HMRC releases updated guidance for Making Tax Digital testers

HMRC has issued new guidance aimed at taxpayers participating in the Making Tax Digital for Income Tax (MTD IT) testing programme. The update provides detailed instructions on adding or ceasing income sources, adjusting payments on account, amending returns, and opting out of the test phase.

Key Updates in the Guidance

Handling Changes in Income Sources

Participants in the MTD IT testing programme must report any changes in their income sources. HMRC advises testers to update their online accounts whenever they start or cease a source of self-employment or property income.

To add a new income source, taxpayers must:

• Log into their HMRC online services account and navigate to the “Managing your Income Tax updates” section.
• Provide details of the income source, including the start date and the accounting method used.
• Ensure their MTD-compatible software reflects the updated information, refreshing it if necessary.

If a tester cannot maintain digital records for the new income source, they will need to opt out of the testing phase and revert to the traditional Self Assessment system.

Similarly, ceasing an income source requires:

• Logging into the online account to enter the cessation date for the business or property income source.
• Stopping quarterly updates once the income source has ended.

Opting Out of MTD IT Testing

HMRC’s guidance confirms that testers can withdraw from the programme at any stage during the testing phase. Opting out involves:

• Navigating to the “Managing your Income Tax updates” section of the MTD IT service.
• Selecting “View deadlines” and “Manage how you report” to initiate the opt-out process.

Once opted out, quarterly updates for the relevant tax year will be deleted. However, participants will still need to complete their usual Self Assessment tax returns and should verify their future MTD IT requirements.

Adjusting Payments on Account

For taxpayers anticipating a lower tax bill than the previous year, HMRC allows adjustments to payments on account through their online account. This feature can be accessed via the “What you owe” and “Adjust payments on account for the tax year” sections.

Amending Returns

Testers who need to amend a return submitted through MTD-compatible software must contact HMRC’s customer support team within the amendment window. Returns for prior years submitted via paper or the legacy Self Assessment system require following separate amendment procedures outlined by HMRC.

Testing to Expand in April

Currently, the MTD IT testing programme is in a private beta stage, limited to a small group of taxpayers. HMRC plans to expand the programme to a public beta in April 2025, allowing a broader range of taxpayers to participate.

Under the proposed timeline, MTD IT will become mandatory for self-employed individuals and landlords with annual incomes over £50,000 starting April 2026, with the threshold lowering to £30,000 in April 2027.