If you are wondering whether you can avoid joining Making Tax Digital for Income Tax, the short answer is: possibly, but only in specific circumstances. HMRC says there are automatic exemptions and exemptions you must apply for. For many sole traders and landlords, the most relevant route is a case-by-case application based on digital exclusion. If you are exempt, HMRC says you must still file your Self Assessment tax return in the usual way.
That distinction matters. A lot of people assume that being less confident with software, keeping only a few records or facing extra admin cost will be enough. HMRC’s current guidance says those reasons alone will not normally qualify. So if you want clarity before the rules affect you, it is sensible to review your position early and get proper advice.
In this guide, Business Help Group UK explains how making tax digital exemptions work under current official guidance, who may need to apply and what was announced in Budget 2026 but is not yet clearly reflected in HMRC’s live exemption guidance.
Who needs to think about Making Tax Digital for Income Tax?
HMRC’s official collection page says people will need to use Making Tax Digital for Income Tax from 6 April 2026 if they are in Self Assessment, have self-employment or property income and have qualifying income of more than £50,000. The same HMRC page also says HMRC will start signing up some taxpayers from September 2026.
That means the issue is most likely to affect:
- sole traders
- individual landlords with property income
- people with both self-employment and property income who are already within Self Assessment
If you are unsure whether you are in scope, do not assume that an exemption is the answer. First establish whether MTD for Income Tax applies to you at all. Exemption only becomes relevant once you know you would otherwise need to follow the MTD rules.
What are the main types of making tax digital exemptions?
HMRC’s guidance on finding out if you can get an exemption from Making Tax Digital for Income Tax says there are two broad types:
- automatic exemptions
- exemptions you need to apply for
For most readers, that second category is where the real question sits. HMRC may accept an application if you are digitally excluded. However, it is not a broad opt-out. The test is fact-specific and HMRC looks at your individual circumstances.
Automatic exemptions
HMRC says some people are already automatically exempt. The current application guidance does not invite everyone to apply first and ask questions later. Instead, it makes clear that some taxpayers are exempt without needing a separate application.
Because HMRC’s live guidance can change, it is worth checking the official page directly if you think you may fall into an automatic category: Apply for an exemption from Making Tax Digital for Income Tax.
The key practical point is this: being automatically exempt is not the same as being outside tax reporting altogether. HMRC says that if you are exempt, you still need to report your income and gains through a Self Assessment tax return as normal.
Exemptions you must apply for
The main application-based route highlighted in HMRC’s guidance is digital exclusion. If your circumstances mean you cannot reasonably use digital tools to meet the MTD requirements, HMRC may agree an exemption. But you should expect HMRC to consider the facts carefully rather than grant it automatically.
HMRC also says you should apply before you need to use MTD for Income Tax. Leaving it too late could create avoidable pressure, especially if you are already trying to work out software, record-keeping and reporting obligations at the same time.
What does HMRC mean by digital exclusion?
This is the area that causes most confusion. HMRC’s official exemption guidance says digital exclusion is decided case by case. That means there is no universal checklist that guarantees success. Instead, HMRC will consider whether it is reasonable to expect you to use digital tools for MTD in your circumstances.
Just as important, HMRC also says it will not accept an application if the only reason is any of the following:
- you previously filed paper tax returns
- you are unfamiliar with software
- you have only a small number of records
- you expect it to take more time or cost more
You can see that wording in HMRC’s official guide: Find out if you can get an exemption from Making Tax Digital for Income Tax.
That is a crucial point for sole traders and landlords. A preference for old systems is not enough. Neither is the argument that digital record keeping feels disproportionate for a simple business. HMRC’s current position is that inconvenience alone does not amount to digital exclusion.
Situations where digital exclusion may be more relevant
HMRC’s public guidance on this point is deliberately high level, so it is wise not to overstate what will qualify. Broadly, where someone genuinely cannot use digital systems reasonably because of their circumstances, that is where an application may have substance.
If you believe that applies to you, your case should be presented carefully and supported by the facts. The stronger the explanation of why MTD cannot reasonably be used in practice, the better.
If you are exempt, do you still need to file a tax return?
Yes. HMRC’s application guidance says that if you are exempt from MTD for Income Tax, you must still report your income and gains in a Self Assessment tax return as normal. Exemption changes how you comply with reporting obligations, not whether you have to comply at all.
That is important because some taxpayers hear the word “exempt” and assume they no longer need to do anything under Self Assessment. That is not what HMRC says. You may be exempt from the digital MTD process while still remaining fully responsible for accurate tax reporting.
How do you apply for an MTD exemption?
