HMRC clarifies how to exit MTD if income falls

Sara White, Editor, Business & Accountancy Daily. Croner-i

With days until Making Tax Digital for Income Tax goes live for £50,000 plus landlords and self employed, HMRC clarifies exit options and cessation process.

The clarification is welcome news and affects 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 since 1 February 2025, and questions about why HMRC is still requiring them to register for the quarterly reporting regime.

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 mandation date of April 2026.’

While MTD starts from 6 April, bear in mind the first filing deadline day is Friday 7 August, so there is still time to prepare, especially as at least 600,000 taxpayers still have to register for the mandatory quarterly reporting. In a detailed post on LinkedIn, Ogilvie clarifies the different routes to a complete cessation of all MTD sources using HMRC webchat or a phone call to an HMRC advisor, adding the request will be confirmed in writing.

But it is very important to realise that are a number of caveats to extraction from the MTD system. It is not straightforward and income needs to have totally stopped.

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 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 us to notify cessation, but we recommend the options above.

‘In all relevant cases, a colleague 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 25/26 Self Assessment tax return will still be required, which will also confirm the cessation. Our colleagues have all been updated 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.’

HMRC will be updating the guidance on cessation before mandation and providing additional detail. This will be available in HMRC guidance manual, Use Making Tax Digital for Income Tax.

Useful links

What you need to know: MTD for Income Tax complexities | 19 Feb 2026

MTD filing deadlines at a glance | 1 Sep 2025