A select committee told the government three years ago that it was making taxpayers buy software. In April it started, and 864,000 people found out what that meant

In November 2025 a Conservative backbencher, Mike Wood, put a written question to the Treasury. Why, he asked, could taxpayers not submit their Making Tax Digital reporting through the personal and business tax accounts HMRC already runs for them?

The answer came on 14 November from Dan Tomlinson, Exchequer Secretary to the Treasury. HMRC's personal and business tax accounts, he said, are not able to provide this level of functionality. Then the sentence that matters: the government is encouraging a thriving third-party software market to support the diverse range of business that will be using the scheme, delivering flexible and tailored ways for users to manage their tax affairs.

That commitment goes further than a market in the abstract. In its own guide for software developers, HMRC writes that the UK government is committed to ensuring the availability of free software products for small businesses with simple tax affairs that are mandated to use the scheme, and that it strongly encourages all providers to produce a free version. It then sets out what it expects of one: a reasonable level of guidance, help and support for users, and that it be free for a full annual accounting period. Expects, not requires. The government undertook to ensure something existed and discharged the undertaking by asking companies to supply it.

That is a policy, openly stated, and it has a consequence that arrived on 6 April this year. From that date, sole traders and landlords with qualifying income above 50,000 pounds have been legally required to keep digital records and file quarterly through a commercial product. HMRC puts that population above 864,000. It does not supply the product. It supplies a list.

None of this is a surprise to Parliament. In November 2023 the Public Accounts Committee reported on the programme and reached a conclusion that reads today like a forecast. HMRC, it said, has lost sight of its original aim to reduce the burden on taxpayers, and is increasing the burdens it imposes by asking Self Assessment taxpayers to pay for third party software and file quarterly.

The Committee asked HMRC what people in scope were supposed to do. The report records the department's answer: those who met the threshold would have to either, in HMRC's own phrase, grin and bear it and do it themselves, or pay someone else to do it for them, though it hoped the software available would make that easier than it otherwise would have been.

What it costs is known only in outline, and the outline is old. HMRC's figures put the average one-off cost of getting ready at around 330 pounds a head, rising to about 460 for those in the lower income band and, at the top of HMRC's own range, close to 1,000. The Committee noted that HMRC had not worked out how many people would face the highest of those costs, and could not say how it varied by income.

The Committee also worried about the market itself. More than 500 products were then listed for the VAT scheme, and it said in terms that attrition among providers could push prices up or quality down.

And there is a line at the top of that same developer guide, which HMRC updated on 7 August, the day of the first quarterly deadline. It says the department is no longer accepting production credential access requests for new 2026 to 2027 quarterly update products, because the market window for these products has now closed.

Read carefully, that withdraws nothing already on the list, and anyone can still move between products that are live. What it means is narrower and stranger. For the tax year now running, the market cannot take a new entrant. The competition that was the reason for not building a public tool is, for this year, shut to newcomers.

Which brings us to who is selling into this market now. On 25 February, Sage announced it had put an agentic AI assistant into Sage Sole Trader, its app for sole traders, which costs the user nothing. Sage's own words for what it does: it simplifies digital record keeping, quarterly updates and end-of-year submissions. That is the statutory obligation, met by a FTSE 100 company, at no charge at the point of use.

The obligation was created by Parliament. The relationship it created belongs to somebody else.