This was the opening question in FOI-2025/162436 and provides context for the remaining questions.
Please set out the generic rules to be applied to the Tranche 1 cohort where a business ceases to trade in the 2024/25 tax year. Please also identify any internal guidance, process documents, or decision trees used to apply those rules.
Customers will need to use Making Tax Digital (MTD) for Income Tax if the following applies:
They are a sole trader or a landlord registered for Self-Assessment
They get income from self-employment or property, or both
The income received from self-employment, property or both together (qualifying income) exceeds £20,000.
If qualifying income is over £50,000 for the 2024/25 tax year, businesses and landlords will need to join MTD from 6 April 2026.
This basic criterion is in public guidance on GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax - GOV.UK https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax
If the customer had a single source of qualifying income that ceased during the 2024/25 tax year, they will not need to use MTD for Income Tax from April 2026 even if the qualifying income received exceeded the threshold.
If there are multiple sources of qualifying income that together exceed the MTD threshold, and one source stops, the customer will need to meet the MTD obligations for these remaining sources of qualifying income. This applies unless or until the gross income from these sources falls below the MTD threshold for three consecutive years. [This is explained further in the answer to Q2B note by FOI author]
Relevant process and logic documents have been outlined in addressing Q4, and additional guidance can be found here:
Work out your qualifying income for Making Tax Digital for Income Tax - GOV.UK: https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax
Making Tax Digital for Income Tax for sole traders and landlords: step by step - GOV.UK https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step
Further guidance on cessation and annualisation is due for publication and is anticipated before the end of 2025.
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