HMRC publish new guidance on Making Tax Digital exemptions

With Making Tax Digital (MTD) for income tax soon applying to some self-employed individuals and landlords, those who are digitally excluded are being urged to check whether they can claim an exemption.

What is Making Tax Digital?

Making Tax Digital is a key part of the government’s tax administration strategy – a 10-year plan with the aim of building a ‘trusted and modern’ tax system.

Eventually, all businesses will need to keep digital records by using software that works with MTD and then submit updates every quarter.

This will help to bring the tax system closer to real-time.

If you are self-employed or a landlord, you will be affected from the:

• 6th April 2026 – if you have an annual business or property income of more than £50,000
• April 2027 – if you have an annual business or property income of more than £30,000

New guidance on MTD exemption

HMRC has released new guidance on getting an exemption from MTD for Income Tax.

HMRC describes being digitally excluded as meaning ‘it’s not reasonable for you to use compatible software to keep digital records or submit them to HMRC’.

Examples include:

• Either your age, a health condition or disability that stops you from using a computer/tablet/smartphone to keep digital records or submit them to HMRC.
• Being a practising member of a religious society or order whose beliefs are incompatible with using digital communications or keeping digital records, and you do not use a computer/tablet/smartphone for business or personal use.
• Being unable to get internet access at your home or business because of your location, and you cannot gain access at a suitable alternative location.

Examples of what doesn’t count as a reasonable exemption reason include:

• Being unfamiliar with accountancy software.
• Previously filing a paper return.
• Having a small number of digital records to create each tax year.
• Taking you extra time or cost to sign up to and use MTD for Income Tax.

What if I’m already exempt from MTD for VAT?

Previous rules stated that sole traders and landlords who were exempt from MTD for VAT would automatically be exempt from MTD for Income Tax.

However, HMRC announced a change to how this process will work.

Those who are exempt from MTD for VAT will need to contact HMRC to do the same for MTD for Income Tax.

You can do this by contacting Self-Assessment: general enquiries by phone or writing, and let them know your National Insurance number, VAT registration number, and the reason why you are exempt from MTD for VAT and if your circumstances remain the same.

To find out more about contracting, please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.