Am I Exempt from MTD for Income Tax Self Assessment if I File SA109?

Introduction to MTD ITSA and Recent Exemption Updates

Making Tax Digital for Income Tax Self Assessment, or MTD ITSA, represents a significant shift in how individuals report their income to HMRC. Set to become mandatory for most self-employed individuals and landlords from April 2026, it requires digital record keeping and quarterly updates of income and expenses. The objective is to modernise the tax system, reduce errors, and provide taxpayers with a more real-time view of their tax position. However, HMRC recognises that certain circumstances may make digital reporting impractical or unduly burdensome. Consequently, various exemptions have been established.

One area that has generated considerable discussion and required clarification is the treatment of taxpayers with complex affairs, particularly those who complete the SA109 supplementary page. This page is used to report residence, domicile, and foreign income details, often involving intricate rules and calculations that are not easily adapted to the standard MTD ITSA reporting framework. Following feedback from professional bodies, including the ICAEW, HMRC has recently updated its guidance to provide much-needed clarity on how these taxpayers will be treated under MTD ITSA. This update introduces both automatic exemptions and an application process for those whose tax affairs necessitate the use of SA109. Understanding these revised rules is crucial for anyone whose tax situation involves a foreign element or complex residence status.

What is Making Tax Digital for Income Tax Self Assessment (MTD ITSA)?

Making Tax Digital for Income Tax Self Assessment, or MTD ITSA, is a government initiative designed to modernise the UK tax system. It aims to make tax administration more efficient, reduce common errors, and provide taxpayers with a clearer, more up-to-date understanding of their tax position. The core principle of MTD ITSA is to move away from annual paper-based tax returns towards a fully digital process.

Under MTD ITSA, eligible businesses and landlords will be required to:

• Keep digital records: Maintain records of all income and expenses using MTD-compatible software, such as AccountsOS. This software must be able to send and receive information from HMRC.
• Submit quarterly updates: Send summaries of their business income and expenses to HMRC at least every three months. These updates replace the need for an annual Self Assessment tax return for the income streams covered by MTD ITSA.
• Submit an End of Period Statement (EOPS): After the final quarterly update for the tax year, an EOPS must be submitted to finalise the business's profits and claim any allowances or adjustments. This statement confirms the accuracy of the quarterly figures and any year-end adjustments.
• Submit a Final Declaration: This is the equivalent of the current Self Assessment tax return, covering all sources of income, including those not within MTD ITSA, and declaring any other personal income or claims for reliefs.

The phased rollout of MTD ITSA means it will initially apply to:

• From April 2026: Self-employed individuals and landlords with gross income from business and/or property exceeding £50,000.
• From April 2027: Self-employed individuals and landlords with gross income from business and/or property exceeding £30,000.

These thresholds refer to the total gross income from all businesses and UK property income, not just profit. The introduction of MTD ITSA represents a fundamental change, requiring taxpayers to adopt new digital practices and maintain more regular engagement with their tax affairs throughout the year. While the transition may initially seem daunting, the long-term goal is to simplify compliance and provide greater clarity for taxpayers.

Understanding the SA109 Supplementary Page

The SA109 supplementary page is an integral part of the Self Assessment tax return for individuals whose tax affairs involve complex residence, domicile, or foreign income considerations. Unlike the main SA100 form, which covers standard UK income and reliefs, SA109 is specifically designed for situations that extend beyond the typical UK-resident, UK-domiciled taxpayer with purely UK-sourced income.

Taxpayers typically need to complete the SA109 page if any of the following circumstances apply to them:

• Non-UK domicile
• Claiming split year treatment
• Claiming the remittance basis
• Reporting foreign income and gains not subject to UK tax on the arising basis
• Electing for the arising basis for certain foreign income
• Claiming relief for foreign tax paid
• Reporting income from a foreign trust or settlement

The questions on the SA109 page are highly detailed and often require a deep understanding of UK tax law regarding residence, domicile, and the taxation of foreign income and gains. For instance, claiming the remittance basis of taxation involves complex rules about bringing foreign income or gains into the UK, and determining an individual's residence status can depend on a multitude of factors under the Statutory Residence Test. Split year treatment, which dictates how an individual's tax year is divided into UK and non-UK parts, also adds significant complexity.

