MTD for Fractional Finance Directors —
Retainers, Success Fees and Your Threshold
Add every client together, before professional indemnity, subscriptions and travel. Fees paid to your own limited company are not included.
- Every client counts together. Three retainers of £2,000 a month are £72,000 of qualifying income, even though no single client looks large.
- Success fees, transaction fees and project work add to the same total, and they tend to arrive in single large payments that can move you across a threshold.
- Only fees paid to you personally as a sole trader count. Fees paid to your own limited company sit outside Making Tax Digital for Income Tax.
A fractional finance director usually holds several part-time retainers at once, plus the occasional project or success fee for a raise, an acquisition or a budget rebuild. For Making Tax Digital the total of all those fees is what counts, measured before your own costs. This guide is about the fee types a finance leader invoices, how irregular payments and payment in shares are treated, and the structure question that decides whether MTD applies to you at all.
Are Fractional FDs and CFOs in MTD?
It depends on how you are engaged. If you invoice clients as a sole trader and your gross fees (with any property or other self-employed income) are over the threshold for the relevant tax year, yes. The first line was £50,000, tested on your 2024–25 return:
| Tax Year Tested | Gross Income Over | MTD Start Date |
|---|---|---|
| 2024–25 | £50,000 | 6 April 2026. Live now |
| 2025–26 | £30,000 | 6 April 2027 |
| 2026–27 | £20,000 | 6 April 2028 |
If clients pay a limited company that you own, the company is outside Making Tax Digital for Income Tax and dividends are not qualifying income. That is the structure question, and it matters more for this role than most, because many fractional FDs trade through a company. See sole trader vs limited company.
The Fee Types a Finance Director Invoices
| Fee | How it counts |
|---|---|
| Monthly retainer (for example two days a month) | Counts, recorded when received on cash basis |
| Interim or day-rate cover | Counts |
| Project work: budgeting, forecasting, systems, due diligence | Counts |
| Success or completion fees on a raise or sale | Counts, often one large payment |
| Board or non-executive fees paid gross | Usually counts, check the status |
| Fees paid to your own limited company | Not in MTD for Income Tax |
| Expenses a client reimburses at cost | Ask your accountant how to record them |
A single success fee can push a year over a line. A £9,000 completion fee added to £60,000 of retainers means £69,000 of qualifying income, and it will not feel like a big year until you add it up.
Paid in Shares or Options?
Because the value is a judgement, keep the agreement, the valuation basis and any share certificate with your digital records. It is also worth flagging in your first conversation with an accountant, because equity can affect both Income Tax and Capital Gains Tax.
What a Fractional Finance Director Can Claim
| Expense | Notes |
|---|---|
| Professional indemnity insurance | Often significant for a finance leader advising on funding or compliance |
| ICAEW, ACCA or CIMA subscriptions | Annual membership and practising-related fees |
| Finance and reporting software | Forecasting, consolidation and reporting subscriptions you pay for |
| Client-site travel | 45p a mile for the first 10,000 miles, then 25p; rail and parking |
| Co-working or serviced office | Desk or meeting-room costs, or a proportion of home costs |
| CPD, training and conferences | Learning that maintains the skills you already use |
| Accountancy and legal fees | Your own return, contracts and engagement letters |
Records for Several Retainers at Once
The record that matters is a client ledger: for each client the retainer, the days included, each invoice, the date it was paid and any extras billed. Software that matches bank payments to invoices does most of the work, and a one-line note against any success fee will save questions later.
- Invoice at the same point each month so the retainer pattern is easy to see.
- Record success and project fees as their own category, not buried in the monthly retainer line.
- Keep engagement letters with your records, since they define what each fee covers.
- Record client-reimbursed costs separately from your own fees.
| Update | Period (standard) | Deadline | 2026–27 |
|---|---|---|---|
| Q1 | 6 Apr – 5 Jul 2026 | 7 Aug 2026 | No points if late |
| Q2 | 6 Jul – 5 Oct 2026 | 7 Nov 2026 | No points if late |
| Q3 | 6 Oct 2026 – 5 Jan 2027 | 7 Feb 2027 | No points if late |
| Q4 | 6 Jan – 5 Apr 2027 | 7 May 2027 | No points if late |
2026–27 is a soft-landing year, with no points for a late quarterly update. That ends on 6 April 2027, when each missed deadline adds a point and four points brings a £200 penalty. Because HMRC has been signing up eligible customers since September 2026, registering yourself keeps you in control. See the registration guide and the software comparison.
Worked Example
Daniel Okafor, fractional FD for three growing businesses
Daniel’s indemnity, ICAEW fees and travel come to about £7,400, which lowers his taxable profit but not the £98,300 total. He has been in MTD since April 2026, and the funding-round fee alone would have taken a smaller practice over £50,000.
Frequently Asked Questions
Do fractional finance directors have to use Making Tax Digital?
If you invoice as a sole trader and your gross fees were over £50,000 in 2024–25, yes, from 6 April 2026. Over £30,000 in 2025–26 means April 2027, and over £20,000 in 2026–27 means April 2028.
Do I add all my clients together?
Yes. The threshold is tested on your combined fees across every client, so several modest retainers can add up to a large total.
Does a success fee count?
Yes. Success, completion and transaction fees are self-employed income and add to your retainers and day rates for the threshold test.
What if a client pays me in shares or options?
The value of what you receive is generally income at the time. Agree the treatment with your accountant, record the value and date, and keep the agreement with your records.
I trade through my own limited company. Am I in MTD?
The company is not in Making Tax Digital for Income Tax, and dividends are not qualifying income. Any fees paid to you personally, or separate rental income, still count.
Do reimbursed client expenses count towards the threshold?
It depends on how they are invoiced. Record them separately from your fees and ask your accountant how to treat them before you include or exclude them.
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