Do I Need an Accountant for Making Tax Digital?

Making Tax Digital is designed for sole traders to manage themselves with software. Here is when you can handle MTD alone and when an accountant adds value.

Quick Answer

You can manage MTD yourself if:

• Business is straightforward (single income source, standard expenses)
• Income under £100,000
• Comfortable with basic software
• Time available for monthly record-keeping

Consider an accountant if:

• Complex business structure or multiple income sources
• Income over £100,000
• Tax planning needs (reliefs, allowances, timing)
• Time-poor or technology-averse
• Previous HMRC investigations or complications

What MTD Software Does vs What Accountants Do

Understanding the division helps clarify whether you need both.

MTD Software Capabilities

MTD-compatible software handles:

• Digital record-keeping (income and expenses)
• Automatic quarter assignment
• Category totals calculation
• Quarterly update submission to HMRC
• End of period statement
• Basic tax estimation

Software provides:

• Compliance with HMRC requirements
• Organised financial records
• Submission deadlines tracking
• Receipt storage

Software does not provide:

• Tax planning advice
• Business strategy guidance
• Complex allowances optimisation
• Representation with HMRC
• Peace of mind through expert review

What Accountants Add

Accountants provide:

• Tax planning (timing income/expenses, allowances strategy)
• Year-end review and optimisation
• Complex situations handling (capital allowances, losses, partnerships)
• HMRC correspondence management
• Business advice beyond compliance
• Error checking and catch-up services
• Representation if HMRC investigates

Accountants do not:

• Record transactions daily (that is your responsibility even with an accountant)
• Eliminate need for MTD software (you still need compliant software)
• Remove all involvement (you provide information and documents)

When DIY MTD Works

Many sole traders successfully manage MTD without accountants.

Straightforward Business Profile

Single income source:

• One type of service (consultancy, freelancing, coaching)
• Clear client invoicing
• Predictable income flow

Standard expenses:

• Common categories (office costs, travel, professional fees)
• No complex capital purchases
• No stock/inventory
• No employees

Example businesses managing MTD independently:

• Freelance graphic designer invoicing clients monthly
• IT consultant with retainer clients
• Tutor with regular students
• Photographer with standard pricing

Technical Comfort Level

You are comfortable with:

• Learning new software interfaces
• Following step-by-step instructions
• Basic categorisation decisions
• Troubleshooting minor technical issues

You do not need to be:

• Accountancy expert
• Tax specialist
• Software developer

MTD software is designed for non-experts. If you can use online banking or email, you can use MTD software.

Time Availability

You have time for:

• Weekly transaction recording (30 minutes)
• Monthly receipt organisation (15 minutes)
• Quarterly submission preparation (1 hour)
• Annual year-end declaration (2 hours)

Total annual time: Approximately 40-50 hours

If this time commitment fits your schedule and you find administrative tasks acceptable (not enjoyable, just acceptable), DIY works.

Financial Threshold

Income under £50,000:

• Tax situation is relatively simple
• Fewer complex planning opportunities
• Accountant fees (£500-1,500 annually) represent larger percentage of income

DIY MTD at this level: Often makes financial sense

When an Accountant Makes Sense

Some situations benefit from professional help.

Complex Business Situations

Multiple income sources:

• Self-employment plus rental property
• Consultancy plus product sales
• Several unrelated business ventures

Significant capital:

• Equipment purchases over £10,000
• Vehicle purchases
• Property investments
• Complex capital allowances calculations

Stock/inventory businesses:

• Product resale requiring inventory tracking
• Manufacturing with work-in-progress
• Seasonal stock fluctuations

Employees:

• Payroll obligations
• PAYE and NICs
• Employment law compliance

Higher Income Levels

Income over £100,000:

• Personal Allowance tapers above £100,000
• Additional tax planning opportunities
• Potential Income Tax, NICs, dividend tax interactions
• Higher scrutiny risk from HMRC

Accountant fees justified: Tax savings often exceed accountant costs at this level

Tax Optimisation Needs

Retirement planning:

• Pension contribution strategies
• Timing income around retirement
• Transitioning business structure

Variable income:

• Some years high, some low
• Loss carryback/forward planning
• Timing flexibility for tax efficiency

Expansion planning:

• Considering limited company structure
• VAT registration decisions
• Partnership opportunities

Time Constraints

You are time-poor if:

• Working 50+ hours weekly in business
• Family commitments limit admin time
• Rather pay for help than do it yourself

Hourly value calculation:

• If you earn £100/hour consulting
• Accountant saves you 30 hours annually
• Value of time saved: £3,000
• Accountant cost: £800
• Net benefit: £2,200

At certain income levels, accountants are economically rational even for straightforward situations.

