Running a modern accountancy practice: a complete guide

Running a small practice in 2026 means working to two timetables that didn't exist three years ago. MTD for Income Tax turns an annual compliance job into a five-deadline year for clients above £50,000 of qualifying income, and registration with HMRC is now a condition of acting for clients at all. Most of what you decide this year follows from those two.

In this article

The short version

• MTD for Income Tax applies from 6 April 2026 where qualifying income was over £50,000 on the 2024-25 return, from 6 April 2027 over £30,000 on the 2025-26 return, and from 6 April 2028 over £20,000 on the 2026-27 return.
• Qualifying income is gross turnover from self-employment and property added together, before expenses. HMRC's own example is £25,000 of rental income plus £27,000 of self-employment, giving £52,000.
• Quarterly updates are due 7 August, 7 November, 7 February and 7 May, and each covers from the start of the tax year to the end of the period.
• HMRC put around 864,000 sole traders and landlords in scope for 2026-27; on 12 August 2026 it reported over 570,000 signed up and 436,000 first updates filed.
• Registration as a tax adviser is mandatory. The window for advisers with existing Self Assessment or Corporation Tax agent accounts closed on 18 August 2026, and a second window runs to 18 November 2026.
• Invoices raised by small accountancy practices were paid on or before the due date 59.87% of the time, against 72.32% for other small businesses, on customer-initiated payments (Adfin platform data).

The five things that changed

Plenty of what you do this year looks like last year. Five things don't.

The first two are HMRC's timetable. The last three are yours.

MTD for Income Tax: the timetable you're working to

Nothing has been deferred. Here are HMRC's three phases, and for each of your clients the year the income is measured in matters as much as the threshold.

The £20,000 phase is confirmed by regulations already made and by a policy paper last updated on 14 August 2026. Content describing the threshold as a test on the current year's income has it the wrong way round: the test runs on the return for the year two years earlier.

Qualifying income is your client's total income from self-employment and property, calculated gross, before you deduct a penny of expenses. HMRC's worked example is £25,000 of rental income plus £27,000 of self-employment: £52,000, so your client is in scope even where their profit is far lower.

Employment income is outside the test, and so are dividends and pensions. A partner's share of partnership profit doesn't count either, though that partner's own self-employment or property income can still bring them in, and where your client has several trades or property sources you add the turnover together. Partnerships themselves are out of scope, and HMRC says only that it will set out the timeline "at a later date".

Four quarterly updates and a return make up your client's year. The deadlines are 7 August, 7 November, 7 February and 7 May, whichever period convention they use, and each update covers from the start of the tax year to the end of that period. That cumulative point is widely misdescribed and it changes how you review the figures. The tax return is still due by 31 January.

On penalties, two clocks run separately. There are no penalties for missing a quarterly update deadline for the 2026-27 tax year, and the return deadline still carries points: four points brings a £200 penalty, then £200 for each further miss. Late payment of the tax is sharper. For 2026-27, nothing to day 15, then 3% of the tax owed at day 15, a further 3% of what's owed at day 30, plus an annual rate of 10% accruing from day 31. For 2027-28 the two 3% charges become 4%. So a client who can't fund a tax payment loses 3% inside a fortnight.

One agent-side detail catches practices out. Your existing Self Assessment authorisations are recognised for MTD for Income Tax, and you still have to sign each client up through the sign-up service, so authorisation and sign-up are separate acts.

How is it going? HMRC described "more than 864,000" sole traders and landlords as in scope for 2026-27, with a first deadline of 7 August 2026, and on 12 August 2026 it reported 436,000 first quarterly updates submitted and over 570,000 sign-ups. Roughly half the in-scope population had filed, five days after the deadline. The 864,000 is HMRC's own estimate from 2023-24 returns, and part of the gap will be clients who turn out to be exempt, deferred or under the threshold.

MTD says nothing about how you bill. MTD for Income Tax: what it changes about how practices bill works through why, and what the quarterly shape does to a fee you set for an annual job.

Registering as a tax adviser with HMRC

Separately from MTD, you have to be registered with HMRC if you interact with HMRC about someone else's tax affairs and get paid for it. Your legal entity registers, and your employees don't register separately.

