Image shows a pile of notepads with Exemption written on the top

Exemptions from MTD for Income Tax - HMRC announce change in approach

20 August, 2025

In a change of approach, HMRC have updated their guidance on exemptions from Making Tax Digital for Income Tax (MTD) in advance of the exemption application process being made available, which we expect to happen this Autumn.

It was previously announced that sole traders and landlords who were exempt from MTD for VAT would automatically be exempt from MTD for Income Tax. However, HMRC have now changed how this process will work. 

Differences between MTD exemption criteria for VAT and Income Tax

While the exemption criteria for MTD for Income Tax largely mirror those applicable to MTD for VAT, HMRC have confirmed that a business subject to an insolvency procedure will not be exempt from MTD for Income Tax even it is exempt from MTD for VAT.

MTD for VAT exemption will not automatically apply for Income Tax

HMRC originally intended for businesses who are exempt from MTD for VAT to be automatically exempt from MTD for Income Tax without having to apply for exemption again.

However, the position has changed and taxpayers who have been granted an exemption from MTD for VAT will need to contact HMRC after the MTD for Income Tax exemption application process opens so that HMRC can check details about the business and confirm that the exemption in place for MTD for VAT will also apply to MTD for Income Tax.  

If a sole trader or landlord who is exempt from MTD for VAT has a change of circumstances, it will necessary to re-apply for an exemption from MTD for Income Tax.

Exemptions which apply automatically

For more details on the exemptions for MTD for Income Tax that will apply automatically, please refer to our MTD Frequently Asked Questions page.

Taxpayers with qualifying income below the relevant threshold will not need to comply with MTD. Other automatic exemptions include trustees and personal representatives, income received by foster carers, individuals without a National Insurance Number and non-resident companies.

More resources and support

As well as HMRC's resources, the ATT has a range of MTD resources for members and the public, which are available via our MTD landing page.  We are also running MTD peer-discussion groups and a MTD – your technical questions answered online Q&A session on 2 October 2025 to help explain areas of uncertainty.