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MTD Exemptions for Income Tax: Who Qualifies and What to Do Next
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) became mandatory for the first group of taxpayers from 6 April 2026. If your qualifying income from self-employment or property exceeded £50,000 in the 2024/25 tax year, HMRC expects you to be keeping digital records and submitting quarterly updates under the MTD qualifying income thresholds.
However, not everyone has to comply. HMRC has confirmed a structured set of MTD exemptions some granted automatically and others requiring a formal application allowing certain taxpayers to continue filing traditional Self Assessment tax returns instead.
Understanding the MTD exemption criteria is particularly important if you would otherwise be an MTD for Income Tax taxpayer but believe your circumstances make digital reporting unreasonable or place you within one of HMRC’s specified exemption categories.
What Are MTD Exemptions for Income Tax?
An MTD exemption means HMRC formally agrees that you do not need to follow the Making Tax Digital rules for Income Tax, including what is required from April 2026 under MTD for Income Tax such as digital records and quarterly submissions. If your exemption is granted, you can continue filing a standard Self Assessment tax return without using MTD-compatible software or submitting quarterly updates.
These Making Tax Digital exemptions are not a general opt-out from the system. HMRC has made it clear that most landlords, sole traders, and self-employed individuals will still need to comply. Exemptions apply only in limited situations where specific conditions are met.
These exemptions sit within the wider framework of Making Tax Digital for Self Assessment, which governs how landlords and sole traders transition from annual returns to ongoing digital reporting obligations
Broadly, there are three categories of exemption:
- Automatic exemptions
- Applied exemptions
- Temporary exemptions
Automatic MTD Exemptions No Application Needed
Some taxpayers are automatically exempt from Making Tax Digital and do not need to contact HMRC. If you fall into one of the categories below, you can continue filing your tax return in the normal way.
- Your qualifying income from self-employment or property is below the MTD threshold for that tax year
- You operate through a limited company, as MTD for Income Tax does not currently apply to companies
- You trade through a partnership or LLP, where no MTD start date has yet been confirmed
- You do not have a National Insurance number by 31 January before the relevant tax year begins
- You are acting solely as a trustee, executor, or personal representative
- You are a Lloyd’s underwriter in relation to underwriting income only
- You are a foster or kinship carer receiving qualifying care relief income only
- You lack physical or mental capacity and somebody is acting for you under a lasting power of attorney or court appointment
These MTD exemptions apply on a year-by-year basis. If your circumstances change later, you may become subject to MTD requirements in future tax years.
Temporary MTD Exemptions for 2026/27
HMRC has also introduced temporary exemptions for the first year of MTD implementation. These apply automatically for the 2026/27 tax year only where relevant information appeared on your 2024/25 Self Assessment return.
You are automatically exempt for 2026/27 if your previous return included any of the following:
- Averaging relief claims using the SA104 supplementary pages
- Trust or estate income reported through SA107 pages
- Non-residence information submitted using SA109 pages where this is expected to continue
- Income as a non-resident entertainer or sportsperson
If these situations applied to you but were not included in your 2024/25 return, you may need to apply directly to HMRC rather than rely on automatic exemption status.
These temporary exemptions end after the first year of rollout. From April 2027 onwards, most taxpayers above the revised income threshold will be expected to comply.
Applied MTD Exemptions You Must Contact HMRC
Some MTD exemptions are not automatic and require a formal application to HMRC. Applications can normally be made either by phone or in writing. Whether you qualify will depend on your individual circumstances and whether you satisfy the relevant MTD exemption criteria.
Digital Exclusion
You may qualify for exemption if it is genuinely not reasonably practicable for you to use digital systems for tax reporting.
HMRC may accept applications based on:
- Age-related difficulties
- Disability or medical conditions
- Lack of reliable internet access
- Religious beliefs preventing the use of digital devices
HMRC will not normally accept the following reasons on their own:
- Preferring paper records
- Limited confidence with technology
- Concerns about software costs
- Having only a small number of transactions
Using an accountant does not make you exempt. If your accountant submits information digitally through MTD-compatible software, HMRC considers you compliant rather than exempt.
Permanent Deferrals
HMRC has confirmed that some taxpayers will remain outside MTD requirements during the current Parliamentary term.
