HM Revenue & Customs has introduced a new beta phase involving individual taxpayers for the forthcoming Making Tax Digital Income Tax for Self Assessment (MTD ITSA) regulations.
The new MTD for ITSA pilot scheme is for tax agents (with an agents service account) who have clients who are self employed or landlords.
A pilot scheme is a significant milestone in HMRC’s endeavour to simplify tax reporting and compliance, especially for self-employed individuals and landlords with significant yearly earnings.
The scheme is designed to test the MTD ITSA reporting system, with a particular focus on clients who are self employed or landlords earning more than £50,000 annually.
The MTD ITSA pilot is now live and HMRC has urged tax agents and accountants to enrol and start getting their clients ready for the impending MTD regulations.
Craig Ogilvie, HMRC director of Making Tax Digital, says: “We want to ensure that this service meets the needs of you [tax agents] and your clients. To support this, we are expanding our testing programme criteria for MTD ITSA. You will be able to sign up your clients from 22 April 2024.
“Taking part will involve using software compatible with MTD to keep digital records and submit quarterly updates. This will give you the opportunity to get ahead of MTD changes with selected client(s) before it becomes mandatory, with access to our dedicated MTD customer support team.”
How do I sign up for the MTD for ITSA Beta Pilot Scheme?
HMRC needs you to use their online process to sign up for the MTD beta pilot scheme with their being restrictions in place relating to the type of client that is eligible and the software you can use.
Accountants need to secure software that is compatible with MTD for ITSA reporting requirements.
Selecting an appropriate tax software provider is crucial for a seamless shift to digital tax reporting and HMRC provides an up to date list of compatible software on their website.
HMRC said: ‘Taking part in testing is a good opportunity to familiarise yourself and a small number of your clients with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) well ahead of 2026. This will help you to prepare your business and be ready to support the rest of your clients.
‘You need to make sure both yours and your client’s record-keeping software is compatible with Making Tax Digital before you sign up. You can check compatible software options.
‘If the software that you or your client prefer to use is not listed, you should contact the software provider to find out when they plan to join Making Tax Digital.’
For beta testing purposes some restrictions are in place for clients with certain circumstances.
Examples include clients who:
- Have a high income child benefit charge (HICBC).
- Have a payment plan with HMRC.
- Are a partner in a partnership.
- Have income from a jointly owned property.
- Have income from a furnished holiday let.
What is Making Tax Digital for ITSA?
The implementation of MTD ITSA marks a notable change in the management of tax matters in the United Kingdom, with the objective of decreasing errors and ensuring tax precision.
Starting from April 2026, self-employed individuals and landlords with annual earnings exceeding £50,000 will be required to provide quarterly tax updates to HMRC using authorised software.
This requirement will broaden to include those with an income above £30,000 6 April 2027 (2027/2028 tax year).
For sole traders and landlords earning under £30,000, the government is examining how MTD for ITSA can be adapted to suit smaller businesses and determine the most effective way for them to meet their income tax responsibilities.
