Exemptions and Deferrals from MTD Income Tax

Who Is Exempt from Making Tax Digital? Full List of Exemptions and Deferrals

Last updated: February 2026

Not everyone will be required to follow Making Tax Digital for Income Tax. HMRC has built a set of exemptions for taxpayers who cannot reasonably comply with digital quarterly reporting, plus deferrals for specific income types and circumstances where the rules will apply later or not at all. If you are a sole trader or landlord wondering whether MTD applies to you, this article lists every confirmed exemption and deferral category, explains how to claim digital exclusion, and sets out what to do if you think you qualify.

MTD Income Tax: who it applies to

Before looking at who is exempt, it helps to understand who falls within scope. MTD for Income Tax applies to individuals with qualifying income above certain thresholds, rolled out in three phases:

Qualifying income means your combined gross income from self-employment and UK property. This is total turnover, not profit after expenses. If your gross rental income is £40,000 and your gross self-employment income is £15,000, your qualifying income is £55,000 and you fall into Phase 1. For a fuller explanation of how MTD works, see our MTD Income Tax guide.

Permanent exemptions

Certain groups are permanently exempt from MTD for Income Tax. If you fall into one of these categories, you will never be required to submit quarterly digital updates, regardless of your income level.

Foster carers

Individuals who receive income from foster care are exempt from MTD for Income Tax. This applies to all foster carers, including those approved by local authorities and those working through independent fostering agencies. The exemption covers foster care income specifically. If a foster carer also has separate self-employment or rental income above the qualifying threshold, HMRC guidance should be checked to confirm whether the non-foster income triggers MTD obligations independently.

Individuals without a National Insurance number

You cannot sign up for MTD for Income Tax without a National Insurance number. HMRC’s digital systems require one to link your submissions to your tax record. If you do not hold a National Insurance number — for example, because you have never worked in the UK or have not yet been issued one — you are automatically outside the scope of MTD. This is a practical exemption rather than a policy choice: the system simply cannot process submissions without an NI number.

Individuals subject to a Power of Attorney

Where a lasting Power of Attorney (LPA) has been registered with the Office of the Public Guardian, and the attorney manages the individual’s tax affairs, the taxpayer is exempt from MTD for Income Tax. This is a permanent exemption. It recognises that attorneys handling financial matters for someone who has lost mental capacity cannot reasonably be expected to maintain quarterly digital reporting through MTD-compatible software on the individual’s behalf.

Court of Protection appointees

Where the Court of Protection has appointed a deputy to manage someone’s property and financial affairs, the individual whose affairs are being managed is permanently exempt from MTD. This is similar to the Power of Attorney exemption but applies where the court has intervened directly, typically because the person lacked capacity to grant an LPA before losing the ability to manage their own finances.

Digitally excluded individuals

HMRC recognises that some people genuinely cannot use digital tools. If you are unable to engage digitally because of age, disability, remoteness of location or any other reason, you can apply for exemption on the grounds of digital exclusion. This is not an automatic exemption — you must apply to HMRC and demonstrate why you cannot comply. The exemption, once granted, is ongoing and does not need to be renewed annually.

Grounds for digital exclusion include:

• Disability or health condition that prevents use of a computer or digital device
• Age, where an elderly taxpayer has never used and cannot learn to use digital tools
• Location, where reliable internet access is not available (for example, remote rural areas)
• Religious beliefs that prohibit the use of electronic technology

HMRC assesses each application individually. Having a representative or agent who could submit digitally on your behalf may affect whether the exemption is granted. The key test is whether the taxpayer themselves, or someone acting for them, can reasonably engage with digital quarterly reporting.

How to apply for digital exclusion exemption

If you believe you qualify for digital exclusion, you need to contact HMRC directly. The process is:

1. Call HMRC’s Self Assessment helpline on 0300 200 3310 (or the MTD helpline once it is fully operational). Explain that you wish to apply for digital exclusion from MTD for Income Tax.
2. Provide your details: your name, Unique Taxpayer Reference (UTR), National Insurance number and the reason you cannot comply digitally.
3. HMRC will assess your claim and confirm the outcome in writing. If approved, you continue to file under the existing Self Assessment process rather than MTD quarterly updates.

There is no online form for digital exclusion applications. The process is handled by telephone or in writing, which is consistent with the nature of the exemption. If your circumstances change (for example, you move to an area with internet access), HMRC expects you to notify them and join MTD at that point.

