MTD Exemptions: Who Is Exempt from Making Tax Digital?
Making Tax Digital for Income Tax is now mandatory for many self-employed individuals and landlords — but not everyone. There are clear exemptions, income thresholds, and special circumstances where MTD does not apply. Understanding whether you are exempt can save you from unnecessary expense and effort, or alert you that compliance is required sooner than you thought.
This article explains exactly who is exempt from MTD for Income Tax and what your options are if you fall outside the mandatory requirements.
The Income Threshold
The primary factor determining whether MTD for Income Tax applies to you is your gross qualifying income:
- From April 2026: MTD is mandatory for those with qualifying income above £50,000
- From April 2027: The threshold drops to £30,000
- Below £30,000: Currently no mandatory requirement (though HMRC may lower the threshold further in future)
Qualifying income means your gross income from self-employment and/or property — not your profit. If you are a freelancer with £52,000 in revenue but only £25,000 in profit after expenses, your qualifying income is £52,000 and you must comply.
If you have multiple income sources, they are combined. A landlord with £20,000 in rental income and a side business earning £35,000 has qualifying income of £55,000.
For a full overview of MTD for Income Tax and the key dates, see our comprehensive guide.
Who Is Definitely Exempt
Employees With No Self-Employment or Property Income
If your only income is from employment (PAYE), MTD for Income Tax does not apply to you. Your employer handles tax deductions through the payroll system, and there is nothing for you to report quarterly.
This remains true even if you earn a very high salary. MTD for Income Tax specifically targets self-employment and property income, not employment income.
Limited Company Directors
If you operate your business through a limited company, MTD for Income Tax does not currently apply to you in your capacity as a director. The company itself may be subject to MTD for Corporation Tax in due course, but that is a separate programme with its own timeline.
However, if you are a company director who also has personal self-employment income or property income above the threshold, that personal income is caught by MTD.
Those Below the Income Threshold
If your combined self-employment and property income is below £30,000 (from April 2027) or below £50,000 (for the 2026-27 tax year), you are not required to comply. You continue filing your Self Assessment tax return as normal.
Partnerships (For Now)
General partnerships, limited partnerships, and limited liability partnerships are currently excluded from MTD for Income Tax. HMRC has indicated that partnerships will be brought in at a later date, but no specific date has been confirmed.
Individual partners who also have personal self-employment or property income above the threshold must comply for that separate income — but the partnership income itself is not yet within scope.
Special Exemptions
HMRC recognises that some individuals cannot reasonably comply with digital requirements. You may be exempt if:
You Are Digitally Excluded
If you cannot use digital tools due to age, disability, remoteness of location, or any other reason, you can apply for an exemption. HMRC assesses these applications on a case-by-case basis. You need to contact HMRC directly to request a digital exclusion exemption.
Examples of valid reasons include: - A disability that prevents you from using a computer or mobile device - Living in an area with no reliable internet access - Religious objections to using electronic communication
This exemption is not automatic — you must apply and be granted it.
You Are Subject to an Insolvency Procedure
Individuals who are subject to formal insolvency proceedings may be exempt from MTD requirements during the insolvency period.
Certain Other Circumstances
HMRC has discretion to exempt individuals in unusual circumstances. If you believe you have a genuine reason why you cannot comply with MTD, contact HMRC to discuss your situation.
Voluntary Registration
If you are below the income threshold and therefore exempt from mandatory MTD, you can still choose to register voluntarily. This means you would keep digital records and submit quarterly updates even though you are not legally required to.
Why Would You Volunteer?
There are several practical reasons:
- Preparation — If your income is close to the threshold and likely to exceed it in the near future, starting early means you are already comfortable with the process when it becomes mandatory.
- Better visibility — Quarterly reporting gives you a clearer picture of your tax position throughout the year, rather than one annual calculation. This can help with budgeting for tax payments.
- Building good habits — Regular record keeping is easier when you start voluntarily than when you are forced into it under deadline pressure.
- Software familiarity — Learning your MTD software when there is no penalty for mistakes is less stressful than learning it when compliance is mandatory.
Are There Downsides?
Voluntary registration means you commit to the quarterly submission schedule. If you register voluntarily and then miss a quarterly deadline, the same penalty rules apply as for mandated taxpayers. So only register voluntarily if you are confident you can maintain the routine.
For more on the penalty regime, see our article on MTD penalties for late submission.
Common Scenarios
"I'm Employed But Have a Rental Property"
If your rental income exceeds the threshold, you must comply with MTD for your property income. Your employment income is irrelevant to the threshold calculation — only self-employment and property income count.
"I'm a Sole Trader But My Profit Is Low"
Your profit does not matter — the threshold is based on gross income (turnover). A sole trader with £60,000 in turnover and £50,000 in expenses has qualifying income of £60,000, even though profit is only £10,000.
"I Do Freelance Work Through a Limited Company"
If all your work goes through the limited company, MTD for Income Tax does not apply to you personally. But if you also do freelance work personally or have rental property income, that personal income counts.
"My Income Fluctuates Around the Threshold"
HMRC uses your qualifying income from the previous tax year to determine whether you must comply. If your income was above £50,000 in 2025-26, you must comply from April 2026. If it drops below the threshold in a subsequent year, you may be able to exit MTD — but check the specific rules, as there are conditions around this.
"I'm Retired With Rental Income"
Retirement does not create an exemption. If your rental income exceeds the threshold, you must comply regardless of your age or employment status. However, if you meet the criteria for digital exclusion, you may be able to apply for an exemption.
How to Check If You Need to Comply
The simplest approach:
- Add up your gross self-employment income and gross property income for the 2025-26 tax year
- If the total exceeds £50,000, you must comply from April 2026
- If it is between £30,000 and £50,000, you must comply from April 2027
- If it is below £30,000, you are currently exempt (but this may change)
If you are unsure, check with an accountant or contact HMRC directly. The consequences of incorrectly assuming you are exempt are worse than the effort of checking.
For a broader understanding of whether you need MTD software, see our article on do I need MTD software.
Getting Started If You Do Need to Comply
If you have checked the thresholds and you are within scope, the next step is choosing MTD-compatible software and setting up your digital records. ClearMTD makes this straightforward — it is designed for sole traders and landlords who need MTD compliance without the complexity of full accounting software.
Create your free ClearMTD account and get set up in minutes.
Frequently Asked Questions
Can I be exempt if I use an accountant?
No. Using an accountant does not exempt you from MTD. Your accountant can submit quarterly updates on your behalf using agent credentials, but the underlying obligation to keep digital records and file quarterly still applies.
What if my income drops below the threshold after I start?
If your qualifying income falls below the threshold in a subsequent tax year, you may be able to leave MTD. However, HMRC has specific rules about exiting — you generally need to remain compliant for the current year and can exit from the following April.
Are there exemptions for older taxpayers?
There is no age-based exemption. However, if age-related difficulties mean you cannot use digital tools, you may qualify for a digital exclusion exemption. You would need to apply to HMRC.
Is there a grace period for new businesses?
No specific grace period exists. If you start a new business and your projected income exceeds the threshold, you should register for MTD and begin keeping digital records from the outset.
Will the £30,000 threshold be lowered further?
HMRC has indicated a desire to bring more taxpayers into MTD over time, and a further reduction in the threshold is possible. No specific date or figure has been confirmed for any reduction below £30,000.