LITRG: New HMRC figures show the scale of MTD challenge
New figures from HMRC suggest that around 216,000 unrepresented landlords and self-employed businesses will be legally required to sign up for the new Making Tax Digital for Income Tax (MTD) regime by April 2026.1 The Low Incomes Tax Reform Group (LITRG) is encouraging taxpayers to get ready.
Published earlier this week, HMRC figures2 show that an estimated 864,000 self-employed businesses and landlords are likely to be affected by MTD from April 2026. The figures suggest that around 216,000 of these taxpayers are ‘unrepresented’ – meaning they do not use the services of an accountant or tax adviser.
LITRG is concerned that some unrepresented taxpayers are still not aware of what MTD is, and what they need to do to comply with these new reporting requirements. The clock is now ticking for people to get ready for this major change.
From April 2026, MTD will apply to people who had more than £50,000 of gross income3 from self-employment and/or rental income in the 2024/25 tax year, unless they are exempt. Affected taxpayers will need to keep digital records, make quarterly reports to HMRC and, importantly, must have the appropriate commercial software to participate4.
Victoria Todd, Head of LITRG, said:
“MTD represents the biggest change to income tax in a generation, and these new figures from HMRC provide a helpful indication of the number who will be affected in the coming years.
“The requirement to take part in MTD from April 2026 is based on a person’s 2024/25 tax return data. We are therefore urging taxpayers with self-employment and/or rental income to prepare and submit their tax returns for the year ended 5 April 2025 as soon as possible, so they are clear as to whether they will be legally required to participate in MTD from April 2026.
“HMRC’s figures also show that, of unrepresented taxpayers potentially within the scope of MTD next year, 79% did not use any commercial software to complete their 2023/24 tax returns5. Using MTD compatible software from April 2026 will likely be a very big change for them. Even those who do currently use commercial software to complete their tax returns may well find they need different software to meet the MTD digital record keeping requirements. For some people, choosing software and learning to use it will be daunting and time-consuming.
“HMRC have confirmed that it will be possible for some people to apply for an exemption from MTD if they meet certain criteria, for example if they are digitally excluded. We are still awaiting confirmation from HMRC as to when this exemption service will launch.6”
Notes for editors
- MTD for income tax is being introduced in phases. From April 2026 it will apply to people with ‘qualifying income’ exceeding £50,000, based on their 2024/25 tax return data. From April 2027 the qualifying income limit will reduce to £30,000, and from April 2028 the limit will reduce to £20,000. You can read more about MTD for income tax on the LITRG website.
- See: Making Tax Digital for Income Tax business population statistics: commentary (HMRC, 13 August 2025)
- The qualifying income for the purpose of establishing whether you have breached the MTD threshold is annual gross income from self-employment and/or rental property. Note that if you have self-employment income and property income then you need to combine gross income from both sources to see whether you breach the MTD threshold.
- HMRC are not providing software for MTD, it will be necessary to use commercial software for keeping digital records, making quarterly returns and for filing a tax return.
- HMRC statistics commentary (note 2 above) says: “For businesses with an agent and over £50,000 qualifying income 78% used software to submit an end of year return compared to only 21% for those without an agent.”
- LITRG understands it will be possible to apply for exemption from Making Tax Digital from Autumn 2025 onwards. HMRC will consider applications and if exemption is granted, you do not need to follow the new MTD rules.
