Making Tax Digital for Income Tax (MTD for IT) Exemptions

Making Tax Digital (MTD) is an initiative set up by the UK government that requires  landlords and sole traders with qualifying income above a threshold to follow a digitised process. This involves keeping digital records and submitting updates to HMRC using compatible software. Not all individuals are obligated to follow MTD rules, though; some may be exempt.

Want to know who is exempt from Making Tax Digital and whether you need to follow the rules for your business? Continue reading this guide to learn all about MTD exemptions, to help you stay compliant.

MTD exemptions – In summary

• MTD isn’t mandatory for everyone. Certain self-employed individuals and landlords may qualify for an exemption.

• Most MTD exemptions are not automatic. You need to contact HMRC directly to request exclusion.

• Exemption from MTD does not remove income tax obligations. You must continue to keep accurate records and submit income tax returns.

What is a Making Tax Digital exemption?

A Making Tax Digital exemption is when HMRC allows a landlord or self-employed individual to be exempt from MTD rules or regulations. Getting an MTD exemption means you don’t need to follow mandated processes like digital record-keeping and submitting quarterly updates via MTD-compatible software, and can instead stick with your existing process.

Who is exempt from Making Tax Digital for Income Tax?

There are several reasons why a landlord or sole trader may be exempt from Making Tax Digital for Income Tax (MTD for IT). For example, you could be exempt due to:

• digital restrictions or limitations

• religious practices

• other protected characteristics

It’s worth noting that you aren’t automatically ruled as exempt from MTD — regardless of the reason for your exemption, you must apply for one.

HMRC grants MTD exemptions under specific circumstances, and the criteria for exemptions differ between MTD for VAT and MTD for Income Tax, so always check the corresponding rules for the relevant tax type.

Threshold exemptions

If your qualifying income falls below certain thresholds, you may be exempt from Making Tax Digital for Income Tax for that period. Your requirement to follow MTD rules relies on your qualifying income within the tax year. 

Here are the MTD for IT thresholds and timeframes:

• From 6 April 2026: yearly qualifying income over £50,000 in the tax year 2024/25

• From 6 April 2027: yearly qualifying income over £30,000 in the tax year 2025/26

• From 6 April 2028: yearly qualifying income over £20,000 in the tax year 2026/27

If your qualifying income is below these thresholds, you may not need to follow MTD rules and can continue with your existing annual income tax return process.

Learn more about MTD thresholds.

Digital exemptions

A business or individual might have a digital exclusion from Making Tax Digital if HMRC recognises that it isn’t possible for you to use MTD compatible software to handle your Income tax or VAT returns.

Digital exemptions can be granted for the following reasons:

• Religious beliefs that prevent you from using electronic communications or digital record-keeping.

• You have a physical or mental condition that means you’re unable to use digital tools.

• You live in a remote location without reliable internet or mobile access.

• Your age or digital literacy makes it unreasonable for you to maintain digital records, even with help.

Income type exemptions

Not all types of income are included in your Making Tax Digital quarterly updates. Only self-employed income and landlord income are used to calculate your qualifying income amount and need to be reported quarterly.

If you are a taxpayer and follow Making Tax Digital for Income Tax rules, you need to submit all your income types through MTD for IT software, once at the end of the tax yaer.

The following income types are included in your end of year MTD for IT submission:

• Capital gains

• Dividends

• Pensions

• Savings and interest 

• Investments

Business type exemptions

Not all businesses are required to follow the rules of Making Tax Digital for Income Tax. The scheme is being introduced in phases — currently, only sole traders and landlords are required to comply.

The following business types are generally exempt from MTD for Income Tax requirements:

• Partnerships – MTD for IT does not apply to partnerships currently, but this may change in the future. Read more about MTD for Partnerships.

• Corporations – These fall under Corporation Tax rules rather than Income Tax.  As of July 2025, MTD for Corporation Tax has been scrapped.

Learn about MTD for Corporation Tax.

