Stop The Software Tax: Why HMRC Must Provide Free MTD Software
The way you file your taxes is changing. And if we don’t act now, it is going to cost you money.
For years, the deal has been simple for many. You earn money, owe tax, log onto the government website, file your return for free, and pay what you owe.
But from April 2026, HM Revenue & Customs (HMRC) is breaking that deal.
They are turning off the free online tax return portal for millions of self-employed people and landlords. They are replacing it with Making Tax Digital for Income Tax (MTD ITSA).
At I Hate Numbers, we are fans of digital accounting. We know that for many businesses, moving to the cloud saves time and boosts profits. But we draw the line at the government mandating a digital system without providing the basic tools to use it.
We are launching the Stop The Software Tax campaign. Our message is simple: If the government mandates it, they must provide it.
The Big Change: Who Must Join and When?
Many people still believe MTD is just a rumour. It is not. It is law, and the deadlines are set in stone.
Making Tax Digital for Income Tax is mandatory. You cannot opt out. If you fall into the income brackets below, the current free Self Assessment portal will effectively be switched off for you.
The Timeline
From 6 April 2026: You are mandated to join if you are a sole trader or landlord with a qualifying income over £50,000.
From 6 April 2027: The threshold drops to include those with income between £30,000 and £50,000.
The Future: The government has already set out plans to lower the threshold further to £20,000 thereafter.
This is not just for big businesses. This captures the local plumber, the freelance graphic designer, and the landlord with a single rental property.
Under these new rules, an annual tax return is no longer enough. You will be required to keep digital records and send quarterly updates to HMRC. That means four submissions a year, plus an End of Period Statement, plus a Final Declaration.
And here is the kicker: HMRC will not provide the software to do it.
The “Software Tax”: A Core Unfairness
Currently, HMRC provides a free, secure, and functional online portal for Self Assessment. It is a public service funded by the taxpayer.
Under MTD, HMRC is refusing to build a replacement portal. Instead, their official stance is that taxpayers must use “recognised third-party software.”
This decision effectively privatises the mechanism of tax collection. It forces you to enter a commercial marketplace to fulfill a statutory legal obligation.
This is what we call the “Software Tax.”
For a small business owner already battling inflation and rising operating costs, this is an unnecessary burden. You are already paying tax on your income. You should not have to pay a private company a monthly subscription fee for the privilege of paying that tax.
Debunking the Myths: “But Isn’t There Free Software?”
HMRC defends this decision by claiming that the “market” will provide free software. They point to a list of software vendors.
We have audited the reality of this “free” software market. The reality is very different from the promise. That’s why we think Stop The Software Tax is a fitting campaign name,.
The Trap of “Freemium”
Commercial software companies have a legal duty to their shareholders to make a profit. They are not charities. When they offer a “free” product, it is usually a marketing hook designed to convert you into a paying customer.
We found that most free options come with significant strings attached:
Transaction Limits: You might get 10 invoices for free. Raise an 11th invoice? You need to upgrade to the “Pro” plan for £15 a month.
Property Caps: Many tools for landlords are free only if you have one single property. If you buy a second buy-to-let? You pay.
Time Limits: Some software is free only during the pilot phase. Once the law kicks in for real in 2026, the price tag appears.
The Bank Account Switch
You may hear that some banks offer free software. This is true—for example, Mettle or NatWest offer access to FreeAgent.
But this comes with a catch: You must bank with them.
If you are happy with your current business bank account—perhaps you use Starling, Monzo, or HSBC—you are out of luck. You must either undergo the administrative headache of switching banks or pay for the software.
Access to a free tax system should not be conditional on which bank you choose.
The Business Case: Why HMRC Should Build It
We are not just complaining. We are presenting a strong business case to the Treasury.
There are three clear reasons why a state-provided tool makes sense for the UK economy.
1. Closing the £46.8bn Tax Gap
One of the primary reasons the government introduced MTD is to close the “Tax Gap”—the difference between the tax that should be paid and what is actually paid.
HMRC’s latest estimate puts the Tax Gap at £46.8 billion (2023–24). A significant portion of this is attributed to “error” and “carelessness” by small businesses.
If the government stands to recover billions of pounds by reducing errors, the government should invest in the tool to prevent those errors.
By providing a clean, simple, standardized government app, HMRC would ensure data is entered correctly. It is a small investment for a massive return. Passing the cost to the taxpayer creates friction and resentment, which leads to lower compliance.
2. The Universal Credit Precedent
The government knows how to do this.
When the Department for Work and Pensions (DWP) introduced Universal Credit, they moved the entire welfare system online. They built a “Digital by Default” service.
Crucially, they built the portal themselves. They did not tell 22 million benefit claimants: “Go and buy third-party software to apply for your money.”
They also provided “Assisted Digital Support” for those who struggle with computers.
If a free digital interface can be built for Universal Credit, it can be built for Income Tax. The precedent exists. The technology exists. Only the political will is missing.
3. Broken Promises from 2016
In the original 2016–17 consultations, HMRC and the government faced heavy scrutiny from Parliament.
Back then, assurances were made. The Treasury Committee highlighted the absolute need for adequate, free software. HMRC stated that free software would be available for the majority of the smallest businesses.
The current situation—where “free” means “limited and conditional”—breaks the spirit of those promises.
Our Demands: A Simple, Public Option
We are not asking for HMRC to build a competitor to Xero or QuickBooks, we love them and use them. There is no need for AI forecasting or complex payroll features in a free tool.
We are demanding a Basic Compliance Tool.
Call out to the Treasury to release a free, state-owned software utility that allows any mandated taxpayer to:
- Keep Digital Records: A simple ledger for income and expenses.
- File Quarterly Updates: The ability to push that data to HMRC four times a year.
- Finalise the Year: A mechanism to submit the End of Period Statement and Final Declaration.
- Bridge the Gap: A free “Bridging Tool” that allows those who love spreadsheets to upload their CSV files directly to HMRC.
Spreadsheets work. They are digital. They are valid. For a landlord with one property, a spreadsheet is often the best tool for the job. HMRC must provide the bridge to let us use them without a toll fee.
Join the Fight: How You Can Help
We are taking this fight to the Treasury, but we need numbers.
This is not about abandoning digital progress. It is about fairness. It is about ensuring that tax compliance remains free at the point of use.
Step 1: Sign the Petition
Add your name to the thousands of sole traders and landlords demanding a free option.
Step 2: Write to your MP
We have created a template letter you can edit, adapt and send to your local MP. It explains the issue clearly and asks them to raise a question in Parliament. We have also made available their contact details
Step 3: Spread the Word
If you have self-employed friends, warn them about what is coming in 2026. get them to Sign the petition
Let’s keep tax fair.
Final Word
We love digital accounting, but we hate unfair barriers to business.
Stop The Software Tax is more than just a slogan, it represents fairness and equity
Sign and encourage others to sign the Stop The Software Tax petition
If you want to help us further with the campaign then contact us at clients@ihatenumbers.co.uk or book a free 15 minute chat with us https://www.ihatenumbers.co.uk/contact-us/
Plan it, Do it, & PROFIT!