Deferrals: income types and circumstances not yet within MTD

Deferrals are different from exemptions. A deferral means MTD does not apply to you yet, but it may do so in the future. HMRC has deferred certain groups and income types while it develops the systems and legislation to bring them into scope.

Partnerships

General partnerships, limited partnerships and limited liability partnerships are all deferred from MTD for Income Tax. No start date has been set. HMRC originally planned to include partnerships shortly after individuals, but this has been pushed back repeatedly. If you operate as a partner in a partnership, your share of partnership income does not currently trigger MTD obligations. You continue to file under Self Assessment until HMRC announces a specific partnership start date.

Non-UK residents claiming residence reliefs

Non-UK resident individuals who have UK self-employment or property income but claim certain residence-related tax reliefs are deferred from MTD. This includes individuals who are taxed under the remittance basis or who claim split-year treatment. The deferral recognises that the interaction between MTD quarterly reporting and residence-based reliefs creates complexities that HMRC has not yet resolved in its digital systems.

Trust and estate income

Income arising within trusts and estates is outside MTD for Income Tax. Trustees and personal representatives managing an estate do not currently need to submit quarterly digital updates for trust or estate income. This is a deferral rather than a permanent exemption — HMRC may bring trusts into scope in the future, but no date has been announced.

Qualifying care relief (Shared Lives carers)

Shared Lives carers (formerly known as adult placement carers) who claim qualifying care relief are deferred from MTD. Qualifying care relief provides a simplified method for calculating taxable income from care placements. Until HMRC adapts its MTD systems to handle this relief, these carers remain outside the quarterly reporting requirement.

Lloyd’s underwriters

Members of Lloyd’s of London who underwrite insurance through syndicates are deferred from MTD. Lloyd’s income follows a unique three-year accounting cycle that does not align neatly with MTD’s quarterly reporting structure. HMRC has deferred this group while it determines how to accommodate the Lloyd’s accounting framework within the MTD system.

Ministers of religion

Ministers of religion who receive a stipend and occupy a property provided by their church or denomination as part of their role may be deferred from MTD where their income is assessed under special rules. This deferral applies to specific ministerial income arrangements, not to all clergy. Ministers with standard self-employment or rental income above the threshold may still fall within MTD.

Worked example: determining whether you are exempt or deferred

Consider David, a 72-year-old landlord in Cumbria who owns three rental properties generating gross income of £62,000 per year. His qualifying income puts him firmly into Phase 1 from 6 April 2026. However, David has never owned a computer, does not have an internet connection at home, and manages all his records on paper. His son helps with the annual Self Assessment return by visiting once a year.

David contacts HMRC on 0300 200 3310 and explains his situation. He provides his UTR (1234567890) and National Insurance number. HMRC assesses his application and grants a digital exclusion exemption. David continues to file his annual Self Assessment return as he always has. He does not need MTD-compatible software, and he does not submit quarterly updates.

Now consider his son, James, who is also a landlord with gross rental income of £38,000. James is 41, computer-literate, and has reliable broadband. He is not eligible for digital exclusion. His qualifying income is above £30,000, so he enters MTD in Phase 2 from 6 April 2027. He needs to choose MTD-compatible software, connect it to HMRC, and submit his first quarterly update by 7 August 2027.

The distinction is clear: David is permanently exempt because he genuinely cannot use digital tools. James is fully within scope because he has no grounds for exemption and his income exceeds the Phase 2 threshold.

What exemptions do not cover

It is worth being clear about what does not qualify as an exemption:

• Finding quarterly reporting inconvenient is not grounds for exemption. MTD applies based on income thresholds, and HMRC expects all capable taxpayers to comply.
• Using an accountant does not exempt you. Your accountant can submit quarterly updates on your behalf through agent services, but you remain within MTD.
• Having low digital skills is not the same as digital exclusion. HMRC may expect you to learn or to use an agent. Digital exclusion applies where there is a genuine inability, not merely a preference for paper.
• Temporary illness or injury does not trigger a permanent exemption, though HMRC may offer time to comply or apply reasonable adjustments.

If none of the permanent exemptions or deferrals apply to you, and your qualifying income exceeds the relevant threshold, you must comply with MTD. Failure to submit quarterly updates results in penalty points, and accumulating four points triggers a £200 penalty. HMRC has confirmed a soft-landing period for 