Making Tax Digital Exemptions: Who Can Apply
HMRC has released clearer guidance on who can apply for a Making Tax Digital exemption. Here's what qualifies — and what doesn't.
Making Tax Digital for Income Tax is getting closer, and for many sole traders and landlords across Cornwall and the UK, it's going to completely change how records are kept and reported to HMRC.
But what happens if you genuinely cannot use digital software? HMRC has now released clearer guidance on how taxpayers can apply for an exemption from Making Tax Digital (MTD) if they are considered digitally excluded.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax means certain sole traders and landlords will need to keep digital accounting records, use compatible software, submit quarterly updates to HMRC, and file a final year-end declaration digitally.
The rollout is happening in stages:
- April 2026: for those with qualifying income over £50,000
- April 2027: threshold drops to £30,000
- April 2028: threshold drops to £20,000
For many businesses, this means moving away from spreadsheets, paper records, or handwritten notebooks.
Who Can Claim an MTD Exemption?
HMRC says you may qualify for an exemption if using digital systems is not reasonably practical. This can include situations involving age, disability, a location with poor internet access, or religious beliefs that prevent the use of electronic communications. For example, someone living in a rural area with unreliable internet access may potentially qualify if digital filing genuinely cannot be carried out effectively.
What Does NOT Count as Digital Exclusion?
This is important because HMRC has been very clear on what they will not accept as a reason for exemption. The following reasons alone are unlikely to qualify: preferring paper tax returns, not understanding accounting software, only having a few transactions each year, or concerns over cost or time involved with MTD. In short, HMRC expects most businesses to adapt to digital record keeping unless there is a genuine barrier.
Already Exempt From MTD for VAT?
If you already have an exemption from Making Tax Digital for VAT, the process may be simpler. HMRC says you should contact them with your National Insurance number, your VAT registration number, and confirmation that your circumstances have not changed. If approved previously, HMRC may extend the exemption to MTD for Income Tax too. However, if your VAT exemption was only because of insolvency procedures, this will not automatically exempt you from MTD for Income Tax.
How to Apply for an MTD Exemption
Applications need to be made directly to HMRC either by phone or in writing. You can apply yourself or ask your accountant to act on your behalf. HMRC says they aim to respond within 28 days. If your application is rejected, you normally have 30 days to appeal the decision.
Important Deadline Warning
If you are due to enter MTD from April 2026, it is sensible to apply well before the deadline. Leaving it too late could create uncertainty right before the rules begin.
What Should You Do While Waiting?
HMRC recommends continuing to prepare for MTD while your application is being reviewed. That means keeping accurate records and making sure your bookkeeping is up to date. Even if you expect to qualify for an exemption, it is still worth having organised records in case your application is declined.
Some People Are Automatically Exempt
Certain groups may automatically fall outside MTD requirements, including some trustees and personal representatives, people without a National Insurance number before the qualifying date, certain non-resident companies, and Lloyd's members for underwriting activities. HMRC has said more guidance on exemptions and deferrals may follow.
Do You Even Need an Exemption?
In many cases, people worry about MTD when actually their accountant can handle the software and submissions for them. If your accountant manages your bookkeeping and quarterly submissions, you may not need to apply for an exemption at all. At Kernow Accountancy, we are already helping businesses and landlords prepare for Making Tax Digital with simple, clear support and software solutions that work for real people, not just tech experts.
Final Thoughts
Making Tax Digital is one of the biggest changes to the UK tax system in years. For some people, digital reporting simply may not be realistic, and HMRC does allow exemptions where there is a genuine reason. But the key thing is to act early. If you think you may qualify for an exemption, or you are unsure how MTD will affect you, getting advice now could save a huge amount of stress later.
Need help understanding whether MTD applies to you? Speak to Kernow Accountancy on 01326 377104 and we'll help you understand your options in plain English.