MTD is now live but with low numbers registered with HMRC, many sole traders and landlords affected are still looking at how to comply, keep the administrative burden to a minimum and will probably be looking for inexpensive – or even free – software to use.
Few sign ups
By early April, about 80% of those who should have registered for MTD hadn’t. The problem is that many don’t see the upside of keeping digital records and reporting figures to HMRC quarterly:
Many people find it hard enough to gather the documents for their annual self-assessment tax return and will not welcome having to comply with strict quarterly reporting requirements:
- The annual self-assessment tax return will be difficult enough for many people to sort out their affairs and they won’t relish meeting tough quarterly reporting deadlines.
- As the MTD compliance threshold is income based, there will be some who will have to comply but will not even have a tax liability. They almost certainly won’t want to pay more agent fees for MTD compliance.
For many, the best option may be to keep the minimum required records with a standard spreadsheet and then use free bridging software to deal with the quarterly reporting requirement. The first quarterly update is due on 7 August so it’s time to get organised.
Software
HMRC has developed a software finder tool that directs taxpayers to appropriate software, including several free options. Many of the options on offer, however, are still in development.
For many sole traders and landlords, software that imports information directly from the taxpayer’s bank account may be the perfect solution, but not if they are putting their business and/or letting income and expenditure through their personal bank account.
Exit Options
The £50,000 MTD threshold from 6 April 2026 is calculated using income for 2024/25. Some people will now have an income below £50,000 and HMRC has explained when it is possible to apply to opt out of MTD.
Unfortunately, opting out is only possible where all sources of qualifying income have ceased; not the case if, for example, self-employment ceases, but there is still property income. Opting out of MTD can be done via HMRC’s webchat, by telephone or by writing to HMRC.
The start point for finding software that works with MTD for income tax can be found here.