 2026 for sole traders and landlords with qualifying income over £50,000, with the threshold falling to £30,000 from April 2027 and planned to fall further after that. Those clients keep digital records and send quarterly updates as well as the annual return. Partnerships, trusts and estates are not currently included.
For a private client team preparing returns for wealthy individuals with rental property, that means more frequent work, more data to collect, and tax software that supports quarterly updates. It also changes how the work is priced, scheduled and billed in the legal system.
What to ask, and what to see
- Show the VAT figures flowing from bills to the VAT return without being retyped, including where office accounts are in a separate system.
- How are quarterly tax deadlines for clients recorded, assigned and supervised?
- Can recurring tax work be set up and billed on a fixed fee, by quarter or by year?
- How does client and property data reach the tax software without being keyed twice?
Technical notes: small decisions, big consequences
Start with the overview: The details that decide the project
Accounts and finance
- Core accounting is still the gold standard
- One-way or two-way sync? Connecting your legal system to Xero
- Units or minutes? How time is recorded
- Your matter and nominal structure
- Making Tax Digital: the firm and its clients (you are here)
Workflow, data and documents
- Workflow: deep, basic or none?
- Client onboarding and matter inception: portal, e-signature and ID checks working as one
- Custom data: what you rely on, and how you move it
- Precedents, merge codes and macros: your document bank in a new system
Your types of work
- Legal aid: your records, not just the Legal Aid Agency’s
- Litigation: Precedent H starts with time recording
- Family: Form E and financial disclosure
- Private client: where does the tax software fit?
Security and access
- Roles or individuals? How user permissions are set up
- Why manage security twice? Linking application security to Microsoft Entra
- How granular is the security inside the system?
- Who can see what in reporting?
- Shared platform, your data: separation, restore and erasure
- When the supplier is the target: where your data lives, who can reach it, and your real risk
Microsoft 365
- How does it connect to Outlook?
- What did you just give it permission to do?
- What happens behind the scenes? Background integrations with Microsoft 365
- OneDrive is not a document management system
- Microsoft 365 is not a backup
Data and decisions
Official sources
Check the detail for yourself at the source. Rules and guidance change, so always use the current version.
- Making Tax Digital: The Making Tax Digital programme for VAT and Income Tax.
- Making Tax Digital for Income Tax: when you need to use it: Thresholds and start dates.
- HM Revenue and Customs: All HMRC guidance and services.
Where does your firm stand?
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