Making Tax Digital: exemption cases, when and how to apply
A range of potential exemptions from Making Tax Digital for Income Tax (MTD) exist, falling into different categories.
Exemption may apply to the taxpayer themselves, or be limited to certain ‘activities’ (ie the source of income which might otherwise be subject to MTD requirements). Some exemptions apply automatically, others require either the taxpayer or their authorised agent to submit an application to HMRC. The duration of the possible exemptions also varies – some apply unless or until circumstances change, others only apply for 2026/27 only.
Below is a breakdown of the potential types of exemption.
Contents
- Outside the scope of MTD
- Income-based exemption
- Digital exclusion
- Exemptions for certain taxpayers
- Exemptions for certain activities
- Temporary exemptions
- Application process for MTD exemptions
Outside the scope of MTD
The following are outside the scope of MTD, and do not need to inform HMRC that MTD does not apply to them:
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Companies – there are no plans to extend MTD to Corporation Tax.
- Partnerships and Limited Liability Partnerships (LLPs) – MTD is intended to be expanded to partnerships and LLPs in the future, but no timescale has been set. However, individual partners or LLP members may still be in scope of MTD if they have other sources of qualifying income (e.g. they are also a sole trader or landlord in their own right).
Income-based exemption
- Individuals with no qualifying income, or with qualifying income below the relevant MTD income threshold are automatically exempt from MTD, and do not need to inform HMRC that MTD does not apply to them.
Digital exclusion
- Taxpayers who are digitally excluded can apply to HMRC for exemption from MTD for an unlimited period if they have circumstances which make it not reasonably practicable to comply with MTD.
Once approved by HMRC, digital exclusion exemptions apply until further notice, but the taxpayer has an obligation to inform HMRC within three months if the reason for their application being approved ceases to apply.
Taxpayers who were granted exemption from MTD for VAT on grounds of digital exclusion will need to contact HMRC to confirm whether those same grounds still apply before they can be exempted from MTD for income tax.
Exemptions for certain taxpayers
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No National Insurance Number – individuals who do not have a National Insurance Number on 5 April before the tax year from which they would otherwise have to join MTD are automatically exempt from MTD for that tax year.
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Lloyds underwriters
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Ministers of religion
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Enduring / lasting power of attorney in place – taxpayers who lack physical or mental capacity and have given enduring power of attorney or lasting power of attorney (or devolved equivalents in Scotland and Northern Ireland) to someone to act on their behalf. Exemption will not be available if the taxpayer is ‘still capable of providing financial information to HMRC’. We take this to mean that exemption may not be granted where the power of attorney has been arranged in advance.
- Deputyship orders – taxpayers for whom the Court of Protection has appointed someone to act under a deputyship order (or devolved equivalents in Scotland and Northern Ireland).
- Companies chargeable to income tax on the profits of a trade
- Married Couples Allowance recipients or transferors
- Blind Persons Allowance recipients or transferors
If the circumstances giving rise to exemptions 6-12 above were reported on the tax return filed with HMRC by 31 January prior to the expected MTD start date, exemption from MTD is automatic. For example, a taxpayer whose 2024/25 tax return declared them to be eg a Lloyds underwriter will be automatically exempt from MTD in 2026/27.
For exemptions 6-9 above, if the circumstances giving rise to exemption only arose after the end of the tax year for which a return was filed with HMRC by 31 January prior to the expected MTD start date, the taxpayer or their agent will have to contact HMRC to request exemption – see ‘Application process for MTD exemptions’ below. For example, a taxpayer whose 2024/25 tax return reported qualifying income over £50,000 would be expected to join MTD in 2026/27. However, if since 5 April 2025 they have become eg a minister of religion, they can apply to HMRC for exemption from MTD effective for 2026/27.
For exemptions 10-12 above, if the circumstances giving rise to exemption are reasonably expected to apply for any tax year after the year for which a return was filed with HMRC by 31 January prior to the expected MTD start date, up to and including their expected MTD mandation year, the taxpayer or their agent will have to contact HMRC to request exemption – see ‘Application process for MTD exemptions’ below. For example, a taxpayer whose 2024/25 tax return reported qualifying income over £50,000 would be expected to join MTD in 2026/27. However, if at any point after 5 April 2025 up to and including the 2026/27 tax year they reasonably expect to eg be entitled to the Blind Persons Allowance, they can apply to HMRC for exemption from MTD, effective for 2026/27.
Note: The Government previously indicated that the exemptions for Lloyds underwriters, ministers of religion, and claimants of the Married Couples Allowance or Blind Persons Allowance were expected to last for the current parliamentary term only (likely until Summer 2029). However the Income Tax (Digital Obligations) Regulations 2026 make no provision for these exemptions to expire.
Exemptions for certain activities
- Overseas trading and property businesses for non-residents – income from non-UK self-employment and property rental arising to individuals who were non-UK resident in the year determining their MTD start date is automatically exempt from MTD.
For example, overseas trading or property income arising to a taxpayer who was non-resident in 2024/25 will be automatically exempt from MTD in 2026/27. The individual would, however, remain potentially in scope of MTD in respect of any UK-source qualifying income.
