Making Tax Digital (MTD) is now live, but given the low numbers registered with HMRC, many sole traders and landlords affected are still looking at how to comply, keep the administrative burden to a minimum and will probably be looking for inexpensive – or even free – software to use.

Low sign-up
At the start of April, nearly 80% of those required to register for MTD had not done so. The problem is that many do not see any upside to keeping digital records and having to report figures to HMRC quarterly:

• A number of individuals will find getting records together for the annual self-assessment tax return difficult enough, and will not relish complying with tight quarterly reporting deadlines.
• Because the MTD compliance threshold is based on income, there will be some who have to comply but will not even have a tax liability. They will almost certainly not want to incur additional agent fees for MTD compliance.

 
For many individuals, the best option might be to keep the minimum required records using a standard spreadsheet and then use free bridging software to deal with the quarterly reporting requirement. With the first quarterly update due on 7 August, now is the time to get organised.
 
Software
 
HMRC has created a software finder tool to direct taxpayers towards suitable software, including a number of free options. However, several of the available options are still at the development stage.
Software that imports information directly from the taxpayer’s bank account may be the perfect solution for many sole traders and landlords, but not for those who are putting their business and/or letting income and expenditure through their personal bank account.

Exit options
The £50,000 MTD threshold from 6 April 2026 is based on income for 2024/25. There will be some individuals whose income has since fallen to below £50,000, and HMRC has now clarified when it is possible to apply to opt out of MTD.
Unfortunately, opting out is only possible where all sources of qualifying income have ceased; not the case if, for example, self-employment ceases, but there is still property income. Opting out of MTD can be done via HMRC’s webchat, by telephone or by writing to HMRC.
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The start point for finding software that works with MTD for income tax can be found here.

The start of April rolled in some far from funny changes for businesses: reduced capital allowances, increased penalties for late filing of corporation tax returns and the closure of HMRC’s free corporation tax return filing portal.
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Capital allowances
Capital expenditure will often qualify for a 100% deduction, but where expenditure does not qualify, then a subsequent annual writing-down allowance (WDA) will be given. For periods commencing on or after 1 April 2026 (6 April 2026 for sole traders and partnerships), the main rate of WDA has been cut from 18% to 14%. This means:

• Most expenditure on cars does not qualify for a 100% deduction, so the WDA reduction effectively results in more tax payable.
• Expenditure on new (not second-hand) zero-emission cars still qualifies for a 100% deduction, although this relief is set to end on 31 March 2027 (5 April 2027 for sole traders and partnerships).

 
A hybrid rate of WDA will apply for accounting periods spanning 1/6 April 2026.
 
Penalties
 
The penalties for filing corporation tax returns late have doubled. The initial late filing penalty is now £200, increasing to £400 if more than three months late.
 
Where a return was also late for the two preceding accounting periods, the £200 and £400 penalties are respectively increased to £1,000 and £2,000.
 
Corporation tax returns
 
While not an issue for those using an agent, HMRC has closed their free online corporation tax filing service on 31 March 2026. This means:
 

• Going forward, anyone filing company tax returns with HMRC will need to use commercial software.
• Any changes or amendments to previously submitted tax returns will also have to be made using commercial software.

 
The closure of HMRC’s tax return filing portal means all records previously held online are no longer available. Hopefully, the records have been downloaded, and these should be stored securely.
 
Companies House was also going to require company accounts to be filed using commercial software from 1 April 2027, but this requirement has now been postponed.
 
The government’s guide to capital allowances can be found here.