Should Accountants Charge More for Non-Digital MTD Clients?

Why Non-Digital Clients Cost More

One Annual Task Becomes Four Quarterly Tasks

Clients within MTD for Income Tax must keep digital records, use compatible software and submit quarterly updates.

Your team may need to:

• request missing records
• enter or import transactions
• reconcile bank and credit card accounts
• separate private and business costs
• correct duplicate or wrongly coded entries
• review the figures before submission

Clients who keep their records up to date may need little help. However, clients who send incomplete records near the deadline need far more time.

Your fee should reflect the work involved, not only the number of submissions.

Poor Records Can Reduce Profit Margins

Consider a client who needs 45 minutes of chasing, 75 minutes of bookkeeping and 30 minutes of review each quarter.

Quarterly work comes to 10 hours a year before the tax return.

Using a recovery rate of £60 an hour, staff time costs £600. Software and document storage may add another £120.

Annual cost then reaches £720.

Monthly fees of £55 produce £660 a year. Your firm is £60 below cost before partner review, tax work or unexpected corrections.

You must know the cost to your practice before setting the fee.

Weak Records Increase Review Work

Poor records can lead to omitted sales, duplicate expenses, private costs in the business accounts and unreconciled bank balances.

Your team must correct these points before relying on the figures. More checking means more staff time and greater pressure near the deadline.

Quarterly reporting makes an underpriced client harder to carry.

Score Record Quality Before Changing the Fee

Use Four Simple Checks

Score each client from zero to two in four areas.

• Banking: Does the client use a separate business account with a working bank feed?
• Documents: Are receipts and invoices sent through the agreed process?
• Timing: Are complete records provided by the agreed date?
• Accuracy: Are transactions clear, with few duplicates or personal items?

The highest score is eight.

Band 1: Organised Records

Scores of seven or eight show organised records with little correction needed.

You can keep these clients on your standard MTD fee.

Band 2: Regular Support

Scores of four to six show usable records, but your team still needs to chase documents or correct entries.

You should include the expected support time in the monthly fee.

Band 3: Heavy Support

Scores of zero to three show late, incomplete or mainly paper-based records.

Your team may need to rebuild parts of the bookkeeping and investigate unexplained balances. These clients should pay for the extra work or move to a bookkeeping package.

Keep the score on the client file and review it each year. You can then support any fee change with examples from the work completed.

Set the Fee From the Work Required

Start With Your Annual Cost

Use this calculation:

Annual hours × recovery rate + software cost + allowance for corrections

For example:

14 hours × £60 = £840

Add £120 for software and £96 for likely corrections.

The annual fee comes to £1,056, or £88 a month.

Your price will depend on staff costs, overheads, software, review time and expected profit.

You could use three fee levels:

• Organised records: £75 a month
• Regular support: £100 a month
• Heavy support: £135 a month

Use your practice costs rather than copying prices from other firms.

How Much Should You Charge This Client?

Enter the annual hours this client’s records take your team, your recovery rate, and the extra costs involved, to see the annual and monthly fee that covers your cost.

Annual fee needed to cover your cost:

£1,056

Monthly fee:

£88

This uses the same formula as “Set the Fee From the Work Required” above. Compare the result to what this client currently pays to see whether their tier needs to change.

Charge Clean-Up Work Separately

Historic bookkeeping should not sit inside the monthly MTD fee.

Review transaction volume, missing periods and unreconciled accounts before quoting a fixed clean-up fee.

Once the records are current, the monthly fee should cover the normal quarterly process.

You must also state what is included. The tax return, capital allowances review, tax planning and extra advisory work may need separate fees.

Clear terms stop clients from expecting unlimited corrections for one monthly price.

Explain the Increase Clearly

Give the client enough notice and explain what has changed.

You can inform your client:

“Your current fee covers records supplied through the agreed digital process. During the last two quarters, our team spent extra time collecting documents, correcting entries and dealing with missing information. Your monthly fee will increase to £100 from the next review date. You can stay on the standard fee by using the bank feed and receipt process before each cut-off date.”

Your client can then improve their records, pay for more support or choose another arrangement.

When the Fee Should Stay the Same

Do not increase the fee where extra work came from poor onboarding or unclear instructions from your firm.

Training, a simpler receipt process or a monthly bookkeeping call may solve the problem.

You must also check whether the client may qualify for digital exclusion because of age, disability, location, religion or another valid reason.

Only charge more where you can show the extra work.

You can use Acxite to spot clients with late or incomplete records. It lets you invite your clients for free and flag duplicate or missing entries, so your team knows the quality of the records your clients submit.