MTD trial users hit by major payment on account problem

Sara White, Editor, Business & Accountancy Daily. Croner-i

Taxpayers signed up to the Making Tax Digital (MTD) for Income Tax trial face major problem settling payment on account as financial information held in separate HMRC systems.

The issue affects up to 4,500 taxpayers signed up to the MTD trial and HMRC wrote to them before the self assessment payment deadline of 31 January, advising them about the issue and giving them instructions on how they can address the problem.

ICAEW first raised the problem after being told by HMRC there was a problem affecting taxpayers who have signed up to the MTD trial and are required to make payments on account for the 2025-26 tax year.

HMRC said the problem is due to the taxpayer’s financial information being split between the trial MTD income tax system (payments on account for 2025-26) and self assessment tax return system affecting 2024-25 balancing payment and some credits. 

ICAEW warned: ‘As a result, some taxpayers’ statements show payments on account as “transferred to digital” or as “nil”. To see the full picture, the taxpayer should access the MTD for Income Tax and self assessment services together from within their personal tax account or business tax account.’

HMRC has written to affected taxpayers telling them they need to use multiple sources to ensure they pay the correct amount.

An ICAEW spokesperson said: ‘It is frustrating that this issue wasn’t anticipated and highlights the need for robust testing of new systems.’

Due to the problem with HMRC’s internal systems, the tax authority said it would not charge MTD trial users with late penalties if payments on account are not paid by the due date, but late payments on account will accrue interest, HMRC confirmed.

An HMRC spokesperson said: ‘Customers who volunteered to test Making Tax Digital can use the service to view both their 2024/25 balancing charge, and payments on account for 2025-26.

‘As part of the transition to MTD, we’ve written to those customers to explain where to view all amounts due. No penalties are applied if payments on account are paid late.’

HMRC confirmed it has written to around 4,500 taxpayers who are part of the public beta MTD trial to make them aware that during the testing period in 2025-26, they may need to view both their self assessment and MTD accounts to confirm total amounts payable, and advising them to contact the specialist MTD trial support team if they require further help.

The HMRC letter informs taxpayers where they can find their payment on account information, that payments on account marked as ‘transferred to digital’ or ‘nil’ were payable by 31 January 2026 self assessment deadline, and what to do if transferred payments on account do not appear in their MTD for Income Tax account. 

With MTD for Income Tax due to become mandatory from April 2026 for nearly 900,000 sole traders, self employed and landlords with qualifying income over £50,000, the payment on account raises major concerns about the launch.

When asked by Business & Accountancy Daily whether the payment on account issue will affect the rollout timetable, HMRC stressed: ‘We remain on track to launch Making Tax Digital for Income Tax in April 2026.’

Where payments on account are needed for the 2025-26 tax year (due 31 January 2026 and 31 July 2026) these are also visible via the MTD system in the beta trial, HMRC added.

ICAEW confirmed that a message has been added to the taxpayers’ MTD for Income Tax accounts informing them that they may need to check their self assessment account.

HMRC also told ICAEW that work is ‘already underway on a longer-term solution’.

It is not clear when the problem was first identified by HMRC and why it had not been picked up during the software development stage as payment on account is critical element of self assessment process, affecting millions of taxpayers.

The HMRC letter also includes a link to help paying bills, stating search ‘Pay your Self Assessment tax bill’ on gov.uk. Trial participants with a tax accountant or agent are advised to ‘speak to them first about what you need to do’ and provide them with a copy of the letter.

The dedicated MTD for Income Tax customer support team is available for trial participants only on 0300 322 9619 (Monday to Friday, 8am to 6pm).