As Making Tax Digital continues to expand, many UK businesses, sole traders, and landlords are asking the same question: Is Making Tax Digital mandatory? Is it avoidable? Who can be exempt from MTD?
And The Answer Is: No, you cannot simply avoid MTD, as it is mandatory. However, there are specific criteria and requirements that, if qualified, can help you with MTD exemption. HMRC understands that digital record-keeping may not be reasonably practical for everyone, meaning some people may be able to claim an exemption.
What Does MTD Actually Mean?
Before jumping into avoiding MTD, it is important to understand what MTD actually means. So, MTD is HMRC’s initiative on making the tax system more effective by making taxpayers keep digital records and use compatible software to keep digital records, send quarterly updates to HMRC, and complete their end-of-year tax obligations through the digital system.
Who Does MTD Apply TO?
As MTD is being introduced in stages, the rule will not apply to everyone at the same time.
If you are a sole trader or landlord, you may need to use MTD depending on your qualifying income and the tax year when the rule applies to you.
When To Start Using MTD?
Well, you need to start using MTD depending on your qualifying income from either or both your self-employment and rental income within a tax year.
The following table shows your qualifying income and tax year:
(Qualifying Income = Gross Income)
| TAX YEAR | THRESHOLD | MTD STARTS |
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
NOTE: If your income level for Tax year 2024/2025 is qualified and you haven’t done it already, you can still sign up, and if you need the professionals to do it for you, Shreem Accountants could be the best option.
Still Confused? Hmm?
Let me give an Example:
Imagine John as a sole trader. His Gross trading income for tax year 2024/25 is £55,000, before deducting business expenses.
Because his qualifying income is above £50,000, which means he falls within the first phase of MTD for income tax and needs to comply from 6 April 2026.
Similarly, imagine Sarah is a sole trader and landlord with total qualifying income of £46,000 for the 2024/25 tax year. This consists of £28,000 from her sole-trader business and £18,000 from rental income.
As her qualifying income is below the £50,000 threshold, Sarah would not be required to use MTD for Income Tax from April 2026. However, this does not necessarily mean she will remain outside MTD. The qualifying income threshold is due to reduce to £30,000 from April 2027 and £20,000 from April 2028, meaning Sarah may need to use MTD in a later tax year if her qualifying income remains above the applicable threshold.
NOW THE MAIN QUESTION: CAN SOMEONE BE EXEMPT FROM MAKING TAX DIGITAL?
Yes, you can be exempt from Making Tax Digital, but exemption doesn’t mean that you do not need to report anything. Instead, you must report your regular income and gains in the Self Assessment tax return as usual. In other words, we can say that the exemption can remove the requirement to use MTD for Income Tax, however, it does not remove your tax obligations.
There are different types of exemptions under MTD. Some are automatic, which means you do not need to apply to HMRC. Other exemptions need you to apply to HMRC and explain why you meet the exemption criteria.
Automatic MTD Exemptions :
Partnerships
Partnerships are exempt from having to use Making Tax Digital for Income Tax. HMRC may announce the timetable for when partnerships will need to use MTD in the future. However, if you have your own qualifying income in addition to your partnership activities, you should consider whether the MTD rules apply to that income separately.
Qualifying Income Is £20,000 or Less
If your qualifying income is £20,000 or less, you are automatically exempt from MTD for Income Tax and you do not need to contact HMRC or submit a separate application to claim it.
Not having a National Insurance Number
You may fall under automatic exemption if you do not have a National Insurance number before the start of the relevant tax year.
For example, if you receive your National Insurance number on 30 April 2026 and your qualifying income was more than £50,000 for the 2024/25 tax year, you may be exempt from MTD for income tax for the 2026/27. As this is an automatic exemption, you do not need to apply to HMRC for it.
Role-Based Exemptions
Some people are automatically exempt from MTD because of the tax role they perform. For example, this applies when you submit an SA700 for a non-resident company or an SA900 for a trust, including charitable trusts and trusts of non-registered pension schemes.
It is important to remember that the exemption only applies to MTD. You must still submit the relevant Self Assessment tax return, such as the SA700 or SA900, to HMRC as normal.
Other Automatic Exemptions
You may also be automatically exempt from MTD for Income Tax if, in your 2024/25 Self Assessment tax return, If you:
- Were a member of Lloyd’s and reported underwriting income using the SA103L supplementary page.
- Told HMRC that you are not physically or mentally capable of providing information to HMRC, and you have either a valid power of attorney in the UK or a legally appointed deputy, controller or guardian acting on your behalf.
Automatic Exemptions Until April 2027
Exemptions may apply automatically for the 2026/27 tax year if your 2024/25 tax return included certain claims or supplementary pages.
These include:
- Claiming averaging relief as a farmer, market gardener or someone who personally creates literary or artistic works using the SA103 supplementary page.
- Claiming qualifying care relief, such as a foster carer or kinship carer.
- Including the SA107 supplementary page to report income from trusts or estates.
- Including the SA109 supplementary page.
If one of these applies to you, you do not need to contact HMRC or apply for an exemption.
Automatic Exemptions That Last Beyond April 2027
There are some exemptions that continue beyond April 2027. You are automatically exempt if your 2024/25 tax return included certain claims or supplementary pages such as:
- SA102M if you are a Minister of Religion
- SA103L if you are a Lloyd’s member with self-employment or property income.
- Married Couple’s Allowance received or transferred.
- Blind Person’s Allowance received or transferred.
If you fall under any of these, you do not need to apply for an exemption to HMRC.
NOTE: If you want to understand these supplementary pages in more detail and find out how they may apply to your situation, Shreem Accountants can help you review your circumstances and understand your MTD position.
MTD Exemptions That Require An Application:
Not all MTD exemptions are automatic. There are some situations when you need to apply to HMRC for exemptions if:
If you are digitally excluded:
- Your age, Health condition, or disability is causing difficulty using digital devices,
- Your religious belief is preventing you from using digital channels, or
- Internet access at your location is the issue.
{But simply being unfamiliar with the accounting software, finding MTD costly or time-consuming, doesn’t mean that you are that you qualify for an exemption. HMRC will consider whether there is a genuine reason why you cannot use digital services.}
Our Final Thoughts on mTD exemption
Making Tax Digital is becoming a key part of the UK tax system, but remember not everyone will have to use it immediately, and some may be eligible for an exemption. The important part is to check your qualifying income, MTD start date, and exemption criteria rather than assuming you are automatically included or exempt.
Not sure if an exemption applies to you? Shreem Accountants can help you by understanding your situation and letting you know which rule applies to you.
