Leaving MTD for Income Tax: When Can You Stop?

You can stop using Making Tax Digital for Income Tax in a small number of situations: your qualifying income has been below the relevant threshold for 3 consecutive years, an amended tax return takes the previous year below the threshold, all your self-employment and property income has ceased, or HMRC confirms you are exempt. A single quiet year is not enough. This guide sets out what HMRC's guidance says about each route.

Key takeaways

• The main exit is 3 consecutive years of qualifying income below the relevant threshold.
• Opting out is a choice you make in your HMRC online account. It does not happen by itself.
• If all your self-employment and property income ceases, you finish that tax year inside MTD and then leave.
• You still send a Self Assessment tax return after you leave.
• Leaving is not permanent. HMRC checks your qualifying income every year.

What does "leaving MTD" mean?

Once you are required to use Making Tax Digital (MTD) for Income Tax, you keep digital records, send quarterly updates by 7 August, 7 November, 7 February and 7 May, and send a year end tax return by 31 January. Leaving means the digital record and quarterly update duties end. You stay in Self Assessment and report once a year on a tax return.

Qualifying income is your gross self-employment and property income before expenses. The service applies from 6 April 2026 if that figure was over £50,000 in 2024/25, from 6 April 2027 over £30,000 in 2025/26, and from 6 April 2028 over £20,000 in 2026/27. Our guide to MTD qualifying income covers how the figure is worked out.

Route 1: income below the threshold for 3 years

HMRC's guidance on what to do if your circumstances change says you can opt out if your qualifying income has been below the relevant threshold for 3 consecutive years. For the third year, HMRC uses the income information in your fourth quarterly update to check whether you can opt out, so you do not have to wait until you send that year's tax return.

HMRC gives its own example. Someone with qualifying income above £50,000 in 2024/25 starts in April 2026. They can opt out after the end of the 2028/29 tax year if their qualifying income is £20,000 or less based on their 2026/27 tax return, £20,000 or less based on their 2027/28 tax return, and £20,000 or less based on their fourth quarterly update for 2028/29. That update is due by 7 May 2029, and they would then not need to use the service for 2029/30.

If your position differs from that example, check the wording on GOV.UK before relying on a date.

Route 2: an amended return for the previous year

The same guidance says you can opt out if you amended your Self Assessment tax return for the previous tax year and the amendment takes your qualifying income below the relevant threshold. This is for genuine corrections to a return. HMRC's page on how to work out your qualifying income adds that if the change is made after the tax year has started and you have already signed up, you can keep using the service voluntarily or choose to opt out.

Route 3: your income sources cease

Ceasing means your business has stopped trading or you have stopped receiving income from property. HMRC's section on how to add or cease income sources treats two cases differently.

• All sources cease. You tell HMRC the date, send the final quarterly update for the period that includes it, and send the tax return for that year using MTD software. After the tax year in which the income ceased, you do not need to use the service.
• One source ceases, another continues. You tell HMRC, complete the outstanding quarterly updates for the ceased source, and carry on as normal for the rest. Income from the ceased source still counts towards your qualifying income while you have a continuing source.

Route 4: you become exempt

If it is no longer reasonable for you to use software, for example because of a health condition, you can apply for an exemption. Once HMRC has confirmed it, you stop digital records and quarterly updates but still send a Self Assessment return. The grounds and the application are covered in our guide to MTD exemptions and digital exclusion. Insolvency is not an exit: HMRC says you keep using the service if you still receive self-employment or property income.

What about people who signed up voluntarily?

The GOV.UK pages we checked do not set out a separate exit rule for volunteers. They say the opt out option only appears in your online account if you are eligible, and that your account shows when you are using the service voluntarily. If you volunteered early, check what your account offers or ask HMRC.

Can you stop? A comparison

Step by step: opting out

1. Keep filing until you are out. The next update is due by 7 November 2026. See our MTD quarterly update deadlines.
2. Send the fourth quarterly update for the third year by 7 May.
3. Sign in to your HMRC online services account and look for the opt out option. An agent can do this through their agent services account.
4. Select it if you want to leave. If you do nothing, you continue as a voluntary user.
5. Send a Self Assessment tax return for the year you opt out, by 31 January.
6. Review each year. Use the GOV.UK tool to find out if and when you need to use MTD again.

Worked example (illustrative)

"Marcus", an illustrative example, is a self-employed kitchen fitter. His turnover in 2024/25 was £58,000, so he started using MTD for Income Tax on 6 April 2026. During 2026 he moves to part-time work. His 2026/27 tax return shows turnover of £19,000 and his 2027/28 return shows £18,000.

In 2028/29 his four quarterly updates total £17,500 of income. He sends the fourth by 7 May 2029. All three years are at £20,000 or less, matching HMRC's example, so the opt out option appears in his online account and he selects it. He does not use MTD for 2029/30, but still sends a tax return.

Marcus and these figures are invented for illustration and are not a real client.

Common mistakes

• Stopping after one low year. The duty continues until you have opted out, ceased or been confirmed exempt.
• Looking at profit. The test uses gross income before expenses.
• Not telling HMRC a source has ceased. Record the end date by the quarterly update deadline for the period in which the income stopped.
• Assuming the tax return goes too. It does not. See our guide to the MTD year end return.
• Deleting records. HMRC says digital records must be stored for at least 5 years from the submission deadline for each tax year.

How we can help

We keep digital records, send quarterly updates and year end returns, and tell clients when an exit route opens up. MTD compliance starts from £49 per month on a fixed fee. See our MTD compliance service, view our pricing, or contact us before the 7 November 2026 update is due.