Due to the intricate nature of these tax rules, completing an SA109 often necessitates professional advice and meticulous record-keeping, particularly regarding the movement of funds between different jurisdictions. The calculations involved can be highly nuanced, making the direct integration of SA109 related income and adjustments into a quarterly MTD ITSA reporting framework particularly challenging. This inherent complexity is precisely why HMRC has recognised the need for specific exemption guidance for SA109 filers, distinguishing them from taxpayers with simpler, more straightforward tax affairs.

HMRC's Updated Guidance: SA109 Exemptions for MTD ITSA

HMRC has revised its guidance on exemptions from Making Tax Digital for Income Tax Self Assessment, specifically addressing the position of taxpayers who use the SA109 supplementary page. This clarification comes after extensive feedback from professional bodies, such as the ICAEW, which highlighted the complexities and practical difficulties that SA109 filers would face under the original MTD ITSA framework. The updated guidance aims to provide certainty and reduce the administrative burden on individuals with complex residence and foreign income tax affairs.

Automatic Exemption for 2024/25 SA109 Filers

A key element of the revised guidance is the provision for automatic exemption. Taxpayers who included the SA109 supplementary page as part of their Self Assessment tax return for the 2024/25 tax year will be automatically exempt from MTD ITSA for the 2026/27 tax year. This automatic exemption is a direct recognition by HMRC of the inherent complexity associated with SA109 filings. By granting an automatic exemption for those who have already demonstrated this complexity in the preceding tax year, HMRC aims to streamline the process and prevent unnecessary MTD ITSA compliance obligations for these individuals.

HMRC will identify these taxpayers based on their 2024/25 Self Assessment submissions and will communicate directly with them regarding their exempt status. It is important for taxpayers to ensure their 2024/25 return is filed accurately and on time to benefit from this automatic exemption.

Application for Prospective SA109 Filers

For taxpayers who did not file an SA109 for the 2024/25 tax year but anticipate needing to file one for the 2025/26 or 2026/27 tax years, an application process has been established. This allows individuals whose circumstances change, or who only begin to have complex residence or foreign income issues in later years, to seek an exemption.

The application process will require taxpayers to demonstrate that their tax affairs will necessitate the completion of an SA109 page in the relevant MTD ITSA year. This typically involves explaining the specific circumstances that give rise to the need for SA109, such as a change in residence status, becoming non-domiciled, or new sources of foreign income that require special treatment. The application should be made to HMRC in advance of the MTD ITSA start date for which the exemption is sought. HMRC will review these applications on a case-by-case basis.

Rationale Behind the SA109 Exemption

The primary reason for exempting SA109 filers stems from the significant challenges in aligning their complex tax calculations with the quarterly digital reporting requirements of MTD ITSA. SA109 involves:

• Intricate rules: Residence, domicile, and remittance basis rules are highly prescriptive and often require year-end reconciliation and professional judgement.
• Unpredictable income: Foreign income or gains, especially for those on the remittance basis, may not be easily quantifiable on a quarterly basis, as the tax liability often depends on when and how funds are brought into the UK.
• Split year treatment: If an individual's tax year is split, their tax status changes mid-year, making consistent quarterly reporting under a single regime problematic.
• Software limitations: Current MTD-compatible software may not be equipped to handle the specific calculations and nuances required for SA109, potentially leading to errors or an increased burden on taxpayers and agents.

By providing these exemptions, HMRC acknowledges that a one-size-fits-all approach to MTD ITSA is not appropriate for all taxpayers and seeks to prevent undue hardship or inaccuracies for those with genuinely complex tax affairs. Taxpayers granted an exemption will continue to file their annual Self Assessment tax return as they do currently, including the SA109 page, rather than engaging in quarterly digital updates.

Eligibility Criteria for MTD ITSA Exemptions Beyond SA109

While the SA109 exemption is a significant recent clarification, it is important to understand that there are broader categories of exemptions from MTD ITSA. These exemptions are designed to ensure that the digital reporting requirements do not impose an unreasonable burden on individuals who genuinely cannot comply. HMRC considers several factors when determining eligibility for these exemptions, which generally require an application and approval.

