Am I excluded or digitally exempt from MTD for Income Tax?

Making Tax Digital (MTD) for Income Tax is being introduced in April 2026.

HMRC is again allowing limited exemptions, as it did with MTD for VAT seven years earlier. Some people are excluded automatically, while others can apply if they meet the required criteria. Such conditions are known as digital exclusion.

This FAQ breaks down who needs to adopt the new rules, who’s exempt, and how to apply for an exemption.

Here’s what we discuss:

Who has to follow the MTD for Income Tax rules?

MTD for Income Tax applies to individuals who currently file a Self Assessment tax return, such as sole traders and landlords.

It’s being phased in based on gross annual self-employment and property income, as follows:

• From 6 April 2026 for individuals with income over £50,000 for the 2024/2025 year.
• From 6 April 2027 for individuals with income over £30,000 for the 2025/2026 year.
• From 6 April 2028 the government has set out plans to introduce MTD for individuals with income over £20,000.

So, if your total qualifying income (from self employment and property) is above these thresholds, you’ll need to register before the relevant start date. HMRC will have written to you, or emailed, to inform you of this.

Can I opt out of MTD for Income Tax?

MTD for Income Tax is mandatory if you meet the criteria listed above, and HMRC says you must sign-up and follow the rules.

You must then sign-up to MTD, and use MTD-ready software.

The exceptions are if you meet one of the exclusion criteria set out by HMRC, as we discuss below. If these apply to you, you will continue to use Self Assessment.

Who is automatically exempt from MTD for Income Tax?

You’re automatically exempt if you:

• Have qualifying income below the threshold for a given year, or below £20,000
• File returns only as a trustee (including charitable trustees and some pension trustees)
• Have income only from foster care
• Do not have a National Insurance number for the relevant tax year (as at 31 January before the tax year)
• Act as a personal representative for someone who has died
• Are a Lloyd’s underwriter

How do I apply to opt out of MTD for Income Tax if I’m one of those exempted?

If you fall into one of the categories listed above, you should not be required to sign up to MTD. If HMRC contacts you saying you must join, contact them, or speak to your adviser, so they can correct your status.

What is digital exclusion under MTD for Income Tax?

According to HMRC, “digital exclusion” means it is not reasonable or practical for you to use MTD-compatible software.

You will need to apply for this exemption.

There are two main groups:

1. Religious exemption: If you’re a practising member of a religious society whose beliefs prevent you from using electronic communications or digital record-keeping.
2. Practical difficulty, as follows:
   • You have a physical or mental condition that makes digital tools difficult or impossible to use.
   • You live in a remote location with no reliable internet or mobile access.
   • Your age or digital literacy makes it genuinely unreasonable for you to maintain digital records, even with help.

How do I apply for digital exclusion from MTD for Income Tax?

You can apply by calling or writing to HMRC Self Assessment: General Enquiries.

If writing, include the title: “Making Tax Digital for Income Tax digitally excluded application”

In your application, include:

• Your name, address, and National Insurance number
• Details of how you currently complete your Self Assessment
• Whether you use an accountant or agent (and what they do)
• An explanation of why you believe you’re digitally excluded
• Any supporting evidence (e.g. medical letter, proof of no internet access)

Can someone else apply on my behalf for an exemption from MTD for Income Tax?

Your accountant, or a trusted friend or family member can apply for an exemption on your behalf.

You’ll need to authorise them first by contacting HMRC in writing or over the phone.

When should I apply for digital exclusion from MTD for Income Tax?

It’s advisable to apply well before MTD applies to you:

• For 2026: apply now to ensure HMRC processes your request in time.
• For 2027: apply from summer 2026.
• For 2028: apply from summer 2027.

HMRC aims to respond within 28 days, though it may take longer if information is missing from your application.

Bear in mind that, as each April approaches, HMRC’s phone lines will be increasingly busy not only with people calling about MTD, but also those needing help with ongoing Self Assessment completions.

What evidence will HMRC need to grant an exemption from MTD for Income Tax?

HMRC will expect a clear, reasonable explanation supported by evidence where possible, such as:

• A doctor’s note confirming a medical condition.
• A letter from a broadband provider or local authority confirming no network service in your area.
• A description of your religious beliefs and how they prevent digital record-keeping.

Do I need to keep digital records if I’m exempt from MTD for Income Tax?

If HMRC grants you an exemption, you’ll continue using the normal Self Assessment process, filing an annual tax return in the usual way.

Therefore, the requirement to keep digital records will not apply and you can continue to keep records of any kind provided they meet HMRC’s requirements.

This isn’t to say that doing so is a good idea, however: digital record via accounting software keeping provides significant advantages, from automation and AI assistants, to simply having a better understanding of your cash flow position.

What happens if my application to be exempted from MTD for Income Tax is rejected?

If HMRC rejects your request, you (or those making the application on your behalf) have 30 days to send a written appeal.

The refusal letter you receive from HMRC will provide specific details including the address to send your appeal to.

You or those applying on your behalf should include your reasons and any new evidence that supports your case.

The letter is the start of an appeal, just like any other with HMRC, potentially moving onto an HMRC internal review and ultimately a tribunal if no mutually acceptable decision is reached.

