Making Tax Digital: Will you be exempt from completing quarterly reports?

For taxpayers who qualify, it introduces a requirement to keep digital records and submit quarterly updates for rental or sole trade income.

The intention behind Making Tax Digital (MTD) is for qualifying taxpayers to report their income every three months, rather than waiting until the end of the tax year.

In return, HMRC will provide an estimate of the tax that may be due after each quarter. It is important to note that this estimate only relates to rental or sole trade income and does not take into account any reliefs or allowances. However, it can still be useful when planning for the tax that will ultimately at the end of the tax year.

How exemptions work

HMRC recognises that digital reporting will not be suitable for everyone and has introduced a number of exemptions. These fall into two broad categories. Some exemptions apply automatically, while others require an application to HMRC. In addition, some exemptions apply indefinitely, while others are only available for a fixed period.

Automatic exemptions (no application required)

You may be automatically exempt in the following situations:

• No qualifying income If you have no rental or sole trade income, or your income is below the qualifying threshold for the relevant tax year.
• Partnerships and LLPs These are currently outside the scope of MTD for Income Tax. HMRC has confirmed that MTD will be extended to Partnerships and LLPs in the future, but no implementation date has been set.
• No National Insurance number If you do not have a National Insurance number in place by January before the end of the tax year, you will be automatically exempt.
• Trustees, executors and personal representatives These roles are exempt from MTD. However, if you also have qualifying income in your own name, you will still need to comply.
• Personal representatives of someone who has died This status is automatically excluded from MTD requirements.
• Lack of capacity with Power of Attorney in place Where a taxpayer lacks physical or mental capacity and has an enduring or lasting Power of Attorney, exemption will apply.

Exemptions that require application

In other cases, you will need to apply to HMRC for exemption. Examples include:

• Digital exclusion This may be due to age, disability, or a health condition that makes it difficult to use digital tools.
• Religious beliefs Where your beliefs are incompatible with the use of electronic communications.
• Remote location If you live or work in an area without reliable internet access.

Each application is considered on its own merits, so it is important to clearly explain your circumstances.

Temporary exemptions

Some exemptions apply only for a limited period and may change over time.

Automatic but fixed-term exemptions

• Ministers of religion or members of the clergy completing supplementary pages
• Individuals claiming Married Couples Allowance or Blind Persons Allowance
• Lloyd’s underwriters

Automatic exemptions until April 2027

• Income received from a Trust or Estate
• Averaging adjustments, including farmers and individuals in creative industries (musicians, writers, artists etc).
• Foster carers claiming care relief
• Non-residents, where this has been declared to HMRC and is expected to continue

These exemptions may be reviewed as MTD expands further.

Common misunderstandings

A common misconception is that being exempt from MTD for VAT also means you are exempt from MTD for Income Tax. This is not the case. Separate rules apply, and you may still need to apply for exemption for Income Tax. Another misunderstanding is that submitting paper tax returns alone will qualify you for exemption. HMRC does not accept this as a valid reason. Similarly, a lack of experience with digital tools or concerns over software costs will not, on their own, qualify for exemption.

Applying for an exemption

If you believe you may qualify for an exemption, it is important to act early. If you are required to keep digital records from April 2026, you should apply as soon as possible. If you are not due to join MTD until a later tax year, you can apply closer to the time, but it is still worth reviewing your position in advance. Applications can be made directly to HMRC or through your agent.

• By phone: HMRC helpline on 0300 200 3310
• In writing: by submitting a request to HMRC
• Through an agent: your accountant or adviser can apply on your behalf

You can also find further guidance and application details on GOV.UK.

What happens after you apply

Once your application has been submitted, HMRC will review your case and respond in writing. HMRC aims to respond within 28 days, although this may take longer if further information is required. If your application is successful, HMRC will confirm:

• that your exemption has been granted
• how long the exemption will apply

If your application is not accepted, you have the right to appeal within 30 days of the date on HMRC’s decision letter.

Important points to be aware of

While your application is being considered, you are still required to comply with MTD. This means you must continue to keep digital records and submit updates unless and until HMRC confirms your exemption. If your circumstances change in the future and you no longer qualify for an exemption, it is your responsibility to inform HMRC. Even if you are granted an exemption from MTD, you may still need to complete a Self Assessment tax return if you meet the usual criteria.

Frequently Asked Questions

Are all exemptions automatic?

No. Some apply automatically, but others require an application.

Does using paper records qualify for exemption?

No. HMRC does not accept this as a valid reason.

Can exemptions be temporary?

Yes. Some exemptions apply only for a limited period.

Need help understanding your position?

Exemptions under Making Tax Digital are not always straightforward, and the detail can make a significant difference. If you are unsure whether you qualify, or would like help applying, we can guide you through the process and help you navigate the way with clarity and confidence.