Making Tax Digital Exemptions 2026: Who Doesn't Have to Comply?

The most common reason someone does not need to comply with MTD for ITSA is simply that their qualifying income falls below the threshold. This is not technically an exemption — you are just not in scope. Qualifying income means your gross income from self-employment plus your gross income from UK property, combined, before any expenses are deducted. If this total is £50,000 or less for the 2024/25 tax year, you do not need to join MTD from April 2026. The thresholds reduce over time: - **April 2026**: Qualifying income over £50,000 - **April 2027**: Qualifying income over £30,000 - **April 2028**: Qualifying income over £20,000 If your income fluctuates year to year, HMRC will use your most recent Self Assessment return to determine whether you are in scope. If your 2024/25 return shows qualifying income of £48,000, you are not in scope for April 2026 — but you may be brought in later if your income rises or the threshold drops. Partnership income counts towards your qualifying income if you are a partner in a trading partnership. Dividend income, employment income, savings interest, and pension income do not count.

Several categories of taxpayer are automatically exempt from MTD for ITSA, regardless of their income level. You do not need to apply — HMRC's systems will recognise your status. **Foster carers claiming Qualifying Care Relief** — If all your self-employment income comes from foster care and you claim Qualifying Care Relief, you are exempt. If you have other self-employment or property income alongside fostering, you may still be in scope for that other income. **Ministers of religion** — Ordained ministers, priests, imams, rabbis, and other religious leaders whose income is treated as employment income under ITEPA 2003 are exempt from MTD for ITSA. This applies specifically to those whose stipend or salary is taxed as employment income rather than self-employment income. **Non-UK residents with no other qualifying income** — If you are non-UK resident and your only UK income is from property (taxed under non-resident landlord rules), you are currently outside the scope of MTD for ITSA in the first phase. **Individuals without a UK National Insurance number as of 31 January before the tax year** — This is a narrow administrative exclusion. If HMRC cannot issue you an NI number by the relevant date, you cannot be enrolled. **Trustees of charitable trusts** — Trustees filing Self Assessment for charitable trust income are not required to use MTD for ITSA. **Lloyd's underwriters** — Members of Lloyd's of London who file Self Assessment for their underwriting income are exempt due to the unique accounting requirements of Lloyd's syndicates. **Those claiming averaging adjustments** — Farmers, writers, artists, and musicians who use profit averaging under ITTOIA 2005 are deferred to April 2027 at the earliest. The averaging calculation is incompatible with quarterly reporting in the current MTD design. **Recipients of trust or estate income only** — If your only Self Assessment income is distributions from a trust or estate, you are not in scope for MTD for ITSA.

If you cannot use digital tools due to age, disability, health conditions, religious beliefs, or lack of internet access, you can apply for a digital exclusion exemption. This is not automatic — you must contact HMRC and make your case. HMRC will consider granting an exemption if: - **Age, health, or disability** prevents you from using a computer, smartphone, or tablet. This includes conditions like severe arthritis, vision impairment, cognitive impairment, or any condition that makes sustained computer use impossible — not merely inconvenient. - **Religious beliefs** genuinely prohibit the use of digital communications. This is an extremely narrow category and HMRC will scrutinise claims carefully. - **No internet access** at your home or business premises due to geographic location. Living in a rural area with slow broadband does not automatically qualify — HMRC will check whether mobile internet or satellite broadband is available. To apply, call HMRC's Self Assessment helpline (0300 200 3310) or write to them. You will need to explain your specific circumstances and may be asked for supporting evidence such as a letter from your GP. HMRC does not publish approval rates, but freedom of information requests suggest that by February 2026, approximately 1,300 digital exclusion applications had been lodged, with over 200 denied. This tells you that HMRC takes a strict approach — simply being uncomfortable with technology or preferring paper records is not sufficient grounds for exemption.

After you contact HMRC, your application goes through a review process. There is no standard form — the process is conversational, either by phone or letter. HMRC will assess whether your reason for seeking digital exclusion is genuine and whether reasonable adjustments could enable you to comply. For example, if you have a visual impairment but could use screen-reading software with MTD-compatible software, HMRC may suggest that route rather than granting an exemption. If your application is approved, you continue filing Self Assessment using paper returns or non-MTD digital methods. Your exemption applies until your circumstances change. If your application is denied, you must comply with MTD for ITSA from your relevant start date. You can ask HMRC to reconsider, and you have the right to appeal through the formal complaints and appeals process. Key points to understand: - There is no deadline to apply, but applying early gives you time to prepare if denied - Having an accountant or agent does not exempt you — your agent can use MTD software on your behalf, which HMRC considers a reasonable adjustment - Being elderly alone is not sufficient — HMRC looks at your specific ability to use digital tools - Not wanting to pay for software is not a valid reason — free MTD software exists

If you operate through a UK limited company, MTD for ITSA does not apply to you in your capacity as a company director. Corporation Tax is a separate regime, and the government cancelled plans for MTD for Corporation Tax in 2023. However, if you are a limited company director who also has self-employment income or UK property income in your personal capacity, that personal income counts towards your qualifying income threshold. Running a limited company does not shield your personal self-employment or property income from MTD. For example, if you are a director of a Ltd company (paid via PAYE and dividends) and you also have a buy-to-let property generating £55,000 gross rent, you are in scope for MTD for ITSA from April 2026 for the property income. The company income is irrelevant — but the property income triggers the obligation. Partnerships where all partners are individuals are in scope. Corporate partnerships (where at least one partner is a company) are currently excluded from MTD for ITSA.

If you believe you fall into one of the automatic exemption categories, you do not need to do anything — HMRC will not enrol you in MTD for ITSA. However, it is worth checking your status by logging into your HMRC online account or Government Gateway to confirm. If you need to apply for a digital exclusion exemption: 1. **Gather evidence** — GP letter, occupational health report, or documentation of your internet availability 2. **Contact HMRC** — Call 0300 200 3310 or write to Self Assessment, HM Revenue and Customs, BX9 1AS 3. **Explain your specific circumstances** — Be factual and specific about why you cannot use digital tools 4. **Keep records** — Note the date, reference number, and name of the person you spoke to 5. **Follow up** — If you do not hear back within 28 days, call again with your reference number Do not assume your application will be approved. While waiting for a decision, prepare a contingency plan — identify MTD-compatible software and consider whether an accountant could handle the digital compliance on your behalf.

If you wrongly assume you are exempt and fail to submit quarterly updates through MTD, you will accumulate penalty points under the new points-based penalty system. Each missed quarterly submission earns one point. At four points, you receive a £200 fine — and further missed submissions incur additional £200 penalties. The soft landing period for 2026/27 means HMRC will not issue penalty points for late quarterly updates during the first year. However, the Final Declaration deadline of 31 January 2028 is still enforced, and failing to file your annual return on time carries the standard Self Assessment late filing penalties. If HMRC determines that you deliberately avoided MTD compliance by claiming an exemption you knew you did not qualify for, this could be treated as a failure to comply with a statutory obligation. In serious cases, HMRC can impose behaviour-based penalties of up to 100% of the tax due. The safest approach: if you are unsure whether you qualify for an exemption, assume you do not and prepare to comply. The cost of MTD-compatible software (often free) is far less than the cost of penalties.