Most sole traders and landlords with qualifying income above the MTD threshold must join Making Tax Digital for Income Tax. However, some taxpayers are automatically exempt, and others can apply for an exemption. If you are exempt, you continue filing your annual Self Assessment return as normal — you just do not have to keep digital records or send quarterly updates through MTD software.
What Is an MTD Exemption?
An MTD exemption removes the requirement to use Making Tax Digital for Income Tax — you continue filing an annual Self Assessment return as normal, without digital records or quarterly updates. Exemptions are either automatic (based on information HMRC already holds, such as your qualifying income being £20,000 or less) or applied for (usually based on digital exclusion — age, disability, religious belief, or lack of internet access). Being exempt does not mean you don’t file a tax return; it means you don’t use MTD software to do it.
Types of MTD Exemption
Exemptions for MTD for Income Tax fall into two main groups:
- Automatic exemptions — given by HMRC based on information they already hold. You do not need to apply.
- Exemptions you apply for — usually based on being digitally excluded. You must contact HMRC and explain why.
Both types can be:
- Permanent — unless your circumstances change
- Temporary — lasting until April 2027 at the earliest
Automatic Exemptions
Income-based exemption
You are automatically exempt if your qualifying income is £20,000 or less. This is the lowest MTD threshold, so if you are below it, you do not need to join MTD unless your income rises. Use our MTD qualifying income calculator to check whether you need to register. According to HMRC’s guidance on who needs to use MTD for Income Tax, qualifying income is your self-employment turnover plus UK property income, gross before expenses.
Worked example: A sole trader with £18,000 in self-employment turnover and £2,000 in expenses has qualifying income of £18,000 (gross turnover, not profit). This is below £20,000, so they’re automatically exempt. They continue filing Self Assessment as normal. If their turnover rises to £25,000 the following year, they’re still exempt (below £20,000 is the floor, not the ceiling — but they should check the threshold for their phase). See our MTD qualifying income thresholds guide for the full threshold structure.
No National Insurance number
If you do not have a National Insurance number before the start of the tax year, you are automatically exempt for that year. For example, if you receive one on 30 April 2026, you would be exempt for 2026 to 2027 but may need to join later if your income is above the threshold.
Worked example: A non-UK resident who starts a UK self-employment in May 2026 and doesn’t receive a National Insurance number until October 2026 is exempt for the 2026/27 tax year. From 2027/28, if their qualifying income is above the threshold, they need to join MTD.
Role-based exemptions
The following entities are automatically exempt because they submit specific Self Assessment returns:
- Non-resident companies submitting an SA700
- Trusts submitting an SA900, including charitable trusts and trusts of non-registered pension schemes
- Personal representatives of someone who has died
If you also have your own self-employment or property income, you may still need to use MTD for that personal income. The exemption applies to the entity type, not to all income you receive.
Worked example: A trustee of a charitable trust (SA900) who also runs a sole trader business with £60,000 turnover is exempt from MTD for the trust’s tax affairs, but must use MTD for their self-employment income because it’s above the £50,000 threshold.
Exemptions based on your 2024 to 2025 tax return
You are automatically exempt if your 2024 to 2025 tax return included:
- The SA103L supplementary page as a Lloyd’s member
- A declaration that you are not physically or mentally capable of providing information to HMRC and have either a valid power of attorney or a legally appointed deputy, controller or guardian
These exemptions are permanent unless your circumstances change.
Worked example: A Lloyd’s member who files an SA103L as part of their 2024/25 return is permanently exempt from MTD for Income Tax. Even if their circumstances change (e.g., they stop being a Lloyd’s member), the exemption continues until HMRC reviews it. If they also have self-employment income from a separate business, that business is not exempt — only the Lloyd’s-related income is covered.
Temporary automatic exemptions (until April 2027)
You do not need to use MTD for 2026 to 2027 if your 2024 to 2025 tax return included:
- Averaging relief as a farmer, market gardener or creator of literary or artistic works using the SA103 page
- Qualifying care relief (for example, foster or kinship carers)
- The SA107 supplementary page for income from trusts or estates
- The SA109 supplementary page for non-residence
These exemptions are temporary. You will need to join MTD from 2027 to 2028 onwards if your qualifying income is above £30,000.
