Digital exclusion exemption from Making Tax Digital

Making Tax Digital for Income Tax requires self-employed people and landlords to keep records and send quarterly updates using compatible software. Some people cannot reasonably do that. If you have been told you must join but you cannot use a computer to keep your records, you can apply to HMRC for an exemption as a digitally excluded taxpayer¹.

An exemption changes how you report, not what you owe. Exempt taxpayers carry on filing a Self Assessment tax return, and the tax is still due by the usual deadline of 31 January following the end of the tax year¹. The exemption is not automatic and it is not permanent: HMRC looks at each case on its own facts, and exemptions are considered year by year⁴.

The rules are being phased in by income. Making Tax Digital for Income Tax currently applies to self-employed people and landlords with qualifying income over £50,000 a year, from April 2026⁶. The threshold falls to £30,000 from April 2027 and to £20,000 from April 2028⁷.

Who can be exempt from Making Tax Digital as digitally excluded

The exemption that most people ask about is digital exclusion. Guidance for taxpayers describes it as covering people who cannot reasonably comply with the requirements, and lists three broad situations: age, disability or a medical condition that makes using electronic communications difficult; no reliable internet access, including living in a remote area with poor broadband; and religious beliefs that prohibit the use of electronic devices⁴.

Alongside digital exclusion there is a separate list of people who are outside Making Tax Digital for Income Tax altogether. That list includes trustees and personal representatives, individuals without a National Insurance number, non-resident companies, Lloyd's underwriters, ministers of religion, people receiving certain allowances such as a blind person's allowance, and foster carers whose only income is from fostering⁴. Some of these are described elsewhere as automatic exemptions, in particular not having a UK National Insurance number and being a foster carer⁸.

The distinction matters. If you fall into one of the automatic categories, you do not have to make a case about your circumstances. If you are claiming digital exclusion, you do, and HMRC decides. Exemptions of this kind apply on a year-by-year basis, so a decision that covered one year does not automatically cover the next⁴.

Exemption from MTD for VAT does not carry over automatically

Making Tax Digital began in 2019 for VAT-registered businesses with turnover above £85,000, and it now covers all VAT-registered businesses whatever their turnover unless HMRC gives an exemption⁹. An exemption from Making Tax Digital for VAT is a decision about VAT. It does not transfer to Making Tax Digital for Income Tax, which is a separate regime with its own application route⁴.

That means someone who has been exempt from digital VAT reporting for years still has to contact HMRC again when income tax reporting applies to them. The application is made to the self-assessment helpdesk, by phone or in writing, and letters should be headed either "Making Tax Digital for Income Tax, digitally excluded application" or "Making Tax Digital for Income Tax, exemption application"⁴. An agent can apply on a client's behalf through the Agent Dedicated Line⁴.

It is worth being clear about what is being asked. The requirement is to use registered MTD-compatible software, and HMRC does not provide its own software for taxpayers to use; it is offered by third-party companies¹¹. An exemption is a recognition that you cannot reasonably meet that requirement, not a preference for paper.

How to apply for a digital exclusion exemption

The application is deliberately low-tech. You contact HMRC by phone or by letter, and a friend or family member can help you do it⁵. There is no online form to complete, which is the point.

Information is needed to support a digital exclusion claim when it is made. If sufficient information is not provided, the application may be rejected or HMRC may come back and ask for more evidence, and HMRC may verify what has been said⁵. In practice that means being ready to explain, in your own words, what stops you using software: a condition and how it affects you, the broadband situation where you live, or the religious belief involved.

Exempt taxpayers still file a Self Assessment return

An exemption from Making Tax Digital does not take you out of the tax system. Exempt users must continue to report income and gains in a Self Assessment tax return¹. The same applies to anyone signed up to Making Tax Digital for Income Tax: they still need to submit their Self Assessment tax return and pay any tax owed by 31 January 2027¹³.

The deadlines are the ordinary Self Assessment deadlines. Your return is due by 31 January following the end of the tax year, and your bill is payable by midnight on 31 January³. If you make payments on account, the second instalment falls due on 31 July¹⁵. Where you have income that is not taxed through PAYE, you need to tell HMRC by filing a Self Assessment return¹⁶.

Two practical points for paper filers. HMRC will not send you a paper return if you filed online in the previous year, so if you have switched to paper you may need to request one¹⁷. And where a payment such as the Winter Fuel Payment is involved, online filers have it included automatically on the 2025 to 2026 return, while paper filers must include it themselves¹⁸.

MTD thresholds: £30,000, then £20,000

Making Tax Digital for Income Tax is being brought in by income bands rather than all at once. The current scope covers self-employed people and landlords with qualifying income over £50,000 a year⁶. From 6 April 2027 it extends to those with turnover above £30,000 in 2025-26, and from 6 April 2028 to those with turnover above £20,000 in 2026-27².

Below the threshold, nothing changes. There are currently no plans to introduce Making Tax Digital reporting requirements for those earning less than £20,000 a year, and they continue under Self Assessment⁴. That is why an exemption application is only needed by someone who has been notified that they must join but cannot use a computer to keep their records².

The thresholds have been contested. The Office for Tax Simplification recommended that HMRC should not go ahead with Making Tax Digital until certain issues had been resolved¹⁰. The thresholds themselves have not moved in response.

Will the new penalty system apply to me if I am exempt?

The penalty system being built for Making Tax Digital is points-based, so that you do not get a financial penalty if you are late once or twice². While the temporary measure applies, the penalty threshold is two points⁷. The draft legislation for Making Tax Digital for Income Tax and penalty reform was introduced in July 2025¹⁹.

If you are exempt and file a Self Assessment return instead, the ordinary Self Assessment penalties for late filing and late payment apply to you, not the points system. That is the trade-off an exemption carries: you avoid the software requirement, but you stay inside the older penalty rules and the paper timetable.

If you are struggling to pay a Self Assessment bill, HMRC's online payment plan is available where all your tax returns are up to date²⁰. Free, impartial help is available from TaxAid and from the tax charities if you cannot afford to pay.