- Overseas trading and property businesses for ‘new’ non-UK residents – income from non-UK self-employment and property rental arising to individuals who are, or reasonably expect to be, ‘new non-residents’ in the year they join MTD is exempt from MTD, subject to ‘notice’ being given to HMRC.
‘New’ non-residents are those who were UK resident in a tax year on which MTD mandation is based but are, or reasonably expect to, be non-resident in the year they would otherwise expect to join MTD.
For example, for those otherwise expected to join MTD in 2027/28, exemption from MTD for non-UK sources of income may be granted if: they were UK resident in 2025/26 but are, or reasonably expect to be, non-UK resident in 2027/28 and have contacted HMRC to request exemption – see ‘Application process for MTD exemptions’ below. The individual would, however, remain potentially in scope of MTD in respect of any UK-source qualifying income.
- Property/trading activities carried out by trustees. Exemption applies to activities carried out in their capacity as trustee only – if they have qualifying income in a personal capacity which is more than the MTD threshold, MTD will apply to them personally.
- Qualifying care activities (including foster carers and kinship carers). Exemption applies to activities eligible for qualifying care relief only – foster carers etc with other sources of qualifying income (eg rental income or an unrelated sole trade) will potentially remain in scope of MTD for those activities.
- UK performances of ‘visiting performers’ (non-resident entertainers and sportspeople). Any other UK-source qualifying income would potentially bring the individual in scope of MTD.
For exemptions 15-17 above to apply, ‘notice’ has to be given to HMRC. Forms of notice include ‘delivering a return containing information about the activity which is sufficient to enable HMRC to be satisfied that the activity is of a specified description’, so where eg foster care income has been adequately disclosed as such on a tax return, the exemption from MTD for that activity should be automatic.
Where ‘notice’ has either not been given, or there is any doubt as to whether it is ‘sufficient’ to satisfy HMRC that an exemption is appropriate, the taxpayer or their agent should contact HMRC – see ‘Application process for MTD exemptions’ below.
Temporary exemptions
Subject to the above exemptions, taxpayers who reported qualifying income of more than £50,000 in 2024/25 would normally have to join MTD from April 2026. However, the following will not have to join until at least April 2027:
- Taxpayers with income from trusts or estates, received as beneficiary or as the settlor of a settlor-interested trust.
- Taxpayers claiming averaging adjustments (mainly farmers, musicians, writers and other creative artists).
- Taxpayers claiming qualifying care relief – eg foster carers who would otherwise have to join MTD due to another source of qualifying income.
- Taxpayers needing to file non-residence (SA109) supplementary pages with their tax return*.
- Visiting performers (non-resident entertainers and sportspeople) who would otherwise have to join MTD due to another UK source of qualifying income.
For temporary exemptions 18-22 above, if the relevant circumstances were declared on a 2024/25 tax return, the temporary exemption applies automatically and these taxpayers do not need to inform HMRC that MTD does not apply to them for 2026/27.
If the relevant circumstances qualifying for exemption were not reported on a 2024/25 tax return, but are reasonably expected to apply in either 2025/26 or 2026/27, taxpayers will need to apply for temporary exemption until April 2027 – see ‘Application process for MTD exemptions’ below.
Where available, the temporary exemption from MTD until April 2027 excuses the taxpayer from MTD for the 2026/27 tax year, but it does not automatically mean they will need to join MTD in 2027/28. Their MTD obligations for 2027/28 will depend on their qualifying income in 2025/26 – if it is more than £30,000, they will need to join MTD from April 2027.
*Note The Income Tax (Digital Obligations) Regulations 2026 impose detailed eligibility conditions for the ‘SA109’ temporary exemption (21 above) to apply. However, we understand that HMRC are permitting temporary exemption for 2026/27 where SA109 pages were filed for any reason in 2024/25, or are reasonably expected to be needed for any reason in 2025/26 or 2026/27 – see our related article ‘HMRC confirm all SA109 taxpayers exempt from Making Tax Digital until April 2027’ for more details.
Application process for MTD exemptions
HMRC have published details of how to apply for MTD exemption. Applications can be made by post or by phone, either by the taxpayer or their appointed agent.
Written applications should use one of the following subject lines to help HMRC process incoming post:
- ‘Making Tax Digital for Income Tax — digitally excluded application’ if applying for exemption on grounds of digital exclusion
- ‘Making Tax Digital for Income Tax — exemption application’ if applying for any other exemption
Taxpayers otherwise expected to join MTD from April 2026 should apply to HMRC for exemption urgently, if they believe they fit one of the categories above. Those expecting to join MTD in either April 2027 or April 2028 are advised to apply for any applicable exemptions during the preceding summer.
HMRC aim to respond to MTD exemption applications within 28 days of receipt, so the need to apply is urgent where the taxpayer is otherwise expected to join MTD for the 2026/27 tax year. At the latest, the availability of any exemption should be established before the first quarterly update deadline of 7 August 2026.
The information presented on this page represents the ATT’s understanding based on the information available at the date of publication shown. You may wish to check against available legislation and any official guidance on GOV.UK that that position has not changed.