Many businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The full launch of MTD for ITSA is expected to start from 6 April 2024. The rules will initially apply to taxpayers who file ITSA returns with business or property income over £10,000 annually. General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. A new system of penalties for the late filing and late payment of tax for ITSA will also apply. Taxpayers interested in signing up for the pilot should contact their software provider or agent for further information. 

HMRC’s guidance on who can use the pilot has been updated as the pilot has been expanded. Currently to be eligible, taxpayers need to have an accounting period that aligns exactly to the tax year (6 April to 5 April) to join the 2022-23 pilot. The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

The pilot currently needs taxpayers who file for:

  • self-employment (including multiple self-employments)
  • UK property
  • Gift Aid
  • Pay As You Earn income, including employment income and occupational pensions (excluding those with a coded-out liability)
  • UK interest
  • UK dividends

Later this tax year, the pilot will be expanded to include the following customer types

  • pension contributions
  • CIS
  • Student Loans
  • additional Self-Assessment (SA 101)
  • foreign income from property
  • voluntary class 2 NICs
  • capital gains
  • marriage allowance.

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Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The full introduction of MTD for ITSA is expected to start from 6 April 2024. The rules will initially apply to taxpayers who file ITSA returns with business or property income over £10,000 annually. General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. A new system of penalties for the late filing and late payment of tax for ITSA will also apply. 

HMRC’s guidance on who can use the pilot has been updated. We have listed the main categories of who can and can’t join the pilot below:

You can voluntarily sign up for the service if all of the following apply:

  • you’re a UK resident,
  • you’re already registered for Self Assessment,
  • your accounting period aligns to the tax year — for example, 6 April 2021 to 5 April 2022,
  • you have submitted at least one Self Assessment tax return,
  • you’re keeping digital records,
  • one or more of the following were included in your last return: an existing self-employment income, a UK property source, a foreign property source.
  • you’re up to date with your tax records — for example, you have no outstanding tax liabilities.

You cannot sign up yet if you:

  • need to report income from any other sources,
  • have an Income Tax charge — for example, high income Child Benefit charges or certain pension tax charges,
  • have a payment arrangement,
  • do not have an up to date address with HMRC,
  • are a partner in a partnership,
  • are currently, or are going to be, bankrupt or insolvent,
  • are a Minister of religion, Lloyds underwriter or foster carer,
  • have a third party capacitor, this includes (but is not limited to): trusted helpers, insolvency practitioners, nominees and solicitors.

The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

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