New Outlook fails to synchronise external IMAP accounts whose email addresses are also Microsoft identities?

@Ewan McLaren said

New Outlook fails to synchronise external IMAP accounts whose email addresses are also Microsoft identities

Some clarification please that might help us identify your problem.

When you say "accounts whose email addresses are also Microsoft identities" do you mean that the email address for the account ends in "outlook.com" or "hotmail.com"?

No, for example ******@test.com will work fine, but if ******@test.com has a microsoft account/identity and has paid for (say) Microsoft office, the account will fail to add/synchronise. Sorry I wasnt clear!

Evan said

test.com will work fine, but if test.com [is] a microsoft account will fail to add

You are trying to add an email account to New Outlook for Windows using these instructions?
https://support.microsoft.com/en-us/outlook/getstarted/add-an-email-account-to-outlook-for-windows

Microsoft identities but do not have Exchange Online mailboxes

That's the part I don't understand. Any email account hosted in the Microsoft Cloud (like a MS 365 Business account) should be added using "Auto Discovery" in New Outlook. All you do is give Outlook the email address and it figures out all the rest.

When you give Outlook just the email address and click [Next], what's the error message?

Sorry for the delays in responding, and for not being clear - I'm dealing with a close family bereavement at the moment so things are a bit all over the place.

So I've opened New outlook - entered the email address I want to add, clicked continue. (lets assume this is test1(at)test.com - and this email address has a paid microsoft office 365 subscription.

Then I've entered the password

It then brings up the screen "To add your IMAP account to outlook, we need to sync your emails to the Microsoft Cloud. Any contacts and events you create in Outlook will be saved to the Microsoft Cloud.

I click continue, and it shortly returns with "Something went wrong. Try again. You may need an app password".

Evan

1 -- You have a MS 365 Business Subscription to which you added a "custom" email domain?

https://learn.microsoft.com/en-us/microsoft-365/admin/setup/setup-business-standard?view=o365-worldwide

https://learn.microsoft.com/en-us/microsoft-365/admin/setup/add-domain?view=o365-worldwide&tabs=domain-connect

If this is the case, then you should never see the "add your IMAP account" prompt. Outlook should connect to your MS 365 Account with a Exchange connection.

2 -- If you use Outlook Web Access ( https://outlook.cloud.microsoft/ ) can you logon to your MS 365 Account and see the mail for your custom domain?