As part of the Making Tax Digital (MTD) for Income Tax awareness campaign, HMRC issued letters to customers with qualifying income over £50,000. These customers were identified based upon the latest information held by HMRC at that time.

While some customers may subsequently have fallen below the threshold due to amendments to their 2024/25 tax returns made after letters were scheduled, HMRC is satisfied that the correct customers have been contacted overall and does not consider that any significant additional mailing or administration costs were incurred.

The information requested falls under the remit of the UK Statistics Authority.

Please see the letter below from the Permanent Secretary at the Office for National Statistics (ONS):

Lord Freyberg

House of Lords

London

SW1A 0PW

09 February 2026

Dear Lord Freyberg,

As Permanent Secretary of the Office for National Statistics (ONS), I am responding to your Parliamentary Question asking whether there is a plan to incorporate self-assessment income tax data into the Inter-Departmental Business Register; if so, when to expect that data to be incorporated; and what assessment has been made of the impact of including that data on the representation of sole traders and businesses operating below the VAT threshold in official economic statistics (HL14179).

The ONS is currently developing a new Statistical Business Register (SBR), which will replace the Inter-Departmental Business Register. We are planning to incorporate self-assessment income tax into the new SBR and are working closely with HM Revenue and Customs with the current expectation that they will be able to share the data later this year. We will then assess the data with a plan to incorporate into the SBR and assess the impact of the self-assessment data on economic statistics of businesses operating below the VAT threshold.

Yours sincerely,

Darren Tierney

The government is undertaking a range of activities to ensure those needing to use Making Tax Digital (MTD) for Income Tax from April 2026 are ready and able to do so successfully.

This includes media campaigns, awareness letters, developing guidance, and working with the software industry to ensure a broad range of MTD‑compatible products is available, including free options.

MTD quarterly updates are not like making a tax return each quarter. Software will manage much of the process, creating simple summaries of income and expenses from the taxpayer’s digital records ready for submission.

Information provided within the quarterly updates will be carried forward to the tax return, helping to reduce errors and make the end of year process faster and easier.

A significant majority of self-employed individuals and landlords have turnover below the VAT threshold, which is currently £90,000. Since 2022, all VAT-registered businesses have been required to use Making Tax Digital (MTD) regardless of whether they are above of below the VAT threshold. The MTD for Income Tax threshold starts at £50,000 from April 2026, reducing to £30,000 in April 2027 and £20,000 in April 2028. This ensures MTD will extend the benefits of digitalisation to many more businesses, helping them to adopt new digital ways of working, improve productivity and growth and get their tax right. This helps address the tax gap for Income Tax Self-Assessment, which is estimated at £8.7bn in 2023-24 and is particularly prevalent amongst the smallest businesses. HMRC has worked extensively with customers, representative bodies and software developers to ensure that MTD works well for businesses of all sizes.

MTD Quarterly updates are not self-assessment tax returns. They are simple summaries of income and expenditure which can be automatically populated through digital records kept by MTD users. HMRC expects quarterly updates to be accurate based on the best available information at the time, but taxpayers do not have to make a declaration of accuracy when these are submitted, and there will not be penalties for inaccurate quarterly updates.

The Government recognises that not everyone is able to interact with HMRC digitally. Taxpayers who are digitally excluded from MTD for Income Tax will be able to apply for an exemption. HMRC will begin operating the exemption process in the coming weeks.

HMRC will publish detailed guidance when the exemption application process opens for digitally excluded taxpayers. This will explain how taxpayers, or someone acting on their behalf, can apply to be exempted from MTD for Income Tax. HMRC will also write to taxpayers to make them aware of the exemptions. There will also be engagement with business and taxpayer representatives to help disseminate this information.

Quarterly updates required by Making Tax Digital (MTD) are not the same as tax returns. They are simple, unadjusted summaries of income and expenditure, acting as a snapshot of quarterly trading activity. They will be populated automatically through software and can be submitted easily. This process has been designed to be simple for users and quick to complete.

Quarterly updates will support taxpayers to get their tax right by ensuring timely and accurate record keeping, enabling tailored digital prompts and to view estimates of their emerging tax liability throughout the tax year, making it easier to submit their end of year return.

MTD is intended to address parts of the tax gap caused by unintentional taxpayer error and failure to take reasonable care. By preventing common taxpayer errors, MTD for income tax helps address the small business Tax Gap, adding £1.95bn to the public finances through to 2029/30.

Making Tax Digital (MTD) quarterly updates support taxpayers in getting their tax right by ensuring timely and accurate record keeping, enabling tailored digital prompts and allowing taxpayers to see estimates of their emerging tax liability throughout the tax year.

This will help to reduce errors, and the time taxpayers need to spend managing their tax affairs. Software will automatically draw data for the updates from the digital records. With income and expenditure already categorised, the end-of-year return will also become quicker and easier, as all the information will be readily available in the software to submit.

To ask His Majesty’s Government what plans they have to use the rollout of Making Tax Digital as a strategic entry point to encourage wider adoption of digital tools among small businesses.

I am grateful to my noble friend for his question. HMRC has taken a range of steps to ensure that the adoption costs of Making Tax Digital are kept to a minimum, including working with industry to ensure that there is free and low-cost software available where necessary. The use of Making Tax Digital should bring significant benefits by increasing accuracy, reducing the time it takes to complete tax returns, and therefore increasing productivity. The rollout of Making Tax Digital encourages taxpayers

to adopt digital solutions. For example, of those businesses already using Making Tax Digital for VAT, one-third have used the software for other business processes. More broadly, the Government are actively promoting digital technology adoption for small businesses, which is key to unlocking productivity and growth, and helping firms reduce administrative burdens. In our small business plan, we accepted all 10 recommendations from the industry-led Digital Adoption Taskforce.