MTD for income tax pilot opened up to more taxpayers

HMRC plans to extend the pilot for Making Tax Digital (MTD) for income tax self assessment, opening up the pilot to more self employed workers and landlords

The pilot is still a test environment and will be opened up to more self-employed taxpayers and landlords from 1 July. Those taking part will be able to test MTD ITSA before April 2024, including their own internal processes for managing MTD.

In a letter sent to accountants and tax advisers, HMRC said: ‘We want to ensure this is well tested before mandation, and that agents and customers have opportunities to feedback on how it will work in practice. That’s why we’re running a pilot, inviting agents to recommend clients who can help us test and learn.’

Agents and customers are already taking part, and HMRC wants more agents to start signing up a small number of their clients to trial the system.

From April 2024, all businesses with annual income from self employment or property above £10,000 will have to follow MTD rules. This is expected to affect 4.4m taxpayers so it is vital that the pilot smooths out the process, which will require quarterly reporting of income for the first time, plus a year end consolidation statement.

Under MTD, the quarterly reporting is a summary, providing a total of the incomes and outcomes going through the business per quarter. As a result, there is not necessarily a need to report under each property address as it is an accumulation of the all the data that is required, HMRC said.

In a statement HMRC said: ‘We’re progressing with the MTD for ITSA pilot and are currently working with software developers to bring in more customers for the 2022-23 tax year, allowing us to test the system and build in customer and agent feedback as we go.

‘We will be testing the first quarterly submission with some of these customers from 6 July, after which we aim to open up the pilot more widely to some customer types.  

‘The update to agents is encouraging them to start considering whether they can bring some customers into the pilot this summer, providing them with an opportunity to test MTD for ITSA with their clients as well as playing a key role in testing the new system themselves before mandation in 2024.’

From July 2022, HMRC will allow taxpayers with the following income types to sign up to the pilot:

  • self-employment (including multiple self-employments);
  • UK property;
  • Gift Aid;
  • PAYE income, including employment income and occupational pensions (excluding those with a coded out liability);
  • UK interest; and
  • UK dividends.   

Taxpayers will need to have an accounting period that aligns to the tax year (6 April to 5 April) to join the 2022-23 pilot, and have MTD compatible software before signing up.

So far only three software providers are geared up to supply products for MTD for ITSA, and none of the major software companies feature on the HMRC approved list.

Apari Software, Cirrostratus Exedra and untied are the only companies which have been endorsed for use. A much longer list of 18 providers, including majors like Iris, Xero and Sage, are still developing new software.

Those interested in joining the pilot can contact their software developer or email HMRC at mailboxmakingtaxdigital@hmrc.gov.uk

Sara White |Editor, Accountancy Daily

Sara White is editor of Accountancy Daily...

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