The MTD Notebook · Exemptions · 10 August 2026

MTD exemptions and digital exclusion: who can actually opt out

Most of the noise about Making Tax Digital for Income Tax assumes everyone with a small trade or a rental is being dragged in. A good number are not — some are exempt automatically and never have to lift a finger, and a smaller group can apply to be excused because using software genuinely is not reasonable for them. But the rules are narrower and more specific than “I don’t like computers,” and being exempt does not get you out of filing a tax return. Here is exactly who qualifies, which exemptions are automatic, which you have to apply for, and the reasons HMRC will and will not accept. Every point is checked against GOV.UK and dated.

1. The two questions that actually matter

“Am I exempt from MTD?” is really two questions, and GOV.UK answers them on different pages with different rules:

• Are you exempt automatically? HMRC works this out from information it already holds — mostly your last tax return. You do not contact anyone and you do not apply. Either it applies to you or it does not.
• Do you need to apply to be excused? This is the digitally excluded route, for people for whom using compatible software genuinely is not reasonable. You have to make a case, and HMRC decides it individually.

Cutting across both, an exemption is either permanent (it lasts unless your circumstances change) or temporary (some run only until April 2027, after which the normal thresholds decide whether you are in). The grid below is the whole landscape:

* Permanent means “unless your circumstances change” — for example, if your qualifying income later rises above the threshold.

2. The £20,000 exemption almost nobody mentions

The single most useful fact on this page, and the one the software adverts never lead with:

Qualifying income is your combined self-employment and property turnover — before expenses, not your profit. So someone with £16,000 of rent, or £18,000 of freelance invoices, is under the line and outside MTD for the foreseeable future. The three published mandation waves — over £50,000 from April 2026, over £30,000 from April 2027, over £20,000 from April 2028 — stop at £20,000. Below that figure there is currently no wave at all.

This matters because a large share of the people anxiously reading about quarterly updates and bridging software have turnover well under £20,000 and are worrying about an obligation that does not apply to them. Work out your own qualifying-income figure before you buy anything — if it is £20,000 or less, the honest answer is that you carry on with a normal Self Assessment return and ignore the rest.

3. Other automatic exemptions — nothing to apply for

Several other groups are exempt automatically, based on what HMRC already knows. You do not apply for any of these; if one applies, it simply does. The main ones:

• No National Insurance number. If you do not have a National Insurance number before the start of the tax year, you are automatically exempt for that year — and in fact cannot sign up. GOV.UK’s own example: get your NI number on 30 April 2026 and you are exempt for 2026–27 even if your income is over £50,000.
• Trusts, estates and non-resident companies. Trustees filing an SA900 (including charitable trusts), and non-resident companies filing an SA700, are automatically exempt. So is anyone acting as the personal representative of someone who has died. You still submit those Self Assessment returns as normal.
• People who cannot manage their own affairs. If your 2024–25 return recorded that you are not physically or mentally capable of providing information to HMRC and you have a power of attorney, or a legally appointed deputy, controller or guardian in place, you are automatically exempt.
• Certain reliefs and supplementary pages on your 2024–25 return — until April 2027. Averaging relief (farmers, market gardeners, and creators of literary or artistic works), qualifying care relief (foster and kinship carers), and the SA107 (trusts and estates income) or SA109 (residence and remittance) pages each give an automatic exemption for 2026–27. From 2027–28 the normal £30,000 threshold decides whether you are in.
• Ministers of religion, Lloyd’s members, and two allowances — beyond April 2027. An SA102M (Minister of religion of any faith), an SA103L (a Lloyd’s member with self-employment or property income), or a claim to Married Couple’s Allowance (for those born before 6 April 1935) or Blind Person’s Allowance on your 2024–25 return give an automatic exemption with no current end date.

The pattern is worth noticing: most of the temporary and long-run automatic exemptions are read off the 2024–25 return you have already filed. If you expect to claim one of these for the first time on a later return, you do not get it automatically — you have to apply, which is the next section.

4. Digital exclusion — the one you apply for

This is the exemption most people mean when they say “I want to opt out.” Being digitally excluded means it is not reasonable for you to use compatible software to keep digital records or to send quarterly updates and your return. Unlike the exemptions above, you have to apply, and HMRC judges every application on its own facts. GOV.UK gives three example grounds:

• your age, a health condition or a disability stops you using a computer, tablet or smartphone to keep or send digital records;
• you are 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 or smartphone for business or personal use at all;
• you cannot get internet access at your home or business because of where you are, and cannot get access at a suitable alternative location either.

These are the examples, not an exhaustive list — HMRC says there may be other reasons and it considers each case individually. If an agent, friend or family member applies on your behalf, the decision still rests on your personal circumstances, not theirs. And there is a useful shortcut: if HMRC previously confirmed you were exempt from filing VAT returns through MTD-compatible software because you were digitally excluded, you can contact Self Assessment enquiries with your National Insurance and VAT numbers, and if nothing has changed HMRC will confirm you are exempt for Income Tax too.

5. The reasons HMRC will not accept

This is the part the “how to opt out of MTD” articles tend to skip, and it is the part that decides most applications. GOV.UK is explicit that it will not accept a digital exclusion application if your only reason is one of these:

In other words, digital exclusion is about whether you can reasonably use the software, not whether you would prefer not to. Preferring paper, finding the software fiddly, or resenting the cost are not grounds — and if that describes you, the practical route is not an exemption but the cheapest compliant setup, which for simple affairs can be a spreadsheet plus free or low-cost bridging software.

6. What being exempt does not get you out of

The most important sentence on the whole GOV.UK exemptions page is easy to miss:

An MTD exemption is an exemption from the method: from digital record-keeping and the four quarterly updates. It is not an exemption from tax, from Self Assessment, or from the 31 January filing and payment deadlines. If you are exempt, your world does not change — you keep doing exactly what you did before MTD existed. That is the point people who chase an exemption sometimes misunderstand: the reward for being excused is that nothing new happens, not that the return goes away.

So the decision tree is short. Turnover £20,000 or less, or one of the automatic categories: you are out, do nothing, keep filing Self Assessment. Genuinely unable to use software: apply for digital exclusion, and keep filing Self Assessment. Everyone else: you are in on your wave’s start date, and the cheapest honest way through is a digital record that totals itself plus bridging software to send it.