HMRC has a dedicated page on how to apply for an exemption from Making Tax Digital for Income Tax. The practical message from that page is straightforward:
- check first whether you are already automatically exempt
- if not, apply before you are required to use MTD for Income Tax
- if HMRC agrees you are exempt, continue filing Self Assessment in the normal way
For many people, the most important part of the process is timing. If you suspect you may need to apply, do not wait until the last minute. Early action gives you time to review your status, prepare your reasons properly and decide what to do if HMRC does not agree.
Why early advice matters
There is a commercial as well as compliance angle here. If you are not exempt, you may need to choose software, change your record-keeping process and plan for ongoing submissions. If you are exempt, you will want confidence that you can continue with the right alternative reporting approach.
Either way, leaving the issue unresolved can create unnecessary stress and potentially lead to avoidable mistakes.
What was announced in Budget 2026 about exemptions?
Budget 2026 included an announcement on MTD for Income Tax exemptions. According to the government’s Budget 2026 Overview of Tax Legislation and Rates, the government said it will exempt:
- qualifying care relief claimants
- non-UK resident foreign entertainers and sportspeople
- expected non-resident customers
The same Budget document says these groups will be exempt until further notice and that secondary legislation will be introduced before April 2027.
However, this point needs careful handling. Based on the official sources provided here, that Budget measure should be treated as an announcement, not as something clearly shown in the current live HMRC exemption guidance. In other words, it may become law through later legislation, but readers should not assume the position is already fully enacted just because it appears in a Budget publication.
That distinction matters if you think you may fall into one of those groups. You should check the latest live HMRC and legislative position before acting on it.
Common misunderstandings about making tax digital exemptions
“I only have a very small business, so I must be exempt”
Not necessarily. HMRC says a small number of records on its own is not a valid reason for a digital exclusion exemption.
“I have always filed on paper, so HMRC should let me continue”
Again, not on that reason alone. HMRC’s guidance expressly says prior paper filing by itself is not enough.
“Software will cost me money, so I can claim exemption”
No. HMRC says expecting additional time or cost alone is not a reason it will accept.
“I am not good with technology, so I qualify automatically”
Not automatically. HMRC says being unfamiliar with software alone is not enough. The issue is whether you are genuinely digitally excluded in a way HMRC accepts on the facts.
What should sole traders and landlords do now?
If you are a sole trader or landlord who may come within MTD for Income Tax, a sensible next step is to work through the issue in this order:
- confirm whether MTD for Income Tax is expected to apply to you
- check whether you may already be automatically exempt
- if not, consider honestly whether there is a credible digital exclusion case
- if you may need to apply, do it before you are required to use MTD
- if exemption looks unlikely, start preparing for compliant digital record keeping and reporting
This approach helps avoid the worst of both worlds: missing an exemption you were entitled to or assuming you qualify when HMRC would not accept the reason.
For many taxpayers, the practical decision is less about finding a way around MTD and more about choosing the least disruptive route. Sometimes that will mean applying for exemption. In many other cases, it will mean getting set up properly so compliance feels manageable.
FAQ: Making Tax Digital exemptions
Can I get an exemption from MTD just because I am not confident with software?
Usually not on that reason alone. HMRC says it will not accept an application where the only reason is that you are unfamiliar with software. The relevant official guidance is here: Find out if you can get an exemption from Making Tax Digital for Income Tax.
Do I still have to file a Self Assessment tax return if I am exempt from MTD?
Yes. HMRC says that if you are exempt, you must still report your income and gains in a Self Assessment tax return as normal. See HMRC’s application page: Apply for an exemption from Making Tax Digital for Income Tax.
Should I wait until HMRC contacts me before applying for exemption?
HMRC says you should apply before you need to use MTD for Income Tax. Leaving it until later may make planning harder and could reduce the time available to put an alternative compliance process in place if HMRC does not agree.
Are the Budget 2026 exemption changes already in force?
Do not assume so based only on the Budget announcement. The Budget 2026 document says secondary legislation will be introduced before April 2027, which indicates a future legislative step. Check the latest official position before relying on those announced exemptions.
Final thoughts
Making Tax Digital exemptions are real, but they are not a general escape route from digital reporting. HMRC currently recognises automatic exemptions and application-based exemptions, with digital exclusion being the key route many people ask about. Just as importantly, HMRC is clear that extra cost, extra time, a small number of records or simple lack of software confidence will not by themselves be enough.
If you are not sure whether you are exempt, whether MTD for Income Tax applies to you or how to prepare if it does, Business Help Group UK can help you review the position calmly and practically. If you want tailored support on your next steps, get in touch with Business Help Group UK for advice based on your circumstances.