How to apply for an exemption to Making Tax Digital for Income Tax

If you think you qualify for a digital exemption from Making Tax Digital for Income Tax, you’ll need to apply directly to HMRC, as most exemptions are not automatically granted.

To get an MTD exemption, you typically need to follow these steps:

• Contacting HMRC – Call or write to HMRC to let them know you want to apply for a digital exemption. You can find HMRC’s contact details on Self-Assessment: general enquiries.

• Provide supporting evidence – You’ll need to provide supporting documents or evidence to justify your MTD exemption. Examples include: 

• Medical evidence for a disability that makes using digital tools difficult. 

• Details about the lack of reliable internet access for remote locations. 

• Statements explaining religious beliefs that prevent the use of digital technology. 

• Case-by-case review – HMRC assesses each application individually, considering the evidence provided and your personal or business circumstances. 

• Confirmation from HMRC – If you’re granted an MTD exemption, HMRC will confirm how you should continue to submit your tax information to ensure you remain compliant.

It might help to recommend applying for an exemption as early as possible. This way, HMRC will be fully aware of your circumstances, and you can continue with your tax reporting without disruption.

What happens if you’re exempt from Making Tax Digital for IT?

Once you’ve been given an official exemption from Making Tax Digital, you can continue to submit your income tax returns using your existing methods instead of MTD compatible software – whether this be via paper returns or the previous online system. Here’s how it works:

• Individuals and businesses exempt from MTD for VAT can continue to send their VAT returns using their existing methods

• Individuals exempt from MTD for IT will continue to send their annual Self-Assessment tax return using the current system.

Note that even if you are exempt from following MTD rules, it is still essential that you keep accurate records of your income and expenses – this is a legal requirement.

Can I opt out of MTD for Income Tax?

Once you’re mandated to follow the rules of MTD, you cannot opt out unless you receive an official exemption or your circumstances change. For example, if your qualifying income for MTD for ITSA falls below the threshold for three consecutive tax years, you may be able to opt out by contacting HMRC to request removal from the scheme.

You’ll need to contact HMRC directly and provide evidence to show that your income has fallen below the threshold or explain your changed circumstances.

Learn more about opting out of Making Tax Digital.

MTD for VAT exemptions

Most VAT-registered businesses are required to comply with Making Tax Digital for VAT rules, regardless of their taxable turnover. However, there are a few specific exemptions for businesses or individuals who cannot meet HMRC’s MTD requirements.

These include:

• Insolvency: Businesses undergoing insolvency procedures are usually exempt.

• Religious objections: Individuals or businesses whose religious beliefs prevent them from using computers or the internet may apply for an exemption.

• Impracticality: This covers situations where it's not reasonably practicable for someone to use digital tools to keep records or send information to HMRC. Reasons might include:

  • Age: Being of an advanced age.

  • Disability: Having a disability that makes it difficult to use digital technology.

  • Remoteness: Living in a remote area with no internet access.

• Existing exemptions: Businesses already exempt from submitting electronic VAT returns may continue to be exempt from MTD for VAT.

Making Tax Digital exemptions FAQs

Can I still sign up for Making Tax Digital for Income Tax if I’m exempt?

Yes, you can voluntarily sign up for Making Tax Digital (MTD) for Income Tax even if you’re exempt. Exempt individuals and businesses are not required to use MTD-compliant software and can continue using traditional Self-Assessment methods – in this case, the choice to follow MTD rules is yours. In fact, it can be an effective way to streamline record-keeping, stay organised, and prepare for digital tax requirements in the future.

What records do I need to keep if I'm exempt from MTD?

If you’re exempt from Making Tax Digital (MTD) for Income Tax, you’re still legally required to continue keeping detailed records and submit an annual Self-Assessment tax return as normal. Although you’re not obligated to use MTD-compatible software, you must maintain sufficient, accurate records of your income to prepare your tax returns.

How do I know if I qualify for an MTD exemption?

To know if you qualify for an MTD exemption, you should check the government’s criteria for MTD for VAT and MTD for Income Tax. You can also contact HMRC directly for further guidance.

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