HMRC has set the criteria for the type of clients who can sign up to the new Making Tax Digital for Income Tax Self Assessment (ITSA) trial for agents
Those excluded from the trial include anyone liable for the high income child benefit charge, taxpayers with jointly owned buy to let property and owners of furnished holiday lets.
There are 14 categories of taxpayer who will not be able to take part in the test pilot, the same criteria set out in January 2023 when HMRC first asked individual taxpayers to sign up for the scheme. There has been no progress on how the software at HMRC can handle anything but the most basic taxpayer's filings.
While agents and accountants will be able to sign up their clients within the tightly defined criterial, the trial will be closed to solicitors and insolvency practitioners acting for a client.
This means that the trial will be limited to a subset of sole traders, landlords and self employed with simple income over £50,000. Partners in a partnership will not be able to take part.
In addition, they will have to use an accounting period of either 1 April to 31 March or 6 April to 5 April. There is no testing available for any using a different reporting range.
Anyone who signs up during test will not be able to claim carry back of losses, change their accounting period or switch accounting method from cash basis to traditional or vice versa. They will also have to complete a self assessment tax return for the tax year before they signed up for MTD for Income Tax.
With two years to go until mandatory reporting for MTD for Income Tax starts in April 2026 for earners with income over £50,000, the first trial for agents and accountants affected by the change goes live today.
HMRC is expecting strong demand for the service and has pre-empted any delays signing up with a message stating that ‘online services may be slow during busy times’.
The full list of exemptions includes any taxpayer who:
- claims high income child benefit charge (HICBC)
- has income from a jointly owned property or a furnished holiday let
- has income from a trust
- has a payment plan with HMRC
- is a partner in a partnership
- uses ‘averaging’ or other arrangements because profits vary between years — for example, farmers, writers or artists
- is subject to a compliance enquiry
- claims married couple’s allowance
- claims blind person’s allowance
- currently, or are going to be, bankrupt or insolvent
- is an MP, minister of religion or Lloyds underwriter
- has income from being a foster carer or being in a shared lives scheme.
The initial pilot is open to accountants and tax advisers on behalf of their clients, but no one else will be able to act on behalf of clients and sign up to the trial on behalf of someone else, including insolvency practitioners, nominees and solicitors.
Penalties will be charged under the new traffic light system, which is meant to be simpler and fairer for taxpayers, with an initial warning rather than an immediate financial penalty.
To sign up, testers will need a Government Gateway user ID and their password for self assessment, which was issued when the taxpayers first signed up.