MTD income tax will be phased in for sole traders and landlords with total qualifying income from those activities of: 

• £50,000 or more for 2024/25, from April 2026;
• £30,000 or more for 2025/26, from April 2027; and
• £20,000 or more for 2026/27, from April 2028.  

Taxpayers that are required to comply with MTD income tax must use compatible software to keep digital records and submit quarterly returns to HMRC.  

Where a person satisfies HMRC that they are digitally excluded, or are automatically excluded for another reason, they do not need to comply with MTD income tax and should continue to submit an income tax self assessment tax return.  

Who is digitally excluded?

The legislation provides that a taxpayer is digitally excluded where:

• they are “a practising member of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records”; or
• “it is not reasonably practicable” for them “to use electronic communications or to keep electronic records”. This could be for “any reason … including age, disability or location”. 

HMRC says that it will not accept that a person is digitally excluded where the only reason they are applying for exemption is because they:

• previously submitted a paper tax return;
• are unfamiliar with accountancy software;
• only have a small number of digital records to create each tax year; or
• are concerned about the time and/or cost pressures of signing up and using MTD income tax. 

Where the taxpayer has help from another person, including an agent, the exemption is still based on their personal circumstances. However, where the agent can keep digital records and file quarterly updates on the taxpayer’s behalf, HMRC says that they should speak with their agent as they may not need to apply for an exemption.

Interaction with VAT exemption

Where HMRC has previously confirmed that the taxpayer is exempt from sending VAT returns using MTD compatible software, the taxpayer should call or write to HMRC with details of:

• their national insurance and VAT registration numbers;
• the reason why they are digitally excluded from sending VAT returns using MTD compatible software and if their circumstances have changed. 

If their circumstances have not changed, HMRC will confirm that they are also exempt from MTD income tax. If they have changed, the taxpayer will need to apply for an exemption. 

If the person is exempt from sending VAT returns using MTD compatible software solely because of an insolvency procedure, they will need to use MTD income tax.

Applying for exemption

Where a taxpayer believes that they are digitally excluded, they must apply for an exemption from HMRC. It is possible for someone to apply on their behalf, for example, an agent or friend.

The application should be made in advance of the relevant start date by calling or writing to HMRC. HMRC’s guidance includes suggested timeframes for submitting applications based on the dates that taxpayers expect to be mandated to use MTD income tax. 

HMRC’s guidance sets out the information that the taxpayer, or the person acting on their behalf, will need to provide. HMRC aims to respond by letter within 28 days of receiving the application. If the taxpayer disagrees with HMRC’s decision, they have 30 days from the date of the letter to appeal. 

HMRC says that taxpayers should continue to prepare for MTD income tax while waiting for confirmation that they qualify for exemption.  

If circumstances change 

If the taxpayer has signed up for MTD income tax voluntarily and they have become digitally excluded, they should opt out using their HMRC online services account.  

Where HMRC has confirmed that a taxpayer is digitally excluded and so exempt from using MTD income tax, and their circumstances change with the result that they are no longer digitally excluded, they should inform HMRC. The letter from HMRC confirming the exemption will explain how to do this.  

Automatic exclusions 

A person is automatically exempt from MTD income tax for a tax year in specified circumstances, including where they: 

• are completing a tax return for that year as a trustee or as a personal representative of someone who has died;
• don’t have a national insurance number on 31 January before the start of that tax year; or
• are a Lloyds member, but only in relation to their underwriting business.  

There is also an automatic exemption for non-resident companies.  

HMRC’s says that it will provide further information on other exemptions and deferrals in the future.   

Further information 

• Find out if and when you need to use Making Tax Digital for Income Tax - GOV.UK
• Find out if you can get an exemption from Making Tax Digital for Income Tax - GOV.UK 
• Apply for an exemption from Making Tax Digital for Income Tax if you are digitally excluded - GOV.UK