How much does joining Making Tax Digital actually cost? HMRC’s own impact assessment gives an answer, and it is smaller than many headlines suggest.
For qualifying income over £50,000, the average MTD cost is £285 one-off, plus £115 a year. For qualifying income between £30,000 and £50,000, it is £350 one-off, plus £110 a year. Those are averages from HMRC’s Tax Information and Impact Note (TIIN) for MTD for Income Tax. They are not a bill for any one person, and they are not a software price list.
There is also a news hook. HMRC has promised to evaluate the impacts of MTD as the thresholds fall. That promise comes from the Parliament written questions record for question 29778, dated 14 September 2026. It is not dated 20 October. That date was the Property118 write-up of the answer, not the answer itself.
The MTD cost figures, by income band
| Income band | Average one-off transitional cost | Average additional annual cost |
|---|---|---|
| Over £50,000 (in MTD from 6 April 2026) | £285 | £115 a year |
| £30,000 to £50,000 (in MTD from 6 April 2027) | £350 | £110 a year |
| Overall average, all in scope | £320 one-off | £110 a year |
Across all businesses and landlords in scope, HMRC’s assessment puts the total transitional cost at £561 million. The net continuing cost is £196 million a year. Those totals sound large because they cover around 2.9 million businesses and landlords over the full rollout. The per-person averages above are the figures that matter for your budget.
Read every figure in this article as an average. Costs vary by business size, complexity, digital capability, and software. A sole trader with one income stream and simple records will sit below the average. A landlord with several properties and paper records will sit above it. The average tells you the scale. It does not tell you your bill.
What the transitional cost is made of
Transitional costs are the one-off costs of getting ready. In HMRC’s coverage, they include familiarisation with the new system, in-house training, possible hardware upgrades for a small minority, and additional accountancy or agent costs.
Transitional costs can be offset against business profits. Software costs and agent costs for business purposes are tax deductible. That does not make the cost disappear, but it does reduce the after-tax effect. Keep invoices for software and agent work linked to MTD, so the deduction is easy to evidence.
The annual cost is different. It covers the ongoing extra cost of keeping digital records and sending quarterly updates through compatible software, on top of what you already spent on tax compliance. It is an additional cost, not your total tax compliance bill.
One guardrail from the same impact note matters for many readers. Those already on MTD for VAT may incur relatively little cost. If you already keep digital VAT records in compatible software, the step to MTD for Income Tax is shorter. Your software may already handle the core task. Your records may already be digital. Check that before you budget the full average.
Why the smaller income band shows a higher one-off cost
The £30,000 to £50,000 band shows a higher one-off cost (£350) than the over £50,000 band (£285). That looks backwards at first glance. HMRC’s figures do not give a single stated reason, and this article does not invent one.
What the figures do suggest is a pattern. Smaller businesses are less likely to already use digital record keeping. They are more likely to need new software, new habits, and more training time at the start. Larger businesses are more likely to already have systems in place. That is a plausible reading of the gap, not a quoted HMRC explanation. The honest statement is the figures themselves, plus the guardrail that costs vary by digital capability.
The annual figures run the other way round, by a small margin: £110 a year for the £30,000 to £50,000 band, against £115 a year for the over £50,000 band. The gap is £5. Do not over-read it. Both bands sit near the same ongoing level.
What this is not
This is not a survey of what traders expect to spend. It is HMRC’s impact assessment averages. A separate Tide survey of traders and landlords, published in October, reported different expectations, including six days of admin and £1,778 of lost time in year one. Those are survey expectations, not HMRC estimates. The two sets of numbers measure different things, and this article does not blend them into one figure. If you read both, keep the labels clear: official estimates here, survey expectations there.
This is also not a software price ladder. Software prices run from free versions for simple affairs up to paid plans, and the right price depends on your records. The shelved free MTD software comparison draft stays shelved. It is not revived here, and this article does not rank free products.
Finally, this is not a sign-up gap story. That story is the companion piece in this batch, covering the reported 275,000 people still outside MTD and HMRC’s automatic sign-up. Read the sign-up gap story for that angle. This article covers what joining costs.