This may apply if your 2024/25 return showed that:
- You are a minister of religion
- You receive or transfer Married Couple’s Allowance
- You claim Blind Person’s Allowance
- You are a Lloyd’s underwriter with additional qualifying income
If these details were not included on your 2024/25 return, you may need to apply directly to HMRC for confirmation.
How to Apply for MTD Exemptions
If your exemption is not automatic, you must contact HMRC directly. Your accountant can also apply on your behalf once authorised.
Before applying, consider which MTD exemption criteria apply to your circumstances and what evidence can support your position. Being within the MTD income threshold does not prevent an exemption where HMRC accepts that the relevant exemption conditions are satisfied.
Your application should normally include:
- Your National Insurance number
- Your contact details
- Your current method of filing tax returns
- A clear explanation of why MTD is not reasonably practicable
- Supporting evidence where relevant
Supporting evidence could include:
- Medical documentation
- Evidence of poor internet access
- Written confirmation from a religious authority
HMRC generally aims to respond within 28 days, although complex applications may take longer if additional information is requested.
If you fall within the first MTD phase and your qualifying income exceeded £50,000, your exemption must normally be approved by 7 August 2026. Missing this deadline may result in you being required to comply for the current tax year.
With key MTD deadlines now active, understanding the full compliance timeline is essential. Read our guide on the MTD Income Tax deadline to see what needs to be actioned immediately and what the consequences are of missing each key date.
What Happens If HMRC Rejects Your MTD Exemption Application?
If HMRC refuses your exemption request, you have the right to appeal the decision. HMRC’s decision letter will explain the appeals process and relevant deadlines.
- If the decision letter is dated on or after 1 April, you generally have 30 days to appeal
- If the decision letter is dated before 1 April, the appeal deadline is normally 30 April
Importantly, if you are required to join MTD from 6 April 2026 and your appeal is still ongoing, you must usually begin complying with MTD requirements while waiting for the appeal outcome.
What If You Are Not Exempt From Making Tax Digital?
Most landlords and self-employed individuals above the income thresholds will not qualify for MTD exemptions and must comply with MTD for Income Tax.
This includes:
- Keeping digital records using HMRC-recognised software
- Submitting quarterly updates to HMRC
- Completing an end-of-year final declaration
The first quarterly submission deadline for affected taxpayers in 2026/27 is 7 August 2026. Businesses that have not yet moved to digital record keeping should act quickly to avoid compliance issues.
Most taxpayers affected by MTD will not qualify for exemption and will therefore need to prepare for full digital compliance. This includes ensuring accounting software is in place, maintaining accurate digital records, and understanding quarterly submission processes before deadlines become enforceable. Assessing whether you are ready for Making Tax Digital for Income Tax can help identify gaps early and reduce compliance risk.
Understanding whether you qualify for an exemption is now an important part of preparing for Making Tax Digital for Income Tax. For a full overview of how the system works and what has changed for 2025/26, see our MTD for Income Tax 2025/26 complete UK guide. While MTD became mandatory for the first group of taxpayers from April 2026, HMRC has confirmed that some landlords, sole traders, and self-employed individuals may remain outside the system either automatically or through a successful exemption application. Knowing whether you fall within these categories is essential before quarterly reporting obligations begin.
Case Study: Assessing Whether a Sole Trader Qualified for an MTD Exemption
Peter approached our Fulham Broadway office after becoming subject to Making Tax Digital for Income Tax from 6 April 2026. His qualifying self-employment income exceeded £50,000, but he had always maintained paper bookkeeping records and had limited experience using accounting software. He believed this meant he would automatically qualify for an MTD exemption.
Cigma Accounting reviewed Peter’s circumstances against the relevant MTD exemption criteria. We explained that simply preferring paper records or lacking confidence with accounting software would not normally be sufficient on its own. An application based on digital exclusion needed to demonstrate why it was not reasonably practicable for him to comply with MTD.
We therefore considered the practical circumstances affecting Peter’s ability to use digital systems and the evidence that could support an application. We also explained the distinction between being automatically outside MTD, receiving a specific automatic exemption and needing to formally apply to HMRC.
