Making Tax Digital for Income Tax
How many people MTD affects — and what it costs them
Making Tax Digital for Income Tax arrives in three waves. HMRC has published, in its impact notes, how many sole traders and landlords each wave brings in and what compliance will cost them — but the figures are split across two documents and HMRC never adds them up. Put together, HMRC's own estimates come to about 2.72 million people at an average of £320 to set up and £110 a year. Every figure below is read from HMRC, 16 August 2026.
~2.72 million in scope, at ~£320 + £110/yr each — HMRC's numbers, added up
HMRC estimates each wave separately: ~780,000 from April 2026, a further ~970,000 from April 2027, and ~970,000 more from April 2028. The waves are additive, so the standing population once the £20,000 threshold lands is roughly 2.72 million. That total is the one figure here HMRC does not state itself — everything else is quoted directly.
"It is expected that around 780,000 people with business or property income over £50,000 will join the MTD for ITSA service … from April 2026 with a further 970,000 joining from April 2027." — GOV.UK, Making Tax Digital for Income Tax Self Assessment for sole traders and landlords
Not sure which wave you are in, or whether you are even affected? Check your MTD start date and what counts as qualifying income.
| Wave | Qualifying income over | Based on your return for | People HMRC expects | Running total |
|---|---|---|---|---|
| First wave — from 6 April 2026 | £50,000 | 2024 to 2025 | around 780,000 | ≈ 780,000 |
| Second wave — from 6 April 2027 | £30,000 | 2025 to 2026 | a further 970,000 | ≈ 1.75 million |
| Third wave — from 6 April 2028 | £20,000 | 2026 to 2027 | around 970,000 more | ≈ 2.72 million |
The first two waves come from HMRC's extension impact note; the third from its separate impact note for reducing the threshold to £20,000. The running total is our addition, not an HMRC figure — but the waves are additive, each bringing a new band of income into scope, so the sum is the standing population, not a double count. The two 970,000s are a coincidence of two independent estimates, not the same figure repeated.
| Population | One-off (transitional) | Every year after |
|---|---|---|
| Over £50,000 (first wave) | £285 | £115 |
| £30,000 to £50,000 (second wave) | £350 | £110 |
| Average across everyone over £30,000 | £320 | £110 |
HMRC estimates these with its Standard Cost Model. A business already keeping digital records, or already on MTD for VAT, may incur far less; a paper-based one, more. HMRC publishes a per-business average only for the over-£30,000 group — it gives no per-business figure for the £20,000 wave.
| Population | Transitional cost | Net rise in ongoing cost |
|---|---|---|
| Everyone over £30,000 (first two waves) | £561 million | £196 million |
| The £20,000 to £30,000 wave (third wave) | £380 million | £101 million |
"Net rise in ongoing cost" is HMRC's net increase in the continuing costs of tax compliance — after the savings it expects MTD to bring. Against this, HMRC's own operational and IT cost for this phase is expected to be in the region of £0.5 billion to the end of March 2028.
Why HMRC says it is worth it
The number these costs are meant to buy down is the tax gap. HMRC puts the tax gap for Self Assessment businesses at around 18.5%, or about £5 billion — tax that is due but goes unpaid, much of it through error rather than evasion. Its case for MTD is that keeping records digitally and filing with compatible software reduces those errors.
| Tax year | Exchequer yield |
|---|---|
| 2028 to 2029 | +£35 million |
| 2029 to 2030 | +£130 million |
| 2030 to 2031 | +£155 million |
Certified by the Office for Budget Responsibility, from HMRC's impact note for the £20,000 threshold. These are for that single measure, not the whole MTD package.
What the numbers mean if it is you
If you are one of the ~2.72 million, the cost that bites is not the software — it is the time, which is what HMRC's £110-a-year average is really pricing. The way to keep it near that average, rather than well above it, is to keep your records in the shape a quarterly update already needs, so filing is a five-minute copy rather than a scramble.
An accountant or bookkeeper? Those ~2.72 million clients arrive in three dated waves, and each one's first deadline depends on which return put them over the threshold. The MTD Practice Tracker keeps every client's wave, updates and returns on one board. £39 one-time.
Just doing your own? The four record-keeping spreadsheets — £19 keep your income and expenses in the shape a quarterly update needs, so you stay near HMRC's £110 average rather than above it.
Common questions
How many people will MTD for Income Tax affect?
HMRC estimates ~780,000 join from April 2026 (income over £50,000), a further ~970,000 from April 2027 (over £30,000) and ~970,000 more from April 2028 (over £20,000). Added together — as HMRC never does in one place — that is roughly 2.72 million sole traders and landlords once the £20,000 threshold takes effect.
How much does it cost a business?
For the over-£30,000 population HMRC estimates an average £320 one-off transitional cost and £110 a year after. It splits that into £285/£115 for those over £50,000 and £350/£110 for the £30,000 to £50,000 band. In aggregate: ~£561 million transitional and a £196 million net rise in ongoing compliance cost.
What about the £20,000 to £30,000 group?
HMRC estimates £380 million transitional and £101 million net continuing cost for the ~970,000 people in that band, mandated from April 2028. For this wave HMRC publishes only the aggregate — no per-business average.
Why is HMRC doing this?
To reduce error. HMRC puts the Self Assessment business tax gap at around 18.5%, or about £5 billion, and argues digital records and compatible software cut the mistakes behind it. Its own operational and IT cost for this phase is expected to be around £0.5 billion to the end of March 2028.
How much tax does HMRC expect the £20,000 threshold to raise?
The OBR has certified the £20,000 measure at +£35 million in 2028/29, +£130 million in 2029/30 and +£155 million in 2030/31.
Use these figures
If you are writing about the scale or cost of MTD for Income Tax and want the numbers, take them. Published under CC BY 4.0 — use it commercially, just credit the source so your readers can check the working.
Machine-readable: /mtd-impact/data.json — the wave populations, the per-business and aggregate costs, the Exchequer yield, the method and the caveats, each figure attributed to its HMRC source.
Citation: “HMRC estimates Making Tax Digital for Income Tax will bring around 780,000 sole traders and landlords into scope from April 2026 (income over £50,000), a further 970,000 from April 2027 (over £30,000) and around 970,000 more from April 2028 (over £20,000) — roughly 2.72 million in total — at an average one-off cost of £320 per business and £110 a year thereafter.” — Fableworks HQ, compiled from HMRC impact notes, 16 August 2026.
The ~2.72 million total is the sum of HMRC's three wave estimates, not an HMRC-published figure. We would rather you quoted it accurately than not at all; HMRC revises its estimates, so the linked impact notes are the live answer if a figure here has aged.
Keep going
Am I in MTD? · What counts as qualifying income · Do I need to buy MTD software? · The MTD penalty regime · Every MTD deadline · Preparing for April 2028
Figures read from HMRC's Making Tax Digital for Income Tax Self Assessment for sole traders and landlords (the £50,000 and £30,000 waves) and Reduction of the mandation threshold from £30,000 to £20,000 from April 2028 (the £20,000 wave), both read 16 August 2026. HMRC's impact notes are the live answer if you are reading this long after that date.