Making Tax Digital for Income Tax is now live for some sole traders and landlords, and one of the biggest points of confusion is whether everyone over the threshold has to join.
The short answer is no.
Some people are automatically exempt. Others can apply for an exemption. However, the rules are more specific than many business owners expect, and assuming you are exempt without checking can cause problems later.
In this guide, we explain who may be exempt from MTD Income Tax, when you need to apply, and when you still need to prepare even if digital reporting feels difficult.
Key Takeaway
Some taxpayers are automatically exempt from MTD Income Tax, while others must apply to HMRC.
However, exemption is more limited than many people expect, and difficulty using software alone is not always enough to qualify.
Who This Article Is For
This article is mainly for sole traders, landlords, and individuals with self-employment or property income who are worried that MTD may not be practical for them.
If you are unsure whether MTD applies to you in the first place, that is a separate question. Exemption only matters if you would otherwise be required to use MTD for Income Tax.
What Does Exemption From MTD Income Tax Mean?
An exemption means you do not have to follow the normal MTD Income Tax requirements for the relevant period.
Depending on your circumstances, that may mean:
- You do not need to sign up at all
- You are automatically outside the rules for a period
- You need to apply to HMRC and wait for a decision
The important point is that not all exemptions work in the same way.
Some happen automatically. Others apply only if HMRC accepts your application.
Who May Be Automatically Exempt?
HMRC says some exemptions apply automatically, which means you do not need to contact HMRC to claim them.
Examples include people whose 2024 to 2025 tax return included certain claims or supplementary pages, as well as some individuals whose circumstances place them outside the current MTD rules altogether.
Depending on your situation, automatic exemption may apply if, for example:
- You are in a partnership, because partnerships are not currently required to use MTD for Income Tax
- You did not have a National Insurance number before the start of the tax year
- You are acting as the personal representative of someone who has died
- Your 2024 to 2025 tax return included specific pages or claims that HMRC currently treats as temporarily or automatically exempt
This is one of the easiest areas to misunderstand because the detail matters.
For some categories, the exemption lasts only until April 2027. For others, HMRC says the exemption lasts beyond April 2027 until a later start date is announced.
Examples of temporary automatic exemptions until April 2027 include some taxpayers whose 2024 to 2025 return included:
- Averaging relief
- Qualifying care relief
- Trust or estate income on SA107 pages
- SA109 pages
Examples of exemptions currently expected to last beyond April 2027 include some:
- Ministers of religion
- Lloyd’s members
- Taxpayers claiming Married Couple’s Allowance
- Taxpayers claiming Blind Person’s Allowance
Can You Apply To Be Exempt From MTD?
Yes.
If you are not automatically exempt, you may still be able to apply.
The most important practical category for many business owners is digital exclusion.
This is where it is not reasonable for you to use compatible software to keep digital records and send updates or returns to HMRC.
HMRC gives examples such as:
- Age, disability, or a health condition making it unreasonable to use a computer, tablet, or smartphone for record-keeping or submissions
- Religious beliefs that are incompatible with digital communications or digital record-keeping
- Lack of internet access at your home or business, with no suitable alternative location available
HMRC considers these cases individually.
That means there is no automatic approval simply because the process would feel awkward or inconvenient.
When HMRC Is Unlikely To Approve An MTD Exemption
This is where many readers may need a reality check.
HMRC says it will not accept an exemption application if your only reason is that:
- You used to file a paper tax return
- You are unfamiliar with accounting software
- You only have a small number of records each year
- Using MTD would take more time or cost more money
This matters because many people assume exemption is available simply because digital reporting feels disproportionate.
In practice, HMRC applies a much higher threshold.
What If You Already Have An MTD VAT Exemption?
If HMRC has already confirmed that you are exempt from using MTD-compatible software for VAT because you are digitally excluded, you should contact HMRC rather than assuming the Income Tax exemption automatically carries across.
HMRC says that if your circumstances have not changed, it can confirm that you are also exempt from MTD for Income Tax.
If your circumstances have changed, you may need to make a fresh application.
What If An Accountant Or Agent Handles The Software For You?
This is another area people often overlook.
HMRC says that if your accountant or agent uses compatible software to keep digital records and submit information on your behalf, you may still be able to meet the MTD requirements without needing a digitally excluded exemption.
In other words, difficulty using software personally does not always mean exemption is the best or only solution.
In some situations, supported compliance through an accountant may solve the problem more effectively.
What If You Expect To Qualify For An Exemption Later?
Some exemptions depend on what appears on your tax return.
That means someone may not be automatically exempt based on their 2024 to 2025 return, but may reasonably expect to qualify because of what will appear on their 2025 to 2026 or 2026 to 2027 return.
In those cases, HMRC guidance says you may need to apply rather than assume the exemption applies automatically.
This is one reason quick online searches can produce misleading answers.
Two taxpayers with similar circumstances may need to follow completely different steps depending on what appeared on the earlier tax return.
Should You Stop Preparing For MTD While Waiting For A Decision?
Not necessarily.
If you need to apply for an exemption, HMRC says you should apply at the correct time for your start year.
If you have already signed up and your circumstances later change, HMRC says you should apply for an exemption and continue using MTD for Income Tax while waiting for a decision.
That means waiting for HMRC’s response is not the same as being safely outside the rules.
What Should You Do Now If You Think You May Be Exempt?
A sensible approach is to:
- First confirm whether MTD applies to you at all
- Check whether your exemption is automatic or requires an application
- Review what was actually included on your 2024 to 2025 tax return
- Avoid assuming cost, inconvenience, or limited software knowledge will qualify on their own
- Get advice if your position is unusual or borderline
For many people, the real issue is not whether exemption exists in theory.
It is whether their exact circumstances fit HMRC’s rules.
Frequently Asked Questions
Can I avoid Making Tax Digital?
Some taxpayers may qualify for automatic exemption or may be able to apply for exemption based on specific circumstances such as digital exclusion. However, most people over the threshold will still need to comply with MTD rules.
Is there an age exemption for MTD?
Age alone does not automatically create an exemption. However, if age makes it unreasonable for someone to use digital record-keeping and submissions, HMRC may consider a digital exclusion application.
Can landlords be exempt from MTD?
Yes, in certain situations. Landlords may qualify for automatic exemption, digital exclusion, or other exceptions depending on their circumstances and tax return details.
Does poor internet access qualify for MTD exemption?
Possibly. HMRC says lack of internet access may support a digital exclusion application if there is no reasonable alternative location available.
Do I need to apply for MTD exemption?
Some exemptions apply automatically, while others require a formal application to HMRC. The correct route depends on your circumstances.
Why This Matters Now
This is an increasingly important issue because HMRC’s exemption guidance has become more detailed, and MTD for Income Tax is now live from 6 April 2026 for qualifying individuals over the first threshold.
That creates a clear need for guidance from sole traders and landlords who are hearing about the rules, worrying they cannot manage the software side, and trying to understand whether exemption is realistic.
How AA&R Certified Accountants Can Help
At AA&R Certified Accountants, we help sole traders, landlords, and small business owners understand whether MTD applies, what records they need, and what the most practical compliance route looks like.
If you think you may qualify for an exemption, or if you suspect you do not but still need help finding a workable setup, we can review your position and help you avoid the wrong assumptions.
Need help working out whether MTD applies or whether exemption is realistic?
Contact AA&R Certified Accountants for clear, practical support before deadlines and admin pressures build.