SA109 Filers (Automatic)

Criteria: Filed SA109 for the 2024/25 tax year.

Applies to: 2026/27 tax year and beyond.

SA109 Filers (Application)

Criteria: Expect to file SA109 for 2025/26 or 2026/27 tax years.

Applies to: Relevant tax years upon successful application.

Digital Exclusion

Criteria: Unreasonable or impractical to use digital tools due to age, disability, remote location, or inability to afford digital tools/internet.

Applies to: Any MTD ITSA mandatory year.

Religious Objection

Criteria: Genuine religious belief prevents use of electronic communications.

Applies to: Any MTD ITSA mandatory year.

Insolvency

Criteria: Individuals in bankruptcy or insolvency proceedings.

Applies to: Period of insolvency.

Low Income

Criteria: Total gross income from business and/or property below the MTD ITSA threshold (£50,000 for 2026/27, £30,000 for 2027/28).

Applies to: Relevant tax years below threshold.

Digital Exclusion

This exemption applies to individuals for whom it is not reasonably practicable to use digital tools for MTD ITSA. HMRC assesses this based on various factors, including:

• Age: Older individuals who may struggle with digital technology.
• Disability: Physical or mental disabilities that prevent effective use of computers or software.
• Geographical remoteness: Lack of reliable internet access or mobile signal in a taxpayer's primary location.
• Affordability: Inability to afford the necessary digital equipment, software, or internet connection.
• Lack of digital skills: Insufficient digital literacy, with no reasonable means to acquire the necessary skills.

To apply for digital exclusion, taxpayers must contact HMRC directly to explain their circumstances. HMRC may require evidence or ask follow-up questions to verify the claim.

Religious Objection

Individuals can apply for an exemption if their genuine religious beliefs prevent them from using electronic communications or keeping digital records. This is a specific and tightly defined exemption, requiring proof of adherence to a faith that explicitly prohibits such activities.

Impracticality for Other Reasons

Beyond digital exclusion and religious objections, HMRC may grant exemptions in other exceptional circumstances where it is genuinely impractical for a taxpayer to comply with MTD ITSA. This category is broad and assessed on a case-by-case basis, requiring strong justification. Examples could include individuals facing severe personal hardship, those in remote locations with no practical access to digital solutions even with assistance, or unique business structures that cannot be accommodated by existing MTD software.

Insolvency

Individuals who are subject to insolvency procedures, such as bankruptcy, may be exempt from MTD ITSA. The focus during such periods shifts to managing the insolvency, and the tax reporting requirements are typically handled by an insolvency practitioner rather than the individual directly through MTD.

Low Income Threshold

It is crucial to remember that MTD ITSA only applies to those whose gross income from self-employment and/or property exceeds specific thresholds. For the 2026/27 tax year, this threshold is £50,000, reducing to £30,000 from April 2027. If an individual's total gross income from these sources falls below the relevant threshold, they are not mandated to join MTD ITSA and are therefore effectively exempt by default. They will continue to file their annual Self Assessment tax return in the traditional manner.

Understanding these various exemption categories is vital for taxpayers to determine their MTD ITSA obligations accurately. While the SA109 exemption provides specific relief for complex international tax affairs, the other categories address broader issues of digital capability and practical feasibility.

Navigating the Application Process for MTD ITSA Exemptions

For those who are not automatically exempt through the SA109 criteria for the 2024/25 tax year, but believe they qualify for an MTD ITSA exemption, a formal application to HMRC is required. The process is designed to allow HMRC to assess individual circumstances and determine if compliance with MTD ITSA would genuinely be impracticable or unduly burdensome.

When to Apply

It is advisable to apply for an exemption as soon as you anticipate that you will be unable to comply with MTD ITSA requirements, and well in advance of the mandatory start date for your income threshold. For those expecting to file an SA109 for the 2025/26 or 2026/27 tax years, an application should be made before the MTD ITSA reporting obligations would commence for that year (i.e., before April 2026 for the first group of taxpayers). Proactive application allows HMRC sufficient time to review your case and provides you with clarity on your obligations.

