Individuals and landlords with gross income from self-employment and/or property above £50,000 on the 2024-25 tax return are mandated to join Making Tax Digital (MTD) from April 2026. But what happens if that income has ceased by then?
If you completely stopped trading before 6 April 2026, and you have no other qualifying income, you must notify HMRC that although you fall within the MTD for income tax rules from April 2026, your qualifying income ceased before that date. You can do this by phone or by webchat. This will mean that you do not need to sign up for MTD.
Where an individual ceases to trade on or after 6 April 2026, they will need to sign up for MTD and submit quarterly updates until that trade stops. To end your MTD obligations you will need to submit the final quarterly update covering the period in which your income ceased; and declare the business end date on your HMRC services account before the next quarterly update is due. We can help you with this.
You must complete a final self assessment tax return for the tax year in which the income ceased.
If you have any residual qualifying income, even if this is minimal, you will need to remain in MTD for at least three years. For example, if you ceased your sole trade on 5 April 2026 but you continue to receive rental income of £3,000 per year from a property that you own, you must continue to create digital records and send quarterly updates for the property income, even though it is below the MTD threshold.
If your qualifying income falls below the relevant threshold for three consecutive years, you can choose to continue using MTD voluntarily; or opt out of MTD and submit a self assessment tax return instead.
For example, if you are required to join MTD for income tax in April 2026 you will be able to opt out after the end of the 2029-30 tax year if your qualifying income is:
- £30,000 or less based on your 2025-26 tax return;
- £20,000 or less based on your 2026-27 tax return; and
- £20,000 or less based on your fourth quarterly update for 2029-30.
We have been preparing to help clients navigate MTD for income tax for some time. Contact us to find out what you need to do to meet the requirements.