Because Peter was already within the first mandatory MTD phase, timing was important. We helped him understand what information would need to accompany an exemption request and what his compliance responsibilities could be if HMRC rejected the application.
Our wider support covered Self Assessment, MTD bookkeeping, personal tax and sole-trader accounting. We also considered how compatible accounting software and professional bookkeeping support could enable Peter to meet MTD requirements if an exemption was unavailable, rather than leaving him without an alternative compliance plan.
Peter was left with a clearer understanding of whether his circumstances could support an exemption and what steps he would need to take if HMRC required him to remain within Making Tax Digital.
FIND OUT WHETHER YOU ACTUALLY QUALIFY FOR AN MTD EXEMPTION
Believe Making Tax Digital may not be reasonably practicable for you? Cigma Accounting can review your circumstances against the relevant exemption criteria and help you understand your application or compliance options.
Expert accountants in London providing practical tax advice for businesses and individuals.
MTD Exemption and HMRC Support in London With Cigma Accounting
Understanding MTD exemptions is important for taxpayers who may have genuine reasons why complying with Making Tax Digital for Income Tax is not reasonable or practical. Exemption is not automatic simply because digital reporting is difficult, so individual circumstances and HMRC requirements need careful consideration. Cigma Accounting supports taxpayers across Wimbledon, including Raynes Park and Wimbledon Park, helping them understand whether an exemption may apply and what information may be needed to support their position.
The Making Tax Digital exemptions can apply in specific circumstances, including where a taxpayer is considered digitally excluded. We help clients understand the relevant MTD exemption criteria, assess whether they may be exempt from Making Tax Digital, and clarify the responsibilities of an MTD for Income Tax taxpayer while an exemption is being considered. Through our offices across London, Cigma Accounting provides practical guidance on HMRC requirements, helping taxpayers establish the correct compliance position and avoid unnecessary reporting mistakes.
MTD Exemptions FAQs: Eligibility, Digital Exclusion and HMRC Applications
Who is exempt from Making Tax Digital for Income Tax?
There are several MTD exemptions, including automatic exemptions and exemptions that require an application to HMRC. Examples include certain taxpayers with qualifying income below the applicable threshold, partnerships, people without a National Insurance number in specified circumstances, certain role-based cases and people HMRC accepts as digitally excluded. Some exemptions are permanent unless circumstances change, while others are temporary.
What are the MTD exemption criteria for digital exclusion?
You may meet the MTD exemption criteria if it is not reasonable for you to use compatible software to keep digital records, submit quarterly updates and complete your tax return digitally. HMRC can consider factors such as age, disability or health conditions, religious beliefs that prevent the use of electronic communications, and inability to obtain suitable internet access because of location.
Are partnerships exempt from Making Tax Digital for Income Tax?
Yes, currently. Partnerships do not presently have to use MTD for Income Tax. HMRC states that it will set out the timetable for partnerships to join the system in the future. An individual partner may still need to consider MTD separately if they have their own qualifying self-employment or property income.
Do I need to apply for an MTD exemption?
It depends on the exemption. Some Making Tax Digital exemptions are automatic because HMRC can identify eligibility from information it already holds. Digital exclusion normally requires an application. Other temporary exemptions may also require an application where HMRC cannot establish eligibility from an earlier tax return.
Can my accountant use MTD software for me instead of applying for an exemption?
Yes, potentially. HMRC specifically notes that where an agent can use compatible software to maintain digital records and make the necessary submissions on your behalf, they may be able to meet the MTD requirements for you. This can mean that a digital-exclusion application is unnecessary in some circumstances.
Do I still have to submit a Self Assessment return if I am exempt from MTD?
Yes. Being exempt from Making Tax Digital does not remove the underlying Self Assessment obligation. HMRC confirms that exempt taxpayers must continue reporting their relevant income and gains through Self Assessment as normal. The exemption removes the MTD digital-record and quarterly-update requirements rather than the requirement to report taxable income.
Find Out Whether You Qualify for an MTD Exemption
Some taxpayers may qualify for exemption from Making Tax Digital where HMRC’s relevant conditions are satisfied. Cigma Accounting helps individuals understand MTD exemption criteria, assess their circumstances and clarify their reporting position, providing practical guidance to avoid incorrect assumptions and maintain HMRC compliance.
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