MTD for Income Tax Exemptions: What to Check in 2026

Check the exemption position before setting up MTD

Making Tax Digital for Income Tax is not a universal digital filing rule. HMRC’s current exemption guidance separates cases that are applied automatically from cases where the taxpayer needs to apply and explain why the exemption should apply.¹

An exemption means MTD for Income Tax is not required, but it does not remove the obligation to report income and gains through Self Assessment in the normal way.¹ That is the central distinction: an exemption changes the reporting route, not necessarily the underlying tax-return responsibility.

Automatic exemptions are not an application exercise

HMRC says that automatic exemptions are based on the information it holds, so no application is needed. Examples include qualifying income of £20,000 or less, not having a National Insurance number before the start of the tax year, and certain role-based returns such as trusts or estates.²

Partnerships do not currently have to use MTD for Income Tax; HMRC says it will set out their future timeline separately.³ There are also time-limited automatic exemptions for some taxpayers whose 2024/25 return included specified claims or supplementary pages, and longer exemptions for some other circumstances. The detail depends on the return and the person’s expected circumstances, so it is important not to apply a broad label such as “farmer” or “non-resident” without checking the published criteria.

Digital exclusion is assessed on personal circumstances

HMRC describes digital exclusion as a situation where it is not reasonable for someone to use compatible software to keep digital records, send quarterly updates or submit their tax return. Age, a health condition or disability can be relevant; a practising member of a religious society whose beliefs are incompatible with digital communication may also qualify in the stated circumstances.⁴

HMRC is equally clear about reasons that are not enough on their own: having filed paper returns before, unfamiliarity with accountancy software, having few digital records, or the extra time or cost of using MTD.⁴

The decision is made case by case. If an agent, friend or family member applies, HMRC says the exemption is still based on the taxpayer’s personal circumstances.⁴

A sensible sequence

Start with the submitted 2024/25 return and current circumstances. Check whether HMRC should already identify an automatic exemption. If not, read the relevant application criteria and provide the information HMRC requests rather than simply declining to sign up.

Someone already exempt from MTD-compatible VAT software because they are digitally excluded should contact HMRC with the information specified in its guidance; HMRC says it can confirm the Income Tax exemption where circumstances have not changed. An insolvency-based VAT exemption does not carry across to MTD for Income Tax.⁵

This is a factual eligibility question with consequences for the filing route. Where the facts are complicated, take professional advice before assuming either that an exemption applies or that it does not.