Set up your practice and clients for MTD for Income Tax from start to finish

This article explains all the steps required to get your practice and clients set up for Making Tax Digital (MTD) for Income Tax.

1. Create an agent services account with HMRC

First, you’ll need to create an agent services account (ASA) with HMRC for your practice, if you haven’t already got one. This will generate a new Government Gateway ID which will give your practice access to HMRC’s MTD services.

If you file MTD for VAT returns for clients, you should already have an agent services account in place with HMRC and won’t need to create a new account. Instead, log in to your existing agent services account and follow the steps outlined below.

Please note that HMRC will soon begin introducing Multi-factor Authentication (MFA) to strengthen security on agents' accounts. Once this has been rolled out, you’ll need to enter an access code after entering your Government Gateway ID and password when you're logging into your ASA. Further information will be published within the Tax Agent’s Handbook once HMRC has started the process.

Read more about how to create an agent services account on HMRC’s website or watch this video.

2. Transfer existing clients’ Self Assessment authorisations to your agent services account

If you’ve recently created an agent services account, you may need to copy across your existing clients’ Self Assessment authorisations from your old HMRC online services account.

Read more about how to add your client authorisations for Making Tax Digital for Income Tax on HMRC’s website or watch this video.

3. Request authority to file MTD for Income Tax returns on behalf of any new clients

You’ll also need to request authority to file MTD for Income Tax returns on behalf of any new clients for whom you don't yet have authority to file Self Assessment, directly from your agent services account. Please note that these clients must have an HMRC business tax account before they'll be able to authorise a new agent relationship.

Read more about how to use the Online Agent Authorisation to get authorised as a tax agent on HMRC’s website.

4. Sign your clients up for MTD for Income Tax

Next, you’ll need to sign up each eligible client through HMRC’s web portal. HMRC will ask you some questions and carry out some checks to ensure your client can sign up, and confirm this with you.

Read more about how to sign up clients for MTD for Income Tax on HMRC’s website or watch this video.

As you go through the sign-up process, you'll be presented with the option to add a business name for the client - we'd strongly encourage you to do this. It’s particularly important if your client has multiple sole trader businesses needing to be signed up for MTD for Income Tax because later in the process you'll need to choose which business to link to each FreeAgent account. Find out more in this useful video from HMRC.

5. Connect your HMRC agent services account to FreeAgent

Once you’ve successfully created your agent services account and any new clients have authorised your new agent relationship, you’ll need to use your agent services account credentials to connect your FreeAgent Practice Dashboard to HMRC.

Please make sure you’re not signed in to any other HMRC accounts in another window at the same time, as this can cause HMRC to incorrectly link the account you’re currently logged in to. If you’re not asked to enter your agent services account credentials (user ID and password) during this process, then close all browser windows and try again. This will avoid HMRC connecting the wrong HMRC account to your FreeAgent Practice Dashboard.

Please note that once you’ve connected FreeAgent to HMRC, you’ll need to update the connection every 18 months. FreeAgent will display an ‘Expiring soon’ warning in the 'HMRC Connection' box on the right-hand side of your clients' MTD for Income Tax returns 10 days before the connection is due to expire.

6. Switch your clients to MTD for Income Tax filing in FreeAgent

Finally, once your HMRC agent services account is connected to FreeAgent and you’ve signed up your clients for MTD for Income Tax, you’ll need to switch them to MTD for Income Tax filing in FreeAgent.

If your client is a sole trader who also rents out properties, or a landlord who also has a self-employed business, they'll need separate sole trader and unincorporated landlord accounts in FreeAgent. Read more about how to use FreeAgent for MTD for Income Tax if you’re a sole trader with multiple businesses or rental income.