Previous HMRC Issues

If you have had:

• Previous tax investigations
• Penalties for late submissions
• Disagreements with HMRC
• Complex previous years' returns

Accountant provides:

• Clean slate with professional review
• Correct foundation going forward
• Representation if issues arise

The Hybrid Approach

Many sole traders use a middle ground.

DIY Record-Keeping with Accountant Review

You do:

• Daily/weekly transaction recording in MTD software
• Quarterly update submissions
• Receipt organisation

Accountant does:

• Annual year-end review
• Final declaration preparation
• Tax planning advice
• Optimisation of allowances and reliefs

Cost: £400-800 annually (less than full-service)

Benefit: Combines your effort with professional oversight

First Year Accountant, Then DIY

Year 1 with accountant:

• Learn the process
• Establish good practices
• Get foundation correct

Year 2+ DIY:

• Continue established routines
• Return to accountant if complexity increases

Cost: Front-loaded investment in proper setup

DIY with Occasional Accountant Consultation

Mostly self-managed:

• Handle quarterly submissions yourself
• Annual declarations yourself

Accountant consultation as needed:

• Large equipment purchase: "How should I handle capital allowances?"
• Business structure change: "Should I incorporate?"
• Unusual transaction: "How do I record this?"

Cost: Pay per consultation (£150-300 each)

What DIY MTD Requires

If going alone, understand the commitment.

Skills Needed

Basic bookkeeping:

• Distinguish income from expense
• Assign transactions to categories
• Reconcile bank statements

Software competence:

• Navigate web applications
• Upload documents
• Follow software prompts

Organisation:

• Regular routine for recording transactions
• Filing system for receipts and documents
• Calendar management for deadlines

Common DIY Challenges

Categorisation uncertainty: "Is this office costs or professional fees?"

Capital vs revenue: "Is this equipment purchase an expense or capital?"

Home office calculations: "What proportion of home costs can I claim?"

VAT complications: "Should I register for VAT?"

Most MTD software provides:

• Help articles for common questions
• Support chat or email
• Community forums

Many questions answerable through:

• HMRC guidance on gov.uk
• Software support resources
• Online sole trader communities

Time to Learn

Month 1: Learning curve as you figure out software, categories, routines

Month 2-3: Becoming comfortable with regular process

Month 4+: Routine established, minimal thought required

Expect initial investment of 10-15 hours learning. Ongoing effort drops significantly once established.

Accountant Costs

Understanding typical fees helps decision-making.

Full-Service Accountant

£800-2,000 annually depending on:

• Income level (higher income = higher fees)
• Complexity (multiple income sources, employees)
• Location (London higher than regions)

Includes:

• Year-end accounts preparation
• Tax return completion
• Tax planning advice
• HMRC correspondence handling
• Generally unlimited phone/email support

Year-End Only Service

£400-800 annually

Includes:

• Annual review of your MTD records
• Final declaration preparation
• Tax calculation
• Limited planning advice

You handle:

• Daily transaction recording
• Quarterly submissions

Pay-Per-Service

Ad hoc consultations: £150-300 per session

Specific tasks:

• Capital allowances calculation: £200-400
• Partnership return: £300-600
• Complex situation review: £250-500

What Affects Accountant Fees

Increases fees:

• Messy records requiring cleanup
• Late information provision
• Frequent changes
• Complex business structure

Reduces fees:

• Well-organised records
• Timely information provision
• Straightforward situation
• Long-term client relationship

Questions to Ask Accountants

If considering hiring one.

Qualification and Experience

"Are you a qualified accountant (ACA, ACCA, CIMA)?"

"How many sole trader MTD clients do you handle?"

"Do you have experience with my industry?"

Service Scope

"What exactly is included in your service?"

"Will you submit my quarterly updates or only year-end?"

"How do you handle HMRC correspondence?"

Software and Process

"Which MTD software do you work with?"

"Can I access my records anytime or only through you?"

"How do you want me to provide information?"

Communication

"How quickly do you respond to questions?"

"Do you charge for phone calls and emails?"

"Will I work with you directly or junior staff?"

Fees

"What is your annual fee?"

"Are there additional charges for anything?"

"When are fees payable?"

The Bottom Line

Most sole traders with straightforward businesses and income under £100,000 can successfully manage Making Tax Digital themselves using compliant software. The key requirements are basic organisational skills, comfort with software, and time for regular record-keeping - no accounting expertise needed.

Accountants add value for complex situations (multiple income sources, significant capital, employees), higher income levels (over £100,000 where tax planning saves more than accountant fees), and when time constraints make DIY impractical. The hybrid approach - DIY record-keeping with annual accountant review - offers middle ground for many.

The decision is not permanent. Start DIY and hire an accountant if complexity increases. Or start with an accountant to learn properly, then transition to DIY. Reassess annually based on business changes, time availability, and confidence level.