How to Apply

The primary method for applying for an MTD ITSA exemption is by contacting HMRC directly. There is no specific online form for all exemption types; instead, the process typically involves a telephone call to the HMRC MTD helpline or writing a letter.

• Telephone: Contact the HMRC Self Assessment helpline. Be prepared to explain your situation clearly and concisely, providing all relevant details. The helpline advisor will guide you through the information required.
• Post: If you prefer to apply in writing, or if your case is particularly complex and requires extensive documentation, you can write to HMRC. Ensure your letter clearly states that you are applying for an MTD ITSA exemption, outlines the specific reasons for your application (e.g., digital exclusion, anticipated SA109 filing for future years), and includes any supporting evidence.

Information Required for Application

Regardless of the method of application, you will need to provide specific information to HMRC to support your claim. This may include:

• Your Unique Taxpayer Reference (UTR).
• Your full name and address.
• The specific reason for your exemption request (e.g., digital exclusion, expected SA109 filing for 2025/26).
• Detailed explanation of why you cannot comply with MTD ITSA requirements. For SA109 filers, this would involve explaining the nature of your residence or foreign income complexity. For digital exclusion, it might involve details of your lack of internet access, digital skills, or disability.
• Any supporting evidence, such as medical certificates, letters from internet providers, or professional opinions on the complexity of your tax affairs.
• The tax year(s) for which you are seeking the exemption.

HMRC Review and Decision

HMRC will review your application based on the information provided. They may ask for further details or clarification. Once a decision is made, HMRC will inform you in writing. If your exemption is approved, you will not be required to comply with MTD ITSA for the specified period and will continue to file your Self Assessment tax return annually. If your application is rejected, HMRC will explain the reasons for their decision, and you will be expected to comply with MTD ITSA. You have the right to appeal an HMRC decision if you believe it is incorrect.

It is important to keep a record of your application, including dates, names of HMRC contacts, and copies of any correspondence. If you use a tax agent, they can assist you with the application process and communicate with HMRC on your behalf.

Implications of MTD ITSA Exemption for Taxpayers

Receiving an exemption from MTD ITSA, whether automatic for SA109 filers or through application, carries specific implications for how you manage and report your tax affairs. While an exemption relieves you of the digital quarterly reporting obligations, it does not remove your overall responsibility to accurately report your income and pay your taxes.

Continued Annual Self Assessment Filing

The most significant implication of an MTD ITSA exemption is that you will continue to file your annual Self Assessment tax return (SA100 and any relevant supplementary pages, including SA109) in the traditional manner. This means you will submit one comprehensive return after the end of the tax year, typically by 31 January following the tax year end if filing online, or 31 October if filing by paper. You will not be required to send quarterly updates of your income and expenses, nor will you need to submit End of Period Statements or Final Declarations specific to MTD ITSA.

For SA109 filers, this means you will continue to complete the SA109 supplementary page as necessary, reporting your residence, domicile, and foreign income details as you currently do. The complexity associated with these aspects of your tax return remains, but you will not be forced to adapt them to a quarterly digital reporting system that may not be suitable.

Maintaining Robust Records

Even with an MTD ITSA exemption, the requirement to keep accurate and complete records of your income and expenses remains paramount. HMRC requires all taxpayers to retain records for at least five years after the 31 January submission deadline for the relevant tax year. These records must be sufficient to support the figures declared on your annual Self Assessment tax return.

While you are not mandated to use MTD-compatible software, using some form of organised record-keeping system, whether digital spreadsheets or traditional ledgers, is highly recommended. This will simplify the preparation of your annual return and provide clear evidence if HMRC ever queries your tax affairs. For SA109 filers, this includes detailed records of foreign income, remittances, and any factors influencing your residence or domicile status.

No Change to Payment Deadlines

An MTD ITSA exemption does not alter your tax payment obligations or deadlines. You will still be required to pay any tax due by the standard Self Assessment deadlines:

• 31 January following the tax year end for any balancing payment and the first payment on account for the next tax year.
• 31 July following the tax year end for the second payment on account.