I have a disability but HMRC says I’m not exempt from MTD for Income Tax. What next?

If HMRC doesn’t grant you an exemption, you may still be able to manage MTD using accessible accounting software.

Look for tools with:

• WCAG 2.1 or 2.2 AA compliance
• Strong screen reader compatibility (e.g. JAWS, NVDA, VoiceOver)
• Keyboard navigation and adjustable contrast, font, and colour settings

You might also qualify for funding through the Access to Work scheme to help cover assistive software or technology costs.

Are seasonal businesses exempt from MTD for Income Tax?

Seasonal or part-time businesses are not excluded if they meet the MTD criteria and HMRC says they must use MTD.

For example, a business that operates only during the Summer may have little or no income for the rest of the year. But MTD for Income Tax is determined based on the total gross qualifying income earned over the entire tax year.

Once your income falls below the threshold for three consecutive tax years, you can apply to HMRC to exit the MTD system. This time period delay is designed to avoid businesses with inconsistent income from constantly going in and out of the system.

If I’m excluded from MTD for VAT, am I automatically excluded from MTD for Income Tax?

If you’re digitally excluded from MTD for VAT because of digital exclusion and your circumstances haven’t changed, you should contact HMRC by phone or in writing to confirm the same exclusion for MTD for Income Tax.

If your VAT exemption was due to insolvency, however, this doesn’t extend to Income Tax.

I usually file paper returns for Self Assessment. Does that mean I’m exempt from MTD for Income Tax?

Filing paper returns in the past doesn’t automatically make you exempt.

HMRC won’t grant an exemption from MTD for Income Tax just because you prefer paper.

Does HMRC accept temporary illness as a reason for exemption from MTD for Income Tax?

If a temporary health condition (e.g. recovering from surgery) or major life event (like a recent bereavement) makes digital filing unreasonable, you can apply for an exemption. HMRC reviews all requests on a case-by-case basis.

This type of exemption is generally temporary, and HMRC may require you to start following MTD once your circumstances improve.

Am I exempted if I can’t afford MTD for Income Tax’s requirements?

Cost alone isn’t a valid reason for exemption. However, it might support your claim when combined with other factors like age or health issues.

The good news: HMRC-approved software providers are expected to offer free or low-cost versions for eligible small businesses and landlords.

As of publication of this article, there’s only one: Sage Individual is Sage’s free, easy to use cloud accounting software designed for sole traders and landlords to manage income, expenses, and MTD for Income Tax submissions in one place.

Can I apply for exemption from MTD for Income Tax if I live abroad but file UK Income Tax?

If you’re a non-resident with UK self-employment or property income that exceeds the threshold, MTD for Income Tax applies to you, just like with a UK-resident taxpayer.

You can still apply for a digital exclusion exemption if you genuinely can’t access digital tools abroad, but residency alone isn’t enough to exclude you.

Can my accountant manage MTD for Income Tax for me?

Yes, your accountant can:

• Submit your quarterly updates
• Prepare and file your end-of-year declaration
• Sign you up for MTD for Income Tax

However:

• You remain legally responsible for accuracy.
• You must keep digital records of all income and expenses.
• You need to authorise your accountant correctly with HMRC. You should start a dialogue immediately with them about this.

Can a family member or friend do MTD for Income Tax for me?

Yes, in the following ways:

• They can register as a “trusted helper”, but they’ll have limited access and can’t file or submit on your behalf.
• To give them full access, they must register as a tax agent and be authorised by you. This adds significant complexity.
• You can also appoint someone as an intermediary to deal with HMRC on your behalf, but it does not grant them full access like a registered agent.

What if I don’t follow MTD for Income Tax when I should?

If you don’t follow the MTD rules when you’re required to, HMRC can issue penalties under its points-based system.

Each time you miss a quarterly update, or tax return, you’ll receive one penalty point. Once you accumulate four points, you’ll be charged a £200 fine. Furthermore, you’ll be charged interest on the amount you owe.

Additional penalties also apply if you make late payments.

HMRC offers free live and recorded webinars, along with short instructional videos, to help taxpayers understand MTD (including choosing compatible software).

HMRC also funds several community and voluntary organisations to help people who have difficulty using online services. Groups like the Good Things Foundation offer free, local support and training for individuals facing digital exclusion or barriers to accessing HMRC services.

Are there any other criteria for exemption for MTD for Income Tax?

Businesses under a deputyship, as appointed by the Court of Protection, are permanently exempt from MTD.

This builds on the Spring Statement 2025 announcement that individuals who have a lasting or enduring Power of Attorney in place are also exempt. (This is a specific exemption group defined by HMRC and it isn’t necessarily the case that all Power of Attorney cases are always exempt from the digital requirement.)

Final thoughts

MTD for Income Tax marks a major shift in how self employed taxpayers and landlords interact with HMRC, but not everyone will need to make the change.

If you think you might be excluded, apply early, keep records of your correspondence, and seek help from your accountant or HMRC’s support services. Or speak to your accountant or bookkeeper so they can act on your behalf.

By taking action now, you’ll know exactly where you stand and avoid unnecessary stress when MTD for Income Tax comes into effect.