HMRC have clarified how you may be able to exit Making Tax Digital (MTD) if your income has fallen

HMRC have clarified how you may be able to exit Making Tax Digital (MTD) if your income has fallen

At the eleventh hour, HMRC has clarified exit options and cessation processes.

The clarification is welcome news and will affect some taxpayers who have been notified by HMRC that they must sign up to wave one of MTD from 6 April 2026 because they had qualifying income over £50,000 for the tax year 2024-25.

There has been a great deal of concern about the fairness of having to sign up to MTD if the taxpayer’s qualifying income has fallen below £50,000, but now HMRC head of MTD confirms that there are ways to opt out, depending on various factors, stressing that a phone call to HMRC or communication on HMRC web chat will secure a cessation!

Craig Ogilvie, director of Making Tax Digital at HMRC said: ‘Based on feedback from stakeholders, we have made improvements to the journey for customers who have ceased all qualifying income before their mandatory date of April 2026.’
 
But it is very important to realise that there are a number of caveats to extraction from the MTD system. It is not straightforward and income needs to have totally stopped.

However, Ogilvie stressed: ‘A cessation will only apply to a customer where all sources of qualifying income have ceased.’

‘Where a customer has ceased a source of self-employment or property income since the end of 24/25 but is still continuing to receive income from a stream of qualifying income, they will still need to start using Making Tax Digital for Income Tax from 6 April 2026.’

‘After you sign up, you will be able to enter the end date of the ceased business using HMRC online services.’
 
‘In all cases, when a customer submits their 25/26 self-assessment tax return, they should also confirm the cessation here too.’

How to request MTD cessation

There are various options to extricate yourself from MTD.

• ‘Our webchat colleagues have clear guidance to take the details and ensure the process is smooth. It’s helpful to be clear with our colleagues, making it clear that you are notifying cessation of all MTD income sources,’ Ogilvie said.
• ‘In response to your feedback, a letter will be provided to the person making the contact (if an agent) and the customer. There may be a slight delay in issuing the letter as we start the process, so be assured it will follow in due course.’
• ‘Our phone service advisors will be able to process the cessation and update the record on the system. As with webchat, a letter will be provided to the agent and customer if the agent calls or the customer only if they call.’
• You can write to HMRC to notify cessation, but HMRC recommend the options above.

In all relevant cases, HMRC will take the details, update the obligations, and confirm that the customer is no longer required to use Making Tax Digital for Income Tax where appropriate.

A 2025/26 Self-Assessment tax return will still be required, which will also confirm the cessation. HMRC have been updating systems to ensure they are ready to support.

Once a taxpayer is signed up to MTD, then HMRC offers a digital option to cease registration.

If you wish to cease one trade or property but remain in MTD, after sign-up, this can be managed in your “MTD Manage your Self-Assessment” service via your HMRC online account or agent services account.

If you have any questions concerning MTD, please contact us here at Kennedys Accounting and we will be pleased to assist.