Just days ahead of the initial phase of Making Tax Digital for Income Tax, HMRC has confirmed the exit options for sole traders and landlords who fall below the annual qualifying income threshold.
There has been a lot of concern from taxpayers whose qualifying income has fallen below the £50,000 threshold since 1 February 2025.
Many had questioned HMRC about why they still had to comply at this stage after they had been notified by the tax authority to prepare for the new quarterly reporting obligations.
To try and settle the fears of many people, Craig Ogilvie, the Director of Making Tax Digital at HMRC, has come out to explain that there are ways for some taxpayers to opt out, depending on various factors.
“Based on feedback from stakeholders, we have made improvements to the journey for customers who have ceased all qualifying income before their mandation date of April 2026,” he said.
How to request MTD cessation
HMRC has called on those affected to phone or communicate with HMRC via its web chat service to confirm a cessation of their compliance requirement.
When you make contact, you should make it clear that you are notifying HMRC about the cessation of all MTD income sources.
Once you have made HMRC aware, it will provide a letter to the person making the contact, whether the taxpayer or an agent working on their behalf, but it has warned that there might be a slight delay in the letter being issued.
Taxpayers still have time to contact HMRC before the first filing deadline on is Friday, 7 August to confirm that their qualifying income falls outside of the current threshold.
What do taxpayers need to know about the cessation?
There are a number of factors that determine whether a sole trader or landlord can exit from the MTD regime and they are not straightforward.
In its clarification message, HMRC confirmed that a cessation will only apply to a customer where all sources of qualifying income have ceased.
If a taxpayer 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.”
Ogilvie added: “In all cases, when a customer submits their 25/26 self-assessment tax return, they should also confirm the cessation here too.”
If you believe you have fallen below the current £50,000 threshold for Making Tax Digital for Income Tax, make sure you reach out to HMRC at the earliest opportunity. If you need any assistance with this, please get in touch.