Worked example: A foster carer claiming qualifying care relief on their 2024/25 return is exempt from MTD for 2026/27. From 2027/28, if their qualifying income (self-employment plus property) is above £30,000, they need to join MTD. The exemption gives them one extra year to prepare.
Longer automatic exemptions
You are automatically exempt if your 2024 to 2025 return included:
- The SA102M page because you are a Minister of religion
- The SA103L page because you are a Lloyd’s member with self-employment or property income
- Married Couple’s Allowance (for those born before 6 April 1935)
- Blind Person’s Allowance
HMRC will set out the future timeline for these at a later date. These exemptions have no fixed end date — they continue until HMRC announces a change or your circumstances change.
Exemptions You Need to Apply For
Digital exclusion
You can apply for an exemption if it is not reasonable for you to use MTD-compatible software. This is called digital exclusion. According to HMRC’s guidance on applying for an MTD exemption, HMRC may grant it if:
- Your age, disability or health condition stops you using a computer, tablet or smartphone
- You are a practising member of a religious society or order whose beliefs are incompatible with digital communications, and you do not use such devices for business or personal use
- You cannot get internet access at home, work or any suitable alternative location
What HMRC will not accept
HMRC will not grant a digital exclusion exemption just because:
- You previously filed a paper return
- You are unfamiliar with accounting software
- You have only a small number of records
- It would take extra time or cost to comply
Each application is considered on a case-by-case basis, so you should explain your specific circumstances clearly. The key test is whether it is reasonable for you to use digital tools, not whether it is convenient.
Worked example: A 78-year-old sole trader with no internet access at home and no smartphone could apply for digital exclusion based on age and lack of internet access. HMRC would consider whether they could reasonably access the internet at a library or community centre. If there’s no suitable alternative, the exemption is likely. A 45-year-old sole trader who “doesn’t like computers” would not qualify — the objection is preference, not capability.
How to Apply for an MTD Exemption
You can apply for an exemption from MTD for Income Tax by contacting HMRC. An agent, friend or family member can apply on your behalf if they have the right authorisation.
You should apply before the date you would otherwise need to start using MTD. HMRC will tell you whether the exemption is permanent or temporary.
The application process:
- Contact HMRC through the official GOV.UK exemption application service.
- Explain your circumstances — why it is not reasonable for you to use MTD-compatible software, or which exemption category you fall into.
- Provide evidence if applicable — for example, medical evidence of a health condition, or proof of lack of internet access.
- Wait for HMRC’s decision — they will tell you whether the exemption is permanent or temporary, and when it expires (if temporary).
If your application is refused, you can appeal. See our appeal HMRC penalty guide for the general appeal process — the same principles apply to exemption refusals.
What Happens When Your Circumstances Change
Exemptions are not always permanent. If your circumstances change, you must tell HMRC.
Income changes: If your qualifying income rises above the threshold for your phase, you lose the income-based exemption and must join MTD. Check your qualifying income each tax year — it’s based on the previous year’s figures. See our MTD qualifying income thresholds guide.
Health or disability changes: If you received a digital exclusion exemption based on a health condition that later improves, HMRC may review the exemption. You’re not required to proactively report improvement, but if HMRC asks, you must respond honestly.
Temporary exemptions expiring: If you received a temporary exemption (until April 2027), you need to join MTD from 2027/28 if your qualifying income is above £30,000. HMRC should notify you before the exemption expires, but don’t rely on this — set a reminder yourself.
Role-based changes: If you stop being a Lloyd’s member, a Minister of religion, or a foster carer, your role-based exemption may no longer apply. Contact HMRC to confirm your status.
The Bottom Line
Exemption from MTD does not mean exemption from tax. If you are exempt from MTD, you must still file a Self Assessment tax return each year and pay tax by the usual deadlines. You simply avoid the quarterly digital update requirement.
Most sole traders and landlords with qualifying income above the threshold will not be exempt. But if you fall into one of the automatic categories or are genuinely digitally excluded, it is worth checking your position before the MTD start date. The income-based exemption (£20,000 or below) is the most common — if your qualifying income is low, you may not need to do anything at all.
For the full MTD overview, see our Making Tax Digital guide. For threshold details, see MTD qualifying income thresholds. For the full MTD filing process, see our how to file MTD guide. For the full jargon buster, see our HMRC jargon buster.