Nearly all — 97 per cent — of the 11.58mn taxpayers who filed their self-assessment returns by the January 31 deadline did so online.
They filed in several ways. Some 5.2mn returns were submitted directly on the HMRC website or app and 6mn via commercial software. Meanwhile, 4.6mn people filed their returns themselves while 6.6mn used an agent, such as an accountant.
The migration to commercial software will soon accelerate. From April 2026, when so-called Making Tax Digital rules come into effect, 1.75mn business owners and buy-to-let landlords will have to use commercial software to file quarterly income reports to the tax authority.
When will taxpayers need to use software or an agent to file their return? FT Money explores the technology and the rule changes.
Should everyone use commercial software or an agent?
Millions of people’s returns are simple enough for HMRC’s platforms to be a perfectly adequate means of filing. These include people drawn into self-assessment through inflation and the frozen personal allowance.
“I think HMRC has put in a large amount of work to improve the self-assessment filing website and allow the public to file their tax returns there digitally,” said Caroline Miskin, a senior digital taxation manager at the Institute of Chartered Accountants in England and Wales.
Some people, such as non-residents or those who earn income from trusts or partnerships, cannot use the HMRC platforms, while bankrupts and those filing on behalf of estates are among those who have to file by paper.
What is the advantage of using software?
Experts say tax can become complex pretty quickly. “There’s so much that goes on in the tax system, software can guide you and nudge you to say ‘have you considered this or that’,” said Stuart Miller, who sits on the Chartered Institute of Taxation’s digitalisation and agent services committee.
However, he added that it is not a “silver bullet”. “You have to make sure your data is correct”.
Miller advocates using software and the “little-and-often” approach to staying on top of one’s tax affairs. “Don’t wait till the kitchen looks like a bomb site to clean it,” he said. “Wipe it down as you go along. It’s more convenient and less convoluted.”
When should one employ an accountant?
Everyone’s affairs are different but Emma Rawson, technical officer at the Association of Taxation Technicians, said: “If you’re getting beyond a simple business that’s the time to start thinking about getting professional advice. Software won’t make all the decisions, such as can I get an allowance or is this item deductible.”
Anish Mehta, managing partner at Apari, one of HMRC’s 39 approved commercial software providers, added that the “best combination is using software for the data and an accountant for the advice”.
“For example, if my buy-to-let mortgage is up for renewal, should I use my capital to pay down the loan or contribute more to my pension?” he said.
How will Making Tax Digital change the landscape?
From April 2026 an estimated 780,000 people with combined gross income of more than £50,000 from businesses and property will have to file quarterly financial reports to HMRC via commercial software. The following year this will be extended to a further 970,000 earning more than £30,000.
Self-assessment taxpayers hoping to start using the software will have to wait until HMRC reopens its testing programme, which it hopes to do in the next year.
The software ranges from basic programs for someone doing a single, relatively simple, return to much more complex offerings tailored to different needs, such as accountants or businesses with employees. Some include bookkeeping and other add-ons so they can be integrated with bank accounts, day-to-day financial management and preparing a tax return.
Prices range from nothing for basic services to more than £150 a year.
MTD has brought “a lot of new investment in the software industry”, Mehta said, citing changes at Apari. “We’ve built a product for the forgotten majority, like sole traders, landlords, employees and construction workers.”
Miller said people should “talk to your peers and friends, and use resources like LinkedIn and professional bodies” to make the best choice.
How does this benefit HMRC?
The tax authority estimates that in the 2021-22 tax year the “tax gap” — the amount that revenue was below expectation — was £35.8bn. Of this, £16.1bn was the result of taxpayer error and failure to take reasonable care.
HMRC said that MTD “aims to tackle parts of the tax gap that arise from taxpayer error and failure to take reasonable care”, adding it will “make it easier for individuals and businesses to get their tax right”.
It estimates the initiative will generate an additional £1.4bn by the end of the 2028-29 tax year. MTD for VAT-registered businesses, which was introduced in 2019, should deliver additional revenue of more than £3.5bn by the end of 2028-29.
Miskin said that “while mistakes could go both ways, the use of software should improve the statistics and reduce mistakes”.