Interest and penalties can still apply for late payments or late filing of your annual return, even if you are exempt from MTD ITSA.

Potential for Future Review

Exemptions are not necessarily permanent. HMRC's guidance may evolve, and your personal circumstances could change. For example, if your reasons for digital exclusion cease to apply, or if your tax affairs simplify to the point where SA109 is no longer required, your exemption status might be reviewed. It is your responsibility to monitor your eligibility and to re-engage with MTD ITSA if your circumstances change and you no longer qualify for an exemption.

In summary, while an MTD ITSA exemption offers relief from quarterly digital reporting, it does not exempt you from your fundamental tax obligations. Maintaining diligent records and understanding your annual Self Assessment responsibilities remain critical.

MTD ITSA Income Thresholds and Their Role in Exemption

Beyond specific exemptions like those for SA109 filers or digital exclusion, the most common reason an individual may not need to comply with MTD ITSA is simply that their income falls below the mandatory thresholds. Understanding these thresholds is fundamental to determining MTD ITSA obligations.

The £50,000 Threshold (from April 2026)

From the commencement of MTD ITSA in April 2026, the initiative will apply to self-employed individuals and landlords whose gross income from their qualifying businesses and/or UK property income exceeds £50,000 in a tax year.

• Gross Income: This refers to your total income before any expenses or allowances are deducted. It is not your profit.
• Qualifying Businesses/Property: This includes income from one or more self-employment trades and/or UK property businesses.
• Calculation Period: The income is typically assessed based on the previous tax year's figures. For example, to determine if you need to join MTD ITSA in April 2026, HMRC will look at your gross income for the 2024/25 tax year.

If your combined gross income from these sources is £50,000 or less, you are not mandated to join MTD ITSA in April 2026. You will continue to file your Self Assessment tax return annually as you do currently.

The £30,000 Threshold (from April 2027)

A year later, from April 2027, the MTD ITSA mandate will extend to self-employed individuals and landlords whose gross income from their qualifying businesses and/or UK property income exceeds £30,000 in a tax year.

• Expanded Scope: This phase brings a larger number of smaller businesses and landlords into the MTD ITSA regime.
• Gross Income: Again, this is the total income before deductions.
• Calculation Period: For the April 2027 start, HMRC will primarily look at your gross income for the 2025/26 tax year.

If your combined gross income from these sources is £30,000 or less, you will not be mandated to join MTD ITSA in April 2027. You will continue to file your Self Assessment tax return annually.

What if My Income Fluctuates?

HMRC's guidance specifies how to handle fluctuating income. Generally, if your income drops below the threshold in a subsequent year, you may be able to leave MTD ITSA. Conversely, if your income rises above the threshold, you will need to join MTD ITSA from the start of the next tax year following the year your income exceeded the threshold. It is important to monitor your gross income annually to ensure you comply with the correct MTD ITSA obligations.

Interaction with Other Exemptions

It is critical to understand that the income thresholds are distinct from other exemption categories. If your gross income is below the relevant threshold, you are not in scope for MTD ITSA, and therefore do not need to apply for other exemptions like digital exclusion or the SA109 exemption. These other exemptions are primarily for individuals whose income does exceed the threshold, but who have other compelling reasons not to comply with digital reporting.

For example, an SA109 filer with gross income of £40,000 for 2024/25 would not be mandated to join MTD ITSA in April 2026 because their income is below £50,000. They would only potentially be mandated from April 2027 if their income exceeded £30,000 in 2025/26. In this scenario, their SA109 filing status would become relevant for an exemption application if their income was above £30,000 for the 2027/28 tax year, and they continued to file SA109.

Therefore, the first step in determining your MTD ITSA status should always be to assess your gross income against the current and upcoming thresholds.

Practical Steps for SA109 Filers and Complex Tax Situations

For individuals whose tax affairs necessitate the use of the SA109 supplementary page, or who have other complex tax situations, navigating the transition to MTD ITSA and understanding exemption rules requires careful planning and proactive steps. Here are practical actions to consider:

1. Review Your 2024/25 Self Assessment Filing

If you filed an SA109 as part of your 2024/25 Self Assessment tax return, you are automatically exempt from MTD ITSA for the 2026/27 tax year. Verify that your return correctly included the SA109 page. HMRC will use this information to identify you for the automatic exemption. Ensure your contact details with HMRC are up to date so you receive any official communication regarding your exemption status.