The requirement began on 18 May 2026 and runs in sequential three-month windows. HMRC's published dates:

• 18 May to 18 August 2026
• 18 August to 18 November 2026
• 18 November 2026 to 18 February 2027
• 31 December 2026 to 31 March 2027

HMRC's guidance frames 18 August 2026 as the deadline for advisers who already hold Self Assessment or Corporation Tax agent accounts, as most practices do. Its news release of the same date frames 18 August as the opening of the second window, running to 18 November 2026. The two reconcile, since one cohort's deadline is the next one's opening, and they read differently enough that which window covers your firm is a question for gov.uk. Both pages are in the sources below for that reason.

Uptake so far is small: HMRC said on 18 August 2026 that "more than 4,000 applications were submitted and over 2,000 accounts created" in the initial phase, and it publishes no adviser population figure for you to set that against.

The consequence is stated plainly in the guidance: an adviser who needs an agent services account and doesn't get one "will not be able to interact with HMRC on behalf of your clients", and carrying on regardless may attract sanctions. Advisers who don't meet the minimum standards or the registration conditions are suspended until they do.

Capacity, and the work practices are turning down

You'll have seen the staffing figure quoted, and it comes from one survey funded by a company that sells outsourcing. In Advancetrack's own 2026 Accounting Talent Index, a survey of around 500 respondents across the UK, the US, Australia and Canada run by an accountancy outsourcing provider, 73% said they were turning away potential clients for lack of available staff. Multi-country and vendor-funded, so read it as an indication and not a measurement of UK firms.

One regulator's count is firmer, though it measures something narrower than your practice: the FRC recorded 3,760 registered audit firms in 2024 against 5,007 in 2020, a fall of 24.9% over five years. Most small practices do no audit, so read that as evidence of exits from the audit market.

Nobody publishes a usable count of UK accountancy practices, so a figure you see quoted for that is an estimate. Your client-side denominator is official: 5.7 million private sector businesses, 4.27 million of them with no employees at all. Where capacity is your constraint, collection is one of the few parts of your week that can take more volume without more people, and scaling a practice without adding credit control headcount covers what that takes.

Pricing, and what the professional bodies say about fees

Your fee structure is a commercial matter, and the bodies are clear that whatever you choose has to be agreed in writing. The joint engagement letter guidance from ATT, CIOT, ACCA and AAT, updated 3 March 2026, names time and expenses, fixed fees, monthly fixed fees, contingent fees to be used with care, and fee insurance. CIOT and ATT's Professional Rules and Practice Guidelines ask you to make sure a client understands the basis of charging before any work starts, and to avoid fee disputes by agreeing fees before you issue fee notes.

Two lines from ACCA are the ones practices tend to remember. Letters of engagement are mandatory, and on recovery: "It is rarely worthwhile suing a client for non-payment of fees if you do not have a letter of engagement in place". A third is more useful to you before a dispute than during one, because neither CIOT nor ATT will arbitrate between a member and a client on the amount of a disputed fee. You have discussion, and then the courts.

Taking fees in advance is expressly contemplated by CIOT and ATT, subject to the amount being reasonable against the likely fee, the terms being in your engagement letter before work starts, and the money being refundable for work you don't deliver.

Fee structure, scope creep and the disputes that follow both get worked through in pricing and fee recovery for accountancy firms. The wording that keeps those terms inside the engagement letter is a separate job, and engagement letter payment clauses that get fees paid is about the clauses themselves. Charging interest on a fee that has gone past its due date is arithmetic before it's a decision, and can accountants charge clients interest on unpaid fees runs that arithmetic for you.

Getting paid: what the data shows about practice fees

Adfin's book is weighted towards small practices billing small recurring fees, so it reaches something published research doesn't. Two segments in it are spread across enough separate firms to publish.

Invoices raised by small accountancy practices were paid on or before the due date 59.87% of the time. Invoices raised by other small businesses were paid on time 72.32%. When a practice's client did pay late, the median delay was 10 days against 5 for the other group (Adfin platform data, 27,483 invoices from 661 practices and 14,784 from 325 other small businesses, customer-initiated payments only).

Read that as a statement about invoices raised by practices on Adfin and not as a verdict on accountants. The label describes the firm raising the invoice, not the paying client's industry. One plausible explanation, untested here, is that your fee is discretionary in a way a supplier invoice isn't, and that you're reluctant to press a client you also advise. What modern accountancy practices do differently about getting paid takes the gap seriously as an argument about the arrangement you set up.