What to budget before April 2027
If you join the £30,000 wave on 6 April 2027, budget in three parts. First, the one-off step: software setup, training time, and any agent help to get records digital. Use £350 as the average marker, then adjust up or down for your own position. Second, the annual extra: around £110 a year on HMRC’s average. Third, your time. HMRC’s averages are money costs. Your time to learn the system is real too, even if it does not appear as a bill.
If you are already in MTD, the nearer date matters more. Your second quarterly update for 2026/27 is due on 7 November 2026. Read “Your Second MTD Quarterly Update Is Due 7 November” for the step by step. Your annual return remains due by 31 January, and it cannot be filed if the final quarterly update is missing.
For the wider MTD rules, read our “Making Tax Digital guide“. For the £30,000 threshold and its start date, read “MTD £30,000 threshold from April 2027“.
The evaluation promise, stated carefully
HMRC will evaluate the impacts of MTD for Income Tax as it rolls out to those with income over £30,000 from April 2027, and to those with income over £20,000 from April 2028. That is the promise in the Parliament record for question 29778, answered 14 September 2026.
An evaluation is not a policy change. It is not a delay. It is not a review of whether MTD itself should happen. It is a commitment to assess impacts as each threshold falls. For readers in the £30,000 wave, that means your experience in the first year is part of the evidence base. Keep records of time and cost, not only for your return, but so the evaluation has real data to work from.
GOV.UK’s “Making Tax Digital for Income Tax” collection gathers HMRC’s own guidance for the rollout. GOV.UK’s press release, “Sole traders and landlords earning more than £30,000 urged to act now“, confirms the April 2027 start and the estimate of around 1,077,000 more people joining then.
Frequently asked questions about MTD costs
What does MTD cost on HMRC’s figures?
On average, £285 one-off plus £115 a year for income over £50,000, and £350 one-off plus £110 a year for income from £30,000 to £50,000. Overall averages are £320 one-off and £110 a year. These are HMRC impact assessment averages, not individual bills.
Are MTD software and agent costs tax deductible?
Software costs and agent costs for business purposes are tax deductible, and transitional costs can be offset against business profits. Keep invoices so the deduction is easy to evidence. This is general information, not advice on your own tax position.
Will I pay less if I already use MTD for VAT?
You may incur relatively little extra cost, under HMRC’s own guardrail. If you already keep digital VAT records in compatible software, the step to MTD for Income Tax is shorter. Check whether your current software already covers Income Tax updates.
Why does the smaller income band cost more up front?
HMRC’s figures show £350 one-off for the £30,000 to £50,000 band against £285 for the over £50,000 band, but HMRC gives no single stated reason. Costs vary by business size, complexity, digital capability, and software, and smaller businesses are less likely to already keep digital records.
Is this the same as the Tide survey figure of £1,778?
No. The Tide figure is survey expectations about lost time, including six days of admin in year one. The figures in this article are HMRC impact assessment averages in money terms. The two must not be blended into one number.
What is HMRC evaluating, and when?
HMRC will evaluate the impacts of MTD for Income Tax as it rolls out to income over £30,000 from April 2027 and over £20,000 from April 2028, under the Parliament record for question 29778, dated 14 September 2026. It is an evaluation as thresholds fall, not a delay or a policy change.
Disclaimer
This guide provides general information about the cost of joining Making Tax Digital as of October 2026. Tax rules and government announcements can change. Nothing in this article is tax advice. Always consult with a qualified tax professional about your specific circumstances. That’s what we’re here for. In accordance with our normal practice we give this reference in good faith and in confidence, without legal liability on the part of the author or the company. The author assumes no responsibility or liability for any errors or omissions in the content of this site
The information provided in this blog is for general guidance and educational purposes only and does not constitute financial, tax, accounting or legal advice. iFiler, registered in England under Company Registration Number 15996173, has prepared this content to offer general insights into financial and taxation matters. Although we make every effort to ensure the accuracy and relevance of the information at the time of publication, we give no guarantee regarding completeness, accuracy or suitability for your specific circumstances.
Readers should not act, or refrain from acting, based solely on the information contained in this content. Always get professional advice tailored to your personal or business situation before making any financial or tax-related decision. iFiler accepts no liability for any loss or damage arising from reliance on the information in this blog.
