This article explains how to sign your business up for Making Tax Digital (MTD) for Income Tax, also known as Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), and connect your FreeAgent account to HMRC.
If you have a Practice Dashboard and you’re submitting MTD for ITSA returns on behalf of your clients, you’ll need to set up your practice for MTD for ITSA and sign up your clients instead of following the steps below.
Please note that FreeAgent’s MTD for Income Tax functionality is currently in pilot. Therefore, you’ll only have access to the functionality if you work with an accountant who is a FreeAgent partner and your business is eligible for HMRC’s pilot scheme. The functionality currently won’t be available if you have an unincorporated landlord account.
If you’re a landlord or have an unincorporated business with property or business income above £10,000 per year, you will need to use FreeAgent's MTD for Income Tax connection in order to send quarterly updates to HMRC using FreeAgent.
Before you start
Before you can connect FreeAgent to HMRC for MTD for Income Tax, you'll need to enter your National Insurance number in FreeAgent.
To do this, select ‘Settings’ from the drop-down menu at the top-right of the screen and select ‘Users’.
Select your name from the list.
Enter your National Insurance number in the ‘National Insurance Number’ field and select ‘Save Changes’ at the bottom of the screen.
1. Sign up for MTD for Income Tax with HMRC
Firstly, if you haven’t already done so, visit HMRC’s MTD for Income Tax sign-up page and sign up your business.
Please note that HMRC will carry out some checks before sending you a confirmation email. This can take up to 72 hours. Once you receive confirmation, you are ready to connect FreeAgent with HMRC for MTD for Income Tax.
2. Connect FreeAgent to HMRC
Please note that you'll need to have entered your National Insurance number in FreeAgent before following the steps below.
After signing up for MTD for Income Tax with HMRC, log in to your FreeAgent account and select 'Connections' from the drop-down menu at the top right of the screen.
Select ‘Manage HMRC connections’ in the ‘HMRC connections’ section. Please note that only users with full (level 8) access will be able to see the ‘HMRC connections’ section. If you have a Practice Dashboard, you’ll need to set up your practice for MTD for ITSA and sign up your clients.
Select ‘Connect FreeAgent to HMRC for ITSA’. Please note that the screen you’ll see will depend on whether or not you’re VAT registered and have set up the MTD for VAT connection.
You'll be redirected to the HMRC website to complete the connection process. Select ‘Continue’ and fill in your Government Gateway credentials.
When the connection is completed successfully, you’ll see the following screen.
You’ll now be able to send quarterly updates to HMRC via MTD for Income Tax using FreeAgent. Find out more about how to view or update your MTD for Income Tax settings.
HMRC requires you to update your connection every 18 months.
To learn more about the government's Making Tax Digital initiative, check out our MTD guides and resources.
Problems connecting to HMRC
If there is a problem during the connection process, you will see the following error message.
This error message could be due to:
- You haven’t completed the sign-up for MTD for Income Tax. Please try logging in to your HMRC business tax account and check that you can access MTD for Income Tax services. If you can't, you'll need to complete the sign-up for MTD for Income Tax.
- You’ve entered your National Insurance number incorrectly. Please double-check that the National Insurance number in your FreeAgent account matches the National Insurance number in your HMRC business tax account.
- If the National Insurance numbers in your FreeAgent account and HMRC business tax account do match, please try again manually entering the same credentials you used to sign in to your business tax account.