The same data also shows what a mandate predicts. Where a direct debit mandate already existed when the invoice was raised, 97.0% of invoices were paid and 1.3% were still open six or more months later. Without one, 90.3% were paid and 5.4% were still open (Adfin platform data, 152,689 invoices created in the seven months to 31 January 2026). Mandated invoices are smaller and belong to clients who had already agreed to a mandate, so some of that reliability was there before the mandate was.

Collecting your own fees doesn't engage the client money rules. ICAEW's Clients' Money Regulations provide that "fees paid in advance for professional work agreed to be performed and clearly identifiable as such shall not be regarded as clients' money" (the version ICAEW publishes, effective 1 January 2017), and ICAS and the CIOT and ATT guidelines say the same. Taking your fee out of a client account is the controlled direction, and setting a client's tax refund against your fee needs written agreement.

A new client hasn't got a payment habit with you yet, and that makes onboarding the cheapest moment to set one. Where payment setup belongs in client onboarding puts the setup in order against the engagement letter and the first piece of work, how to move clients from bank transfer to direct debit at onboarding is the conversation itself, and making direct debit part of signing the engagement letter puts the mandate in front of a client who's already signing a stack of other things.

An existing book is the harder half, because you're asking clients to agree to something they've been doing differently until now. The mechanics are in how to move an existing client base onto direct debit and the wording to send them in how to tell clients you are moving them to direct debit. Either way, two choices come before the mechanics: direct debit or a standing order, argued out in should an accountancy practice use direct debit or standing order, and whether you need your own Service User Number at all, in can a small business take direct debit without its own.

Lock-up and debtor days, without a benchmark

If you've ever tried to find out whether your lock-up is good, you'll have found what everyone finds: there's no independent, current benchmark for lock-up or debtor days in UK accountancy practices. The nearest well-documented figure is for law firms. The Law Society's 2026 Financial Benchmarking Survey, written by Hazlewoods and sponsored by Lloyds Commercial Banking, reported median total lock-up of 134 days excluding unbilled disbursements, or 144 days including them, from 121 firms' 2025 figures. A ten-day swing from one drafting choice, inside one survey, tells you how much the definition matters. The accountancy figure that circulates instead, lock-up at 32% of fees, traces back through a 2010 trade article to a survey run in 1982.

So you measure before you improve, consistently enough that your own numbers compare with each other. How to reduce lock-up and debtor days in a practice sets out both conventions and shows the arithmetic.

Software, and what MTD compatibility doesn't tell you

HMRC asks three things of a product: that it keeps digital records of self-employment and property income and expenses, that it sends quarterly updates, and that it lets your client add other income sources and submit the tax return by 31 January.

Open a full product record in HMRC's own finder and you see the whole feature taxonomy: digital records, bridging software, agent use, individual use, update period type, income sources, platform, operating system, mobile app, language. No invoicing attribute, no billing attribute, no payment attribute. "MTD-compatible" tells you what a product can file and nothing about how you'll be paid.

Two cautions go with that, before you settle on your own shortlist. HMRC removed its table of software listings from gov.uk in July 2025, so check any list you're shown against the finder itself. And UK market share figures for accounting software are estimates: only Xero publishes a UK number in a filing, 1,319,000 UK customers at 31 March 2026, up 14%, attributing part of that growth to "some early flow through Making Tax Digital (MTD) for Income Tax".

What you can establish about UK accounting software use is narrower than the market-share figures being quoted at you, and what accounting software UK businesses actually run on works through where each number comes from. For your own stack the question is which handoffs you'd otherwise be doing by hand, and practice software stack: what actually needs to integrate takes them one at a time.

Which parts of collection need you

Read back through the fee side of your year and it splits in two. Your conversation with a client whose business is struggling, your decision to keep working while a fee is outstanding, your judgement about whether to cease to act: those are professional calls about your own relationships, and CIOT and ATT's guidelines leave ceasing to act for non-payment to you, with reasonable notice and a disengagement letter, and never where it would risk assisting criminal activity.

The rest is repetition against a different client name every week. You can set the rules of engagement once, covering which channels are allowed, how persistent to be, what goes out without you seeing it and where you review, then let software work the sequence client by client from your own domain. Whether per-client timing collects more money isn't something anyone here can measure.

For tools, best credit control software for accountants in 2026 and best payment providers for accountancies in 2026 compare what's published, and if your ledger already reminds clients for you, invoice chasing vs Xero's built-in payment reminders covers where that stops.

Common questions

When does MTD for Income Tax apply to my clients? From 6 April 2026 where qualifying income was over £50,000 on the 2024-25 return, from 6 April 2027 where it was over £30,000 on the 2025-26 return, and from 6 April 2028 where it was over £20,000 on the 2026-27 return. Qualifying income is gross turnover from self-employment and property added together, before expenses, so HMRC's example of £25,000 of rent plus £27,000 of self-employment comes to £52,000.

Do I have to register with HMRC as a tax adviser? If you interact with HMRC about someone else's tax affairs and are paid for it, HMRC treats you as a tax adviser and your legal entity has to register. Registration runs in three-month windows from 18 May 2026: 18 May to 18 August 2026, 18 August to 18 November 2026, 18 November 2026 to 18 February 2027, and 31 December 2026 to 31 March 2027. Check HMRC's guidance for the window that covers your firm.

What are the MTD quarterly deadlines? 7 August, 7 November, 7 February and 7 May, under both the standard and the calendar update period conventions. Each update covers from the start of the tax year to the end of the period, and the tax return is still due by 31 January.

Are there penalties for missing a quarterly update? Not for the 2026-27 tax year. The tax return deadline still carries penalty points, with a £200 penalty at four points and £200 for each further miss. Late payment of the tax is charged separately: for 2026-27 nothing to day 15, then 3% of the tax owed at day 15, a further 3% of what's owed at day 30, and an annual rate of 10% from day 31.

Does collecting fees by direct debit involve client money rules? No. ICAEW's Clients' Money Regulations exclude fees paid in advance for professional work agreed to be performed and clearly identifiable as such, and ICAS and the CIOT and ATT guidelines agree. Taking a fee out of a client money account is tightly controlled and quite separate, and your own body's current rules govern.

Is there a benchmark for lock-up in an accountancy practice? Not an independent, current one. The best-documented professional services figure is for law firms: the Law Society's 2026 survey, written by Hazlewoods and sponsored by Lloyds Commercial Banking, put median total lock-up at 134 days excluding unbilled disbursements and 144 days including them, from 121 firms' 2025 figures. The accountancy figure in circulation, 32% of fees, traces back to a 1982 survey.

Sources

• HMRC — 436,000 sole traders and landlords make their tax digital (accurate as of August 2026)
• HMRC — check if and when you need to register as a tax adviser (accurate as of August 2026)
• HMRC — deadline approaches for first Making Tax Digital quarterly update (accurate as of August 2026)
• HMRC — find out if and when you need to use Making Tax Digital for Income Tax (accurate as of August 2026)
• HMRC — find software compatible with Making Tax Digital for Income Tax (accurate as of August 2026)
• HMRC — Making Tax Digital for Income Tax as an agent, step by step (accurate as of August 2026)
• HMRC — Making Tax Digital for Income Tax software finder, product record (accurate as of August 2026)
• HMRC — penalties for Making Tax Digital for Income Tax (accurate as of August 2026)
• HMRC — reduction of the mandation threshold from £30,000 to £20,000 from April 2028 (accurate as of August 2026)
• HMRC — second registration window now open for tax advisers (accurate as of August 2026)
• HMRC — send quarterly updates (accurate as of August 2026)
• HMRC — work out your qualifying income for Making Tax Digital for Income Tax (accurate as of August 2026)
• Department for Business and Trade — business population estimates for the UK and regions 2025 (accurate as of August 2026)
• FRC — key facts and trends in the accountancy profession 2025 (accurate as of August 2026)
• ACCA — engagement letters (accurate as of August 2026)
• ATT — engagement letters (accurate as of August 2026)
• CIOT — professional rules and practice guidelines (accurate as of August 2026)
• ICAEW — Clients' Money Regulations effective 1 January 2017 (accurate as of August 2026)
• AccountingWEB — managing lock-up, part one (accurate as of August 2026)
• Consultancy.uk — three in four accounting firms struggle to take on new work amid hiring challenges (accurate as of August 2026)
• Law Society — financial benchmarking survey 2026 (accurate as of August 2026)
• Xero — FY26 annual results market release (accurate as of August 2026)

This article is information about tax administration and professional conduct, and it isn't tax or legal advice. HMRC's thresholds and dates, its penalty figures and its registration windows are as published in August 2026 and they change, so check gov.uk before you rely on any of them. A practice making a decision about its own obligations, its client money position or a fee dispute should take it up with its professional body, its PII provider or its own adviser. Last updated August 2026.