2. Assess Future SA109 Requirements

If you did not file an SA109 for 2024/25 but anticipate needing to do so for 2025/26 or 2026/27, you will need to apply for an exemption. Consider the following:

• Changes in Residence: Are you planning to move to or from the UK, or will your residence status change?
• Domicile Status: Is there any change in your domicile status or a decision to claim the remittance basis?
• Foreign Income: Will you have new or substantially different sources of foreign income that require specific reporting on SA109?

Proactively identifying these changes will allow you to submit an exemption application to HMRC in good time.

3. Monitor Your Gross Income Thresholds

Regularly review your total gross income from self-employment and UK property. If your income falls below the MTD ITSA thresholds (£50,000 from April 2026, £30,000 from April 2027), you will not be mandated to join MTD ITSA regardless of your SA109 status. This is the simplest form of "exemption."

4. Maintain Diligent Records

Even if exempt from MTD ITSA, maintaining accurate and comprehensive records is non-negotiable. For SA109 filers, this includes:

• Dates of arrival in and departure from the UK.
• Details of days spent in the UK.
• Records of all foreign income and gains, distinguishing between those brought to the UK (remitted) and those kept abroad.
• Evidence of foreign tax paid for claims of Foreign Tax Credit Relief.
• Documentation supporting any claims for split year treatment or changes in domicile.

Robust record-keeping is essential for preparing your annual Self Assessment return accurately and for responding to any HMRC enquiries.

5. Seek Professional Advice

Given the complexities of residence, domicile, and foreign income rules, seeking advice from a qualified tax professional is highly recommended. An accountant or tax advisor specialising in international tax can:

• Confirm your MTD ITSA obligations and exemption eligibility.
• Assist with preparing and submitting your exemption application to HMRC.
• Ensure your SA109 is completed accurately and all relevant reliefs are claimed.
• Provide guidance on effective record-keeping for complex tax affairs.
• Represent you in communications with HMRC.

For SA109 filers, professional advice can be invaluable in navigating the nuances of MTD ITSA and ensuring ongoing compliance with HMRC regulations.

How AccountsOS Supports MTD Compliance and Exemption Management

AccountsOS is designed to simplify tax compliance for self-employed individuals and landlords, whether you are fully within the MTD ITSA regime or managing your tax affairs under an exemption. Our platform provides robust tools that can assist in both scenarios, ensuring you remain compliant with HMRC requirements.

For MTD ITSA Compliant Users:

• Digital Record Keeping: AccountsOS provides an intuitive interface for recording all your income and expenses digitally. Our smart categorisation features help ensure accuracy, which is fundamental to MTD ITSA.
• Quarterly Updates: Our software is MTD-compatible, allowing you to easily generate and submit your quarterly summaries directly to HMRC with confidence. We streamline the process, reducing the time and effort required for regular reporting.
• Real-time Tax Estimates: See your estimated tax liability update throughout the year, based on your recorded transactions. This helps you budget for your tax payments and avoid year-end surprises.
• End of Period Statement & Final Declaration Support: AccountsOS helps you compile the necessary information for your EOPS and Final Declaration, making the year-end reconciliation straightforward.

For Exempt Users (including SA109 Filers):

Even if you are exempt from MTD ITSA, AccountsOS remains an invaluable tool for managing your financial records and simplifying your annual Self Assessment.

• Superior Record Keeping: AccountsOS provides a secure and organised digital repository for all your income and expense data. This is crucial for all taxpayers, especially those with complex affairs that might be subject to HMRC enquiries. You can easily track all transactions, attach receipts, and generate comprehensive reports for your annual Self Assessment.
• Simplified Annual Self Assessment Preparation: By meticulously tracking your financial data throughout the year, AccountsOS makes the preparation of your annual SA100 and supplementary pages significantly easier. You can export detailed summaries that can be directly used by you or your tax agent to complete the SA109 and other forms.
• Monitoring Income Thresholds: AccountsOS can help you track your gross income from business and property throughout the tax year, allowing you to easily determine if you remain below the MTD ITSA thresholds and thus outside the scope of the mandate.
• Evidence for Exemption Applications: While AccountsOS does not directly apply for exemptions, the detailed financial records it maintains can serve as valuable supporting evidence if you need to apply for an exemption based on impracticality or other reasons.
• Professional Collaboration: You can easily grant access to your tax agent, allowing them to view your records, assist with annual return preparation, and provide tailored advice, particularly for complex SA109-related issues.

