Could you be exempt from Making Tax Digital (MTD)? Know who qualifies and how to apply

The first phase for Making Tax Digital (MTD) for Income Tax is nearly upon us and you must know whether these rules apply to you.

The new system of digital tax reporting commences from 6 April 2026 and while HMRC has confirmed that self-employed individuals, landlords or sole traders could be exempt, the reality is that most people will not qualify.

However, if you do believe that you or someone you support may be exempt, you must act now and make an application in time.

Who must comply with MTD for Income Tax?

MTD for Income Tax applies to landlords, self-employed individuals and sole traders who receive a qualifying income from self-employment or property.

From 6 April 2026, individuals with a qualifying income of £50,000 or more based on their 2024/25 tax return will be required to comply.

Those affected will need to keep digital records and submit quarterly updates using MTD-compatible software.

The income thresholds will reduce to £30,000 in April 2027 and £20,000 in April 2028 and more people will be brought into MTD over the coming years.

Landlords, self-employed individuals and sole traders should assess their qualifying income before expenses to know if they are affected.

What are the automatic exemptions for MTD?

Some individuals are automatically exempt from MTD for Income Tax and do not need to apply.

These include:

• Trustees and personal representatives
• Individuals without a National Insurance number
• Non-resident companies
• Lloyd’s underwriters
• Ministers of religion
• Certain allowance recipients, such as a blind person’s allowance
• Foster carers with only foster income

These exemptions apply on a year-by-year basis and you must review your eligibility regularly.

If your circumstances do change, you may become subject to MTD from that point onward.

When can you apply for an exemption?

MTD compliance relies on digital record keeping and software and there are digital exclusions for when you are not reasonably able to meet these requirements.

This could be due to:

• Age, disability or medical condition that makes it impractical to use digital technology
• No reliable internet access at home, at your business premises or in any other accessible location
• Religious beliefs that prohibit the use of electronic devices or digital record keeping

Any application must be supported with clear evidence, as HMRC will test this strictly.

A preference for paper records, lack of confidence with technology, wanting to avoid software costs or having a small number of transactions will not qualify.

It is also important to note that using an accountant does not make you exempt. If your agent submits information digitally on your behalf using MTD-compliant software, HMRC will expect you to meet the MTD requirements. It is not the responsibility of your accountant to ensure you comply.

How to apply for an MTD exemption?

If you believe you or someone you know is exempt from MTD, you must make an application directly to HMRC either by phone or in writing.

You will need to provide personal details, your current filing method and a clear explanation with evidence of why MTD is not reasonably practical for you.

HMRC will aim to respond within 28 days, but you are expected to continue preparing for MTD while you await this decision.

If your application is refused, you must then comply with the MTD requirements. However, you do have the right to appeal this decision.

Why do you need to act now for MTD?

HMRC exemptions will only apply to a small minority of people and it will be unavoidable for most landlords, self-employed individuals and sole traders.

Time is running out and delayed action or rushed decisions can lead to costly mistakes, such as fines.

If you believe you or someone you support may qualify for an exemption, you must seek advice now.

We can help assess whether an exemption is appropriate and guide you through the application process with the right evidence.

If you find that you are not exempt, our team can help explain the MTD process and your requirements and advise on digital record-keeping and MTD software that works for you.

We can monitor changes in your income thresholds and exemption status as more people will be affected by MTD in the next few years.

Whether you are preparing for MTD or need to apply for an exemption now, our team can help you so that your business and finances stay compliant.

For more information or guidance, contact our team today.