This article, "HMRC to write to taxpayers about Making Tax Digital for income tax," originally appeared on AccountingWeb.com.
HMRC has confirmed in the latest Agent Update that it will be writing to sole traders and landlords from April about Making Tax Digital for income tax (MTD IT). The letters will be targeting individuals with a total self employment and/or property income of over £50,000.
The letters that are set to be posted through letterboxes from April 2025 will be addressed to those whose 2023 to 2024 self assessment tax return shows their total income (turnover, not profit) as being either over, or close, to £50,000.
These letters will inform taxpayers that they may need to use MTD IT. The letters will be going to some taxpayers who are not yet mandated to comply.
There will be two different letters – one for taxpayers already expected to comply with MTD IT and another one for those whose turnover is between £45,000 and £50,000. HMRC will then inform taxpayers if they definitely have to use MTD IT after they file their 2024/25 tax return.
Ahead of the letter to impacted taxpayers, in March 2025 HMRC will also write to agents with clients who are likely to be affected by the change.
Sign up affected clients
The first tranche of taxpayers must comply with MTD IT from 6 April 2026 if their annual turnover exceeds £50,000. The next set of taxpayers due to enter MTD IT from 6 April 2027 will be those with an annual turnover exceeding £30,000. However, HMRC’s communication campaign will be focusing only on the first tranche to begin with.
Individuals affected by the change from 6 April 2026 will need to sign up because this will not be done automatically. Agents have the option to sign up now for the 2025/26 tax year – where they will have access to the MTD customer support team – or from April if they have the option to sign up for 2025/26 tax year or 2026 27 onwards.
HMRC will be at the Festival of Accounting & Bookkeeping on 12–13 March at the NEC in Birmingham (get your FREE ticket). Attendees can speak to them in person on their dedicated stand about ways to prepare for MTD IT, or they can attend the various talks over the course of the event, including a keynote from Craig Ogilvie, the director of Making Tax Digital on day one.
Letters are the start of the campaign
Caroline Miskin, the senior technical manager of digital taxation at the Institute of Chartered Accountants in England and Wales (ICAEW), highlighted to AccountingWEB that the letters are going out to taxpayers based on the 2023/24 tax return data but it will be the 2024/25 return data that will ultimately determine who will have to enter MTD IT.
However, the letters aren’t the only communication planned. HMRC also plans on marketing and paid advertising specifically targeting those in the construction industry from March.
Additionally, HMRC is hosting a series of events in its offices across the UK, where agents and software developers are invited to come along too. The first of these events will be on Wednesday 9 April in Newcastle, followed by another on 29 April in Stratford and another on 7 May in Cardiff.
Richard Wild, the head of the tax technical team at the Chartered Institute of Taxation (CIOT), welcomed the news that HMRC will write to taxpayers about MTD IT, but he stressed the importance of the wording in the letter.
“For many, this will be the first time that they have heard about MTD IT directly from HMRC, as opposed to from their agent or software company, if indeed at all.
“We look forward to working with HMRC on the content of the letter, to ensure that it lands without causing panic, avoids taxpayers making ill-informed decisions about software, and mitigates the inevitable questions that are likely to go to HMRC, agents and software companies.”
AccountingWEB will report on what’s actually in the letters when that becomes available.
Get ahead of the HMRC push
While these letters start the wheels turning on MTD IT, the message coming loud and clear to AccountingWEB is that it will generally be better for clients to hear about MTD from the agent in advance of the letter from HMRC.
“HMRC’s letters are their first real step in communicating directly with taxpayers about MTD, something which we will see much more of as we get closer to April 2026,” said Emma Rawson, the director of public policy at the Association of Taxation Technicians (ATT).
“If you haven’t spoken to your clients already about MTD, my advice is to have that discussion before the letters arrive. You don’t want the first time clients hear about MTD to be from HMRC, rather than you.
“On the other hand, if you have tried to get clients to engage on MTD in the past, but found them reluctant, the letter might help you convince them. Nothing makes things feel real quite like that brown envelope landing on the doormat.”
Rawson will be on an all-star panel on day two of the Festival of Accounting & Bookkeeping (FAB), alongside Rebecca Benneyworth, Chris Downing from Sage and Chris Jennings, MTD Beta lead at HMRC.
ICAEW’s Miskin also emphasised the importance of agents understanding what is involved so they are prepared when the letters arrive, and they can then communicate this to their clients and begin to prepare their practice for the significant change.
“Firms may want to consider signing up a client or two for the testing phase to get hands-on experience, but great care is needed to choose software that will be ready for quarterly updates and, most importantly, the year-end finalisation process,” she said.
An accountant’s point of view
Practice owner Lorraine Ellison will be at FAB on day two, discussing how she’s got her practice ready for MTD.
Ellison said when the letters land in April she expects them to trigger calls and messages from clients. Without having the January rush or finalising salaries and dividends in March, she’ll have plenty of time in April to answer the queries that will likely be coming her way then.
Arriving as the new tax year begins, Ellison believes the letters “may encourage sole traders to get motivated to do their books and to check if they need to get ready for MTD”.
For Ellison, the letters will contribute towards her MTD preparation – but they won’t be the sole focus. She has been talking to clients about MTD for five years. In order to get her practice ready, she has moved smaller clients onto QuickBooks one by one, with new clients having to go onto the cloud software as they join. She does admit to having a few stragglers however.
The practice owner also recently undertook a client segmentation exercise and realised nine extra clients will have to report quarterly under MTD IT. Another part of her preparations was to join the pilot scheme with one sole trader.
“I am so glad I did as I now know how it works for sole traders and have my service offering ready. I am now getting on with my project to find out about the sole trader and rental income and have selected one client to add to the pilot so I can get trained up,” she said.
Book your FREE ticket for the Festival of Accounting & Bookkeeping and learn more about how you can prepare your practice and clients for the mandation of MTD for income tax.