MTD: Income Tax Pilot Tool

• Taxpayers and their agents can sign up and participate in a voluntary Making Tax Digital (MTD) for Income Tax pilot scheme (private beta). 
• If the taxpayer has multiple income sources, you’ll need to sign up each one for MTD for Income Tax (it is not possible to sign up only one of multiple trades).
• Signing up to the Pilot will mean that you will allow your software to transmit your accounting data to HMRC every three months.
• Only certain taxpayers are currently eligible to participate.

Are you eligible to take part?

• Use our MTD pilot: eligibility checker to check whether you can sign up to volunteer under the pilot scheme.

Recent changes

• After pausing the pilot in February 2023, HMRC have now confirmed that the MTD  pilot (private beta) will expand from April 2024. A larger but still restricted pool of sole traders and landlords will be able to volunteer. 
• Making Tax Digital for Income Tax is currently voluntary. It will become Mandatory from 6 April 2026 in phases based on your total annual income from self-employment or property. Taxpayers can either: 
  • Volunteer to use the service now (for self-employment and property income sources), or 
  • Continue to send self-assessment tax returns as normal, and sign up to MTD for income tax when it becomes mandatory.
• Most sole traders and landlords will be able to volunteer for the MTD pilot from April 2025. 
• The Government is keeping plans for extending MTD to sole traders and landlords with income below £30,000 under review.  
• Data has show that in the three years since the pilot scheme began 1015 people have participated, of these, only 218 or approximately 21% are landlords with property income. The numbers have fallen dramatically since the first year, 2018-2019, from 877 to 26 in 2020-2021 and as of January 2022, only nine were participating.

Note 1: HMRC's current system has a default accounting period of 5th April. If the taxpayer has a different accounting period i.e. 31 March

• an election must be made before the first quarterly update is submitted to use the 31 March, and 
• Adjustments must be made to add income and expenses from 1 April to 5 April. 

• This is a test pilot and it may well be that aspects of the service will change. 
• You must use commercial software: HMRC will not provide any free software. For information about the software available please see Compare software for Making Tax Digital for Income Tax. 
• After pausing the pilot in February 2023, HMRC have now confirmed that the MTD testing pilot will expand from 22 April 2024. A larger but still restricted pool of self-employed tax payers and landlords will be able to volunteer. 
• Making Tax Digital for Income Tax is currently voluntary. Eligible taxpayers who wish to participate in MTD for 2024/25 should sign up for the MTD pilot between April and June 2024. 

Before signing up you should

• Check that you are eligible (Use our tool, see tab MTD pilot: eligibility checker). 
• Choose the Software that you want to use. 
• Sign up to MTD with HMRC. 
• Authorise your compatible software, by entering your Government Gateway ID and password. 

There are two routes to sign up for the MTD pilot:

1. Individuals may sign up directly, See Sign up voluntarily for Making Tax Digital for Income Tax
2. Agents can sign up clients on their clients behalf. See, Sign up your client for Making Tax Digital for Income Tax

If you are using an agent, they must be Authorised to act on your behalf. Once authorised, your agent can sign up your business, use software to create, store digital records, edit and send data to HMRC. Agents must have an agents services account. 

The Pilot is not recommended for

• Taxpayers with a poor understanding of IT.
• Taxpayers with a poor understanding of bookkeeping.
• Those who do not have a reliable broadband connection.
• Those who will not be available at least on a quarterly basis to send in data.
• VAT registered traders.
• Traders and landlords with a low income.

Under the MTD for Income Tax pilot, taxpayers cannot carry back losses, change their accounting period, or switch between cash and accruals. You should take this into consideration when deciding whether to volunteer for the pilot (private beta). 

Ask your adviser if you decide to take part in this pilot and wish to delegate to them.

Useful guides on this topic

Making Tax Digital for Income Tax: Data required by HMRC
What information do you need to submit under Making Tax Digital for Income Tax? What are the requirements for relevant persons under the VAT threshold? What are the categories of information required?

Compare software for Making Tax Digital for Income Tax
What's the cheapest software I can use for Making Tax Digital for Income Tax? What is the best value software that I can use?

Making Tax Digital: Index & timeline
When does Making Tax Digital (MTD) apply? What does MTD really mean? How will it affect you?

MTD: Toolkit for accountants
What is the current timetable for Making Tax Digital? How will it work? Which clients will be excluded? What planning needs to be undertaken?  

Making Tax Digital: Survival guide (for the self-employed & landlords)
This is a freeview factsheet for the many self-employed taxpayers, company owners and property landlords who are unaware of HM Revenue and Custom's radical plans to transform the tax online filing system. 

Making Tax Digital: Pricing for Accountants
How much can you charge? How much should you charge? 

External links

HMRC: Sign up as an individual for Making Tax Digital for Income Tax

HMRC: Find software that's compatible

HMRC: Apply for an exemption from Making Tax Digital for Income Tax