The figures below are broad estimates intended to illustrate the scale of cessation-related interactions that HMRC and taxpayers may face during the first years of MTD ITSA.:
20,000 Tranche 1 taxpayers will be automatically exempt from MTD ITSA due to a business closed in 2024/25 not being included. Some may have to adjust their 2024/25 return to include a cessation date.
20,000 Tranche 1 taxpayers will need to ensure their 2025/26 return includes the relevant cessation dates and then manually claim exemption from MTD ITSA because a business that closed in 2025/26 will not be included
4,000 Tranche 1 taxpayers with foreign income will need to manually claim exemption from MTD ITSA if that income stopped in either 2024/25 or 2025/26
25,000 Tranche 2 customers should ensure they complete the cessation field in their SA103 and SA105 forms.
Some 48,000 of these interactions will be supervised by agents.
Around 20,000 unrepresented taxpayers will need to manage this themselves.
These projections are based on numerical information from HMRC’s responses to Questions 5, 6, and 7 of FOI-2025/162436, and from HMRC’s MTD ITSA statistics. The calculations supporting these figures are presented in the sections that follow.
HMRC’s published MTD ITSA business population statistics provide additional context for understanding the scale and characteristics of taxpayers affected by MTD. The statistics use data from 2023/24; they include breakdown by income type (Table 1); agent representation (Table 2); and software use (Tables 3-5).
The total number of taxpayers with a self employment or a property business is 7,020,000
Table 2 shows the size of each MTD ITSA Tranche and percentage with agent representation.
Tranche 1: 864,000; 75%
Tranche 2: 1,077,000; 63%
Tranche 3: 975,000; 59%
Across Tranches 1 and 2 combined the agent representation is 68%
Approximately 864,000 taxpayers fall within MTD ITSA Tranche 1. Tranche 1 represents around 12.3% of taxpayers potentially included in MTD ITSA.
Although applying the historical cessation rate to the Tranche 1 population yields an estimated 34,500 cessations, this figure exceeds HMRC’s directly reported figure in Question 7. As HMRC’s Q7 count represents specific and verified cessations for 2023–24, this direct figure is used for subsequent calculations.
HMRC reported 22,000 cessations among taxpayers with MTD-qualifying income over £50,000 in 2023–24. This figure represents approximately 2.5% of the Tranche 1 population. This compares with the ONS annual mortality figure of 0.889% for people aged between 20 and 70.
However, not all cessations will result in avoiding the need to join MTD ITSA. A working assumption is that roughly 20,000 of these cessations relate to taxpayers who would otherwise fall within Tranche 1 and are therefore likely to be exempt from joining MTD ITSA.
For comparison the ONS annual mortality figures for people between 20 and 70 is 0.889%; 2.5%
Applying the estimated inclusion rate (12.3%) and the cessation exemption rate (2.5%) to the foreign-income population, 649,000 taxpayers, yields an estimated ~2,000 taxpayers who will require a manual exemption process because they cannot be automatically recognised as exempt.
SA103 and SA105
20,000 for 2024/25 is from question 7
20,000 for 2025/26 assumes the same cessation rate for the following year
SA106
2000 for 2024/25 is from the derivation in Question 7
2000 for 2025/26 assumes the same cessation rate for the following year
Tranche 2 numbers
20,000 Tranche 1 factored up to reflect the projected size of Tranche 2
Agent Representation
Based on the HMRC agent representation percentage rate of 75% for Tranche 1 and 63% and Tranche 2 the overall estimate is 68%.
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