TECHNICAL NOTES · ACCOUNTS AND FINANCE

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

  1. Show the VAT figures flowing from bills to the VAT return without being retyped, including where office accounts are in a separate system.
  2. How are quarterly tax deadlines for clients recorded, assigned and supervised?
  3. Can recurring tax work be set up and billed on a fixed fee, by quarter or by year?
  4. 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

Workflow, data and documents

Your types of work

Security and access

Microsoft 365

Data and decisions

Official sources

Check the detail for yourself at the source. Rules and guidance change, so always use the current version.

All official sources for law firms →

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