Use FreeAgent’s MTD for Income Tax functionality for your clients
This article explains how to use FreeAgent’s Making Tax Digital (MTD) for Income Tax functionality on behalf of your clients.
Once your practice and clients are set up for MTD for Income Tax in FreeAgent, you can follow the steps below to manage their MTD for Income Tax submissions:
1. Set up default access and submissions settings for your clients
You can choose default settings for your practice to dictate whether your clients can make any submissions themselves, and which submissions will require approval from clients. You can override these settings for individual clients.
Read how to automate clients’ quarterly MTD for Income Tax approvals or send MTD for Income Tax submissions to a client for approval.
2. Prepare your clients’ accounts
In order to create quarterly update reports, FreeAgent needs to have the details of your clients’ properties (if they have an unincorporated landlord account type), bank transactions, invoices, bills and out-of-pocket expenses.
If your client is a sole trader who also rents out properties, or a landlord who also has a self-employed business, they'll need separate sole trader and unincorporated landlord accounts in FreeAgent. Read more about how to use FreeAgent for MTD for Income Tax if you’re a sole trader with multiple businesses or rental income.
As CIS deductions are reported on the CIS contractor’s CIS300 return which HMRC uses to account for those amounts, CIS deductions suffered don’t need to be reported as part of either the contractor’s or the subcontractor’s MTD for Income Tax quarterly updates.
Because the deductions on a subcontractor’s HMRC record will be populated from the information HMRC has received from the contractor’s CIS300 returns, if you act for any CIS contractors it’s important to check that the correct deductions have been reported to HMRC.
You might find the following articles useful for preparing your clients’ accounts to send quarterly updates:
- Fast-track guide for sole traders for filing Making Tax Digital (MTD) for Income Tax quarterly updates
- Fast-track guide for landlords for filing Making Tax Digital (MTD) for Income Tax quarterly updates
- Prepare for MTD for Income Tax in FreeAgent
3. Manage your clients’ MTD for Income Tax submissions
You can access the MTD for Income Tax submission summary report on your Practice Dashboard to get a clear view of clients’ MTD for Income Tax submissions and what stage each submission is at in the filing process.
When you’re ready to make a submission, you can file clients' quarterly updates in bulk.
Alternatively, you can switch to each client’s account individually to send their quarterly updates to them for approval (if required) and send their quarterly updates to HMRC.
If you need to, you can request data from HMRC if there are details of any income, employment or benefits that aren't currently in your client’s FreeAgent account.
When the time comes, you can enter any adjustments and allowances, individual information such as disclosures, income sources and tax reliefs, and send their end-of-year updates to HMRC.
You can then close off the submissions for the tax year by submitting a final declaration for each client.
If your client has a self-employed business and also rents out properties, you’ll need to submit an end-of-year update for each income stream but only one final declaration for the client, which can be submitted from either their sole trader or their landlord FreeAgent account. The final declaration in the other FreeAgent account can be marked as sent.
Marking self employment data as sent
If you’re submitting an end-of-year update and/or final declaration using a different filing solution, you can lock your clients’ accounts in FreeAgent to prevent them from editing the bookkeeping.
To mark an end-of-year update as sent, select ‘More’ in the top-right and select ‘Mark Self Employment Data as Sent’.
What’s the difference between quarterly updates, end-of-year update and final declaration?
Quarterly updates send the cumulative amount of income and expenses to HMRC for the quarterly period and retrieve a new annual tax estimate in return. Quarterly updates need to be submitted to HMRC every three months for each separate self-employment and property income source. Accounting and tax adjustments don’t need to be made before sending a quarterly update.
If you’ve made changes to the bookkeeping after submitting the quarter four update, you can send an extra quarterly update to get an up-to-date tax estimate. To do this, select ‘Send update’ in the top-right of any page in the client's MTD for Income Tax area.
The end-of-year update covers all the other adjustments and allowances that need to be reported before you submit the final declaration. The final declaration finalises the Income Tax position for the whole of the tax year.
Useful resources
You might find the following articles helpful for managing clients’ MTD for Income Tax submissions in FreeAgent: