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Stuart Miller

Director of Product Compliance and Industry Engagement, Xero

If they haven’t done so already, accountants need to start preparing their clients — and themselves — for the digital tax changes that will be coming into force very soon.

The Government’s Making Tax Digital rules have developed something of a ‘boy who cried wolf’ reputation. They have long been talked about but never fully appear. Yet, accountants and bookkeepers should be under no illusions, warns Stuart Miller, Director of Product Compliance and Industry Engagement at global small business platform, Xero.

Businesses must prepare to comply with digital tax rules

Digital tax rules ARE coming — and, when they arrive, old paper accounts will be consigned to the bin. “If HMRC continues on its current trajectory, Making Tax Digital will come into force in April 2026 and apply to all property-letting and self-employed with gross income above £50k,” he says.

“From April 2027, it will then apply to all property-letting and self-employed gross income above £30k. It’s a big change because it means that landlords and small businesses will be required to keep digital records and file quarterly reports.”

Set up the digital groundwork with accountancy software

Miller advises accountancy practices: if you haven’t done so already, you should start preparing the digital groundwork for your clients now. “Do your segmentation work, look at your client portfolios and find out who among them is digitally capable and who is not,” he says.

“If some of your clients are still giving you a shoebox full of receipts, you have around 12 to 18 months to help them find the right accountancy software and ensure they have the right digital record-keeping processes in place.”

Even the best AI tools in the world won’t
work without a sound digital foundation.

Reaping the rewards by switching to digital

Some accountants and bookkeepers might view these changes as an unnecessary hassle. That would be a mistake, insists Miller because those who have already adopted digital tools are now reaping the rewards. “They’re ahead of the game because real-time digital data allows them to provide real-time tax advice and advisory services to clients,” he says. This greater level of insight makes them better equipped to serve small businesses and help them grow.

AI assistance enhances accountants’ efficiency

There’s another reason why switching to digital is important. Advanced technology is transforming the way accountants work. For example, AI tools in software can now automate data entry, process eInvoices, pre-populate tax returns and send automatic payment reminders, giving accountants more time to deliver better client support. That’s a game-changer. “But even the best AI tools in the world won’t work without a sound digital foundation,” notes Miller.

He does, however, stress that digital technology will never replace solid technical background and accounting knowledge. “Think of technology as your assistant,” says Miller. “It’s not going to do your advisory work for you, but it is going to streamline processes. However, it will require accountants to learn new skills, so they can keep up with the change — otherwise, they could get left behind by challenger firms.”

Choosing the AI technology that is best for you

When it comes to using AI technology within your accountancy business, don’t rush into it. “Steady adoption is always best,” says Miller. “Test the tools, find your flavour and see what works for you — what’s good for one accountancy practice may not be good for another.

“Also, be prepared to fail and think: ‘Actually, this tool doesn’t work for us,’ but don’t shy away from AI either. A particular tool may bring fantastic efficiencies and savings, or it won’t, and you may need to try something else.”

He adds: “There might be tools you can explore that are connected to the technology you’re already using. For example, Xero’s AI-powered business companion, ‘Just Ask Xero’ (JAX) will allow accountants to complete simple accounting tasks by messaging JAX either in Xero or via tools like WhatsApp and email.”

To learn more about AI and how accounting firms are using it, read Xero’s AI guide for accountants and bookkeepers.

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