MTD Exemption Explained | Making Tax Digital ITSA Rules

MTD Exemption: Who Is Exempt from Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) represents a major shift in how self-employed individuals and landlords report income to HMRC.

While many taxpayers will be required to comply, HMRC recognises that some individuals are unable to operate digitally. In these cases, an MTD exemption may apply.

From 6 April 2026, MTD for ITSA becomes mandatory for those with qualifying income of £50,000 or more, with further expansion planned.

Understanding whether you qualify for an MTD exemption is essential to avoid unnecessary compliance burdens or penalties.

What Is Making Tax Digital for Income Tax?

MTD for ITSA requires affected taxpayers to:

  • Keep digital accounting records

  • Submit quarterly updates to HMRC

  • File an end-of-period statement

  • Submit a final declaration each year

  • Use HMRC-approved MTD software

These requirements apply to self-employed traders and landlords whose combined gross trading and property income exceeds the relevant threshold and who are not covered by an MTD exemption.

“MTD exemption infographic showing who is exempt from Making Tax Digital for ITSA, including automatic exemptions, digital exclusion reasons, how to apply to HMRC, and key 2026 deadlines.”

MTD Exemption: Who Must Comply from 2026 Onwards?

Under the latest confirmed rules:

  • From 6 April 2026: MTD applies if qualifying income in 2024/25 is £50,000 or more

  • From 6 April 2027: Threshold reduces to £30,000

  • HMRC has confirmed no MTD for ITSA mandation during 2025/26, which remains a transition year

Anyone below the threshold or qualifying for an exemption will remain within Self Assessment for now.

Meaning of “Digitally Excluded” for MTD Exemption Purposes

HMRC accepts that some individuals cannot comply with digital reporting. You may qualify for an exemption if you are considered digitally excluded due to:

  • Age, disability, or health conditions that prevent digital record-keeping

  • Religious beliefs incompatible with digital technology, with no personal or business use of digital devices

  • Lack of internet access at your home or business location, with no reasonable alternative

Each application for an MTD exemption is considered on its own facts and circumstances.

Reasons That Do NOT Qualify for an MTD Exemption

HMRC will not grant an MTD exemption solely because:

  • You previously filed paper tax returns

  • You are unfamiliar with accounting software

  • You have few transactions

  • MTD will cost more or take additional time

These reasons are explicitly rejected under HMRC guidance and will not support an MTD exemption claim.

Existing MTD for VAT Exemption and MTD Exemption for ITSA

If you already hold an MTD exemption for VAT due to digital exclusion, HMRC will normally accept that this also applies to MTD for ITSA, provided:

  • Your circumstances have not changed

  • You formally notify HMRC in writing

This avoids the need for reassessment but does not remove the requirement to apply.

How to Apply for an MTD Exemption

To apply for an MTD exemption, you (or your agent) must write to HMRC before your MTD start date, including:

  • National Insurance number

  • Full name and address

  • How your tax returns are currently submitted

  • Details supporting digital exclusion

  • Information about any accountant or agent

  • Any additional needs or reasonable adjustments

Applications should be sent to:

 
Self Assessment, HM Revenue and Customs, BX9 1AS

An agent may apply on your behalf where appropriate.

MTD Exemption Where You Have an Agent

HMRC will not grant an MTD exemption if:

  • You personally cannot use digital systems but

  • An agent or third party can maintain digital records and submit returns for you

In such cases, HMRC expects MTD compliance through that representative.

Automatic MTD Exemption Categories

Some individuals are automatically exempt from MTD for ITSA and cannot opt in voluntarily, including:

  • Trustees (including charitable trusts and non-registered pension schemes)

  • Individuals without a National Insurance number by 31 January before the tax year

  • Personal representatives of deceased individuals

  • Lloyd’s underwriters (for underwriting income)

  • Non-resident companies

No application is required for these automatic MTD exemption categories.

How Trueman Brown Can Help

Navigating MTD rules and determining whether an exemption applies can be complex.

Trueman Brown supports self-employed individuals and landlords by:

  • Reviewing eligibility for an exemption

  • Preparing and submitting exemption applications to HMRC

  • Advising on MTD readiness where exemption does not apply

  • Acting as your agent for MTD compliance where required

To speak to an adviser:

📧 Email: mark@truemanbrown.co.uk
📞 Phone: 01708 397262

Early advice ensures you remain compliant while avoiding unnecessary stress or cost.

FAQs

What is an MTD exemption?
An exemption allows eligible taxpayers to remain outside Making Tax Digital due to digital exclusion or automatic exemption status.

Do I need to apply for an MTD exemption?
Yes, unless you fall into an automatic exemption category. Digital exclusion exemptions must be applied for in writing.

Is MTD mandatory in 2025/26?
No. MTD for ITSA becomes mandatory from 6 April 2026 for those meeting the income threshold.

Can my accountant handle MTD instead of me?
Yes, but if an agent can submit digital records on your behalf, HMRC will not grant an MTD exemption.

What happens if I do nothing?
Failure to comply without an approved exemption may lead to penalties once MTD for ITSA applies.

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