MTD ITSA Exemptions: Who Does Not Need to Comply and How to Apply

Not everyone with qualifying income above the Making Tax Digital for Income Tax (MTD ITSA) threshold must comply. HMRC recognises several categories of exemption, some of which are automatic and require no application, and others which you must actively request. This article sets out who is covered and what each exemption involves.

Two Categories of Exemption

MTD ITSA exemptions fall into two types:

• Automatic exemptions: Applied by HMRC based on your tax return data. You do not need to contact HMRC or submit an application.
• Exemptions you apply for: You must submit a request and give reasons. HMRC considers these on a case-by-case basis.

Both types can be either permanent or temporary.

If you are exempt, you do not have to use MTD ITSA, but you must continue submitting a Self Assessment tax return as normal.

Automatic Permanent Exemptions

The following exemptions are permanent and apply automatically. You do not need to do anything.

Qualifying income at or below £20,000

If your qualifying income (gross income from self-employment and property before expenses) is £20,000 or less, you are automatically exempt. This exemption holds until your income rises above that figure or until the £20,000 threshold is legislated to apply to a specific group. The threshold for Phase 3 (April 2028) is subject to legislation; the exemption below £20,000 remains in place in the interim.

No National Insurance number

If you do not have a National Insurance number, you cannot sign up for MTD ITSA and are automatically exempt.

Acting in a specific capacity

You are automatically exempt in your role as:

• A trustee (including a charitable trustee or trustee of a non-registered pension scheme).
• A personal representative of a deceased person.
• A person filing on behalf of a non-resident company.

These exemptions apply only to those specific roles. If you also have your own self-employment or property income outside those roles, you may still need to comply for that income.

Other automatic permanent exemptions

You are also automatically exempt if you are:

• A Lloyd's member submitting a return in relation to your underwriting business.
• An employed Minister of religion of any faith who submits the SA102M supplementary page.
• Someone who received or transferred Married Couple's Allowance (for those born before 6 April 1935).
• Someone who received or transferred Blind Person's Allowance.
• Not physically or mentally capable of using digital services and you have either granted lasting or enduring power of attorney to someone to act on your behalf, or a court-appointed deputy acts for you.

HMRC will set out when the Minister of religion, Married Couple's Allowance, and Blind Person's Allowance exemptions end in due course.

Automatic Temporary Exemptions (Until April 2027)

If your 2024-25 Self Assessment return included any of the following, you are automatically exempt until the 2027-28 tax year at the earliest:

• A claim for averaging relief (for example, farmers or creative artists).
• A claim for qualifying care relief (such as foster carers or kinship carers).
• The SA107 supplementary page to report income from trusts or estates.
• The SA109 supplementary page, provided you expect to use it again for your 2026-27 return.

SA109 applies to those who are non-UK resident, dual tax residents, claiming overseas workday relief, using split-year treatment, eligible for the foreign income and gains regime, or using the temporary repatriation facility, among others.

For these temporary exemptions, you do not need to contact HMRC. If your qualifying income exceeds £30,000 in the 2025-26 tax year, you will be required to use MTD ITSA from the 2027-28 tax year onwards.

Exemptions You Must Apply For

Digital Exclusion Exemption

This is the most widely discussed MTD exemption and the one most relevant to individual sole traders and landlords. You can apply if it is not reasonable for you to use compatible software to keep digital records or submit returns to HMRC.

HMRC accepts the following as valid grounds:

• Your age, health condition, or disability stops you from using a computer, tablet, or smartphone.
• You are a practising member of a religious society or order whose beliefs are incompatible with using digital communications, and you do not use a computer, tablet, or smartphone for business or personal use.
• You cannot get internet access at your home or business because of your location, and cannot get access at a suitable alternative location.

HMRC will not accept an application based on:

• Previously filing a paper return.
• Being unfamiliar with accountancy software.
• Having a small number of digital records to create.
• The extra time or cost involved in signing up.

Applications are considered on a case-by-case basis. HMRC may accept other reasons beyond those listed above if they are genuinely compelling.

If an agent, friend, or family member applies on your behalf, HMRC will still assess the application based on your personal circumstances, not theirs.

To apply, use the GOV.UK service at /guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax.

If You Are Already Exempt from MTD for VAT

If HMRC previously confirmed you are exempt from Making Tax Digital for VAT due to digital exclusion, contact HMRC's Self Assessment team by phone or in writing rather than submitting a fresh application. Provide your National Insurance number, VAT registration number, and confirm whether your circumstances have changed. If nothing has changed, HMRC will confirm the exemption extends to MTD ITSA.

If your VAT exemption was granted because of an insolvency procedure, it does not automatically carry over to MTD ITSA.

Applied Temporary Exemptions (Until April 2027)

If your 2024-25 tax return did not include the claims or supplementary pages listed in the automatic temporary exemptions section, but you reasonably expect your 2026-27 return to include them, you can apply for a temporary exemption. This covers:

• Expected claims for averaging relief.
• Expected claims for qualifying care relief.
• Expected use of the SA107 page.
• Expected use of the SA109 page.

If you are a non-UK resident foreign entertainer or sportsperson, you must apply for an exemption even if you included this income on your 2024-25 return.

Applied Exemptions Beyond April 2027

If your 2024-25 return did not include a relevant claim or page, but you expect your 2026-27 return to show you are a Minister of religion, a recipient of Married Couple's Allowance, or a recipient of Blind Person's Allowance, you should apply for an exemption. HMRC will set out the end date for these exemptions later.

What Exemption Does Not Mean

Being exempt from MTD ITSA does not remove your Self Assessment obligations. You must continue to submit a Self Assessment tax return each year if you are registered for it. The exemption only removes the MTD-specific requirements: digital records, quarterly updates, and submission via MTD-compatible software.

What This Means for You

If you are above the income threshold but believe an exemption applies, check the automatic categories first. Many people who qualify for an automatic exemption do not need to take any action at all. If you need to apply, do so before your compliance date to avoid being treated as non-compliant in the interim.

For a full explanation of who needs to comply with MTD ITSA and the step-by-step preparation process, see the DigiTaxHub MTD guide. For the sole trader preparation checklist, see our MTD sole trader checklist.

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DigiTaxHub.co.uk is an independent information resource and is not affiliated with or endorsed by HMRC. This article is for information purposes only and does not constitute tax or financial advice. Always verify current rules at GOV.UK and speak to a qualified accountant if you are unsure.