Technology & MTD Readiness: Why It Matters When Selling Your Accountancy Practice

Introduction

Digital adoption and Making Tax Digital (MTD) compliance are now among the most important factors influencing the value of accountancy practices. Buyers increasingly seek firms that are not only profitable, but also technologically advanced and prepared for regulatory change.

This guide explains what MTD is, how technology impacts valuations, and what steps you can take to ensure your practice is buyer-ready.

1. What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is HMRC's long-term initiative to modernise the UK tax system. It requires businesses and their agents to keep digital records and submit updates through approved software.

Key phases include:

• MTD for VAT – already mandatory for most VAT-registered businesses.
• MTD for Income Tax Self Assessment (ITSA) – due to apply to landlords and sole traders above certain thresholds.
• MTD for Corporation Tax – expected in future phases.

See HMRC's official guidance on Making Tax Digital for Income Tax for full details.

2. Why Buyers Care About MTD Readiness

From a buyer's perspective, MTD readiness demonstrates:

• Reduced compliance risk – clients are less likely to fall foul of deadlines or errors.
• Operational efficiency – cloud-based systems reduce manual processes and costs.
• Scalability – modern digital workflows make it easier to integrate acquisitions.
• Future-proofing – buyers avoid having to invest heavily in technology upgrades post-acquisition.

Practices that are already MTD-compliant often command higher valuations because they represent lower risk and higher efficiency potential.

3. Technology Stack That Adds Value

The right technology stack can significantly enhance your practice's appeal to buyers:

• Cloud accounting software – Xero, QuickBooks, Sage Business Cloud
• Practice management systems – IRIS, CCH, TaxCalc
• Client portals – secure document sharing and communication
• Automated workflows – reducing manual data entry and errors
• Mobile accessibility – allowing flexible working arrangements

4. Preparing for MTD Compliance

If your practice isn't fully MTD-ready, here's what you need to focus on:

• Audit your current systems – identify gaps in digital record keeping
• Choose HMRC-approved software – ensure compatibility with MTD requirements
• Train your team – staff need to be comfortable with new processes
• Test thoroughly – run pilot programs with willing clients
• Document everything – create clear procedures for compliance

The HMRC MTD for VAT guidance provides detailed information on current requirements.

5. Impact on Practice Valuation

Technology readiness directly impacts valuation in several ways:

• Higher multiples – MTD-ready practices are seen as lower risk and more attractive to buyers, with surveys showing MTD is both the biggest challenge and opportunity for firms in 2025
• Reduced due diligence risk – fewer compliance concerns for buyers
• Faster sale process – less time spent on technology assessments
• Broader buyer appeal – more potential acquirers interested

Use FeeBuyer's instant valuation tool to see how your current technology setup might impact your practice's value.

6. Common Technology Mistakes to Avoid

• Fragmented systems – using multiple incompatible software packages
• Poor data quality – incomplete or inaccurate client records
• Lack of staff training – team not properly trained on new systems
• No backup procedures – inadequate data security and recovery plans
• Ignoring client experience – not considering how changes affect clients

7. Next Steps for MTD Readiness

If you're planning to sell within the next 12-24 months, start your MTD preparation now:

• Conduct a technology audit of your current systems
• Identify gaps in MTD compliance
• Create a roadmap for necessary upgrades
• Budget for technology investments
• Consider professional advice on system selection

Remember: The cost of becoming MTD-compliant is often far outweighed by the increased valuation and faster sale process it enables.

Disclaimer: This article provides general information, not financial or legal advice. Consider professional advice for your specific circumstances.