Taxpayers are exempt from MTD income tax in certain circumstances. The exemptions can be complicated to understand as: 

• some apply automatically and some must be applied for; and 
• some are temporary, lasting until April 2027 at the earliest, and some apply permanently, or at least until the person’s circumstances change.  

HMRC has updated its guidance on exemptions from MTD income tax to clarify some areas and to better reflect the legislation. This follows feedback from professional bodies and others, including ICAEW. The main changes relate to taxpayers who complete the SA109 supplementary page (Residence and foreign income and gains regime, etc) in the self assessment tax return. 

Taxpayers completing the SA109 

The updated guidance explains that:  

1. where the taxpayer included the SA109 page in their 2024/25 tax return, they are automatically exempt from MTD income tax for 2026/27; and
2. where the taxpayer did not include the SA109 page in their 2024/25 tax return, they can apply to HMRC for exemption from MTD income tax for 2026/27 if they reasonably believe that they will include the SA109 page in either of their 2025/26 and 2026/27 tax returns.  

Prior to the update: 

• the guidance on automatic exemption (point 1, above) included reference to a requirement for the taxpayer to believe that it is likely they will include the SA109 page in their tax return for 2026/27. This reference has now been removed; and
• the guidance on applying for an exemption (point 2, above), did not include a reference to the 2025/26 tax return. This has now been added, for the purposes of the SA109 and for other temporary exemptions (eg, where a claim is made for averaging relief or qualifying care relief, or in the case of income from trusts or estates).  

Further, more examples have been added to the list of reasons why a taxpayer may complete the SA109 page. It is understood that the list is not intended to be exhaustive. 

Other exemptions 

The updated guidance also: 

• explains that partners who claimed averaging relief using the SA104 page in their 2024/25 tax return are automatically exempt from MTD income tax for 2026/27 if they would otherwise have to use MTD income tax (eg, for property income); 
• clarifies that a taxpayer who does not have a national insurance number before the start of a tax year is automatically exempt from MTD income tax for that tax year; and 
• includes reference to terminology used across UK, and more closely aligns with the legislation, in explaining the automatic exemption applying where a person has given someone power of attorney to act on their behalf or where a legally appointed deputy, controller or guardian is in place.