AccountsOS ensures that whether you are actively participating in MTD ITSA or operating under an exemption, your financial records are always accurate, organised, and readily accessible, saving you time and reducing the risk of errors. Our platform helps you maintain control over your tax obligations, providing peace of mind in a changing tax landscape.

Future Outlook for MTD ITSA and Exemptions

The tax landscape in the UK is continually evolving, and Making Tax Digital for Income Tax Self Assessment is a long-term programme with potential for further development. While HMRC has provided recent clarifications on SA109 exemptions, it is prudent for taxpayers and agents to consider the potential for future changes.

Potential Expansion of MTD ITSA

The current rollout of MTD ITSA is phased, with thresholds set at £50,000 from April 2026 and £30,000 from April 2027. It is possible that in future years, HMRC may seek to lower these thresholds further, eventually bringing a greater proportion of self-employed individuals and landlords into the MTD regime. While there are no immediate plans beyond the £30,000 threshold, the long-term vision for MTD is broad.

Additionally, there is ongoing discussion about extending MTD to other forms of income, such as those from employment or pensions, although this is a more distant prospect and would require significant legislative and system changes.

Evolution of Exemption Criteria

The exemption criteria themselves may also evolve. As MTD-compatible software becomes more sophisticated and widespread, and as digital literacy improves across the population, the grounds for exemptions such as digital exclusion might be reviewed or narrowed. HMRC's recent update for SA109 filers demonstrates a willingness to refine guidance based on practical feedback, and this responsiveness is likely to continue.

It is conceivable that, in the longer term, technological advancements could lead to MTD-compatible software being able to better accommodate the complexities currently found on the SA109 page. Should this happen, the need for a specific SA109 exemption might be reconsidered by HMRC. However, given the deep-seated complexities of residence and domicile rules, any such integration would require substantial development and would likely be many years away.

Importance of Staying Informed

Given these potential future developments, it is crucial for all taxpayers, including those currently exempt, to stay informed about HMRC's MTD guidance. Regularly checking official HMRC publications, subscribing to tax news from professional bodies, and engaging with tax software providers like AccountsOS will help you remain aware of any changes that might affect your tax obligations.

For SA109 filers, in particular, maintaining open communication with your tax agent is vital. They can provide tailored advice on how any future changes to MTD ITSA or exemption rules might impact your specific circumstances, ensuring you continue to comply with your tax obligations efficiently and accurately. The overarching message remains one of adaptability and vigilance in the face of ongoing tax digitalisation.

Worked Examples of SA109 Exemption Scenarios

To illustrate how the MTD ITSA exemption guidance for SA109 filers applies in practice, let us consider a few common scenarios.

Example 1: Automatic Exemption

Scenario: Sarah is a self-employed consultant who moved to the UK from abroad a few years ago. For the 2024/25 tax year, she filed her Self Assessment tax return online, including the SA109 supplementary page, as she was claiming the remittance basis of taxation for her foreign income. Her gross income from self-employment and foreign investments combined was £65,000 for 2024/25.

Analysis:

• Sarah's gross income of £65,000 exceeds the £50,000 MTD ITSA threshold for April 2026, meaning she would ordinarily be mandated to join MTD ITSA.
• However, because she filed an SA109 page for the 2024/25 tax year, she is automatically exempt from MTD ITSA for the 2026/27 tax year.
• HMRC will identify her from her 2024/25 return and she will receive communication confirming her exempt status.
• Outcome: Sarah will continue to file her annual Self Assessment tax return, including the SA109, as she has done previously. She will not need to submit quarterly updates or use MTD-compatible software for the 2026/27 tax year.

Example 2: Application for Exemption

Scenario: David is a UK landlord with a gross property income of £55,000 for the 2024/25 tax year. He did not file an SA109 for this year as his affairs were straightforward. However, in late 2025, he plans to move abroad for a new job, meaning he will become a non-resident landlord from the 2025/26 tax year and will need to complete an SA109 for that year and subsequent years.

Analysis:

• David's gross income of £55,000 for 2024/25 means he would be mandated to join MTD ITSA from April 2026.
• He is not automatically exempt because he did not file an SA109 for 2024/25.
• However, he anticipates needing to file an SA109 for 2025/26 and 2026/27 due to his change in residence status.
• Action: David should contact HMRC as soon as possible, explaining his upcoming change in residence and the need to file SA109 for 2025/26 and 2026/27. He will need to apply for an MTD ITSA exemption based on his expected SA109 filing.
• Outcome: If his application is approved, David will be exempt from MTD ITSA for the relevant years and will continue to file his annual Self Assessment tax return, including the SA109.

Example 3: Below Income Threshold and SA109

Scenario: Emily is a self-employed artist who also receives some foreign dividend income. For the 2024/25 tax year, she filed an SA109 to report her foreign dividends and claim foreign tax credit relief. Her total gross income from her art business and foreign dividends for 2024/25 was £28,000.

Analysis:

• Emily filed an SA109 for 2024/25, which would typically qualify her for an automatic exemption for 2026/27.
• However, her gross income of £28,000 for 2024/25 is below the £50,000 MTD ITSA threshold for April 2026, and also below the £30,000 threshold for April 2027.
• Outcome: Emily is not mandated to join MTD ITSA at all, as her income falls below the relevant thresholds. The SA109 exemption is therefore not strictly necessary for her, as she is already outside the scope of MTD ITSA. She will continue to file her annual Self Assessment tax return, including the SA109, as she currently does.

These examples highlight the importance of considering both your income levels and your specific tax circumstances, particularly regarding residence and foreign income, when determining your MTD ITSA obligations and potential exemption eligibility.

Frequently asked questions

What is the SA109 supplementary page used for?

The SA109 supplementary page is used in Self Assessment to report details related to residence, domicile, and foreign income or gains for individuals with complex international tax affairs, such as those claiming the remittance basis or split year treatment.

Who is automatically exempt from MTD ITSA due to SA109 filing?

Taxpayers who included the SA109 supplementary page in their Self Assessment tax return for the 2024/25 tax year are automatically exempt from MTD ITSA for the 2026/27 tax year. HMRC will identify these individuals.

Can I apply for an SA109 exemption if I didn't file it in 2024/25?

Yes, if you expect to file an SA109 for the 2025/26 or 2026/27 tax years, you can apply to HMRC for an MTD ITSA exemption. You will need to explain your circumstances and the reasons for needing to complete the SA109.

What happens if I am exempt from MTD ITSA?

If exempt, you will continue to file your annual Self Assessment tax return, including any necessary supplementary pages like SA109, in the traditional manner. You will not be required to keep digital records or submit quarterly updates under MTD ITSA.

Does the SA109 exemption affect my tax payment deadlines?

No, an MTD ITSA exemption does not change your tax payment deadlines. You will still be required to pay any tax due by the standard Self Assessment deadlines of 31 January and 31 July.

What other types of MTD ITSA exemptions are there?

Other exemption categories include digital exclusion (where it's impractical to use digital tools due to age, disability, or location), religious objection, insolvency, and those whose gross income falls below the mandatory MTD ITSA thresholds.

How do I apply for an MTD ITSA exemption?

For most exemption types, you should contact HMRC directly by phone or in writing to explain your circumstances. For SA109 filers not automatically exempt, you would apply based on your anticipated future SA109 filing.

Should I still keep digital records if I am exempt?

While not mandated for exempt individuals, keeping accurate digital records using software like AccountsOS is highly recommended. It simplifies the preparation of your annual Self Assessment return and provides robust evidence for HMRC.

Related guides

• MTD for Income Tax Self Assessment Guide
• Understanding Self Assessment
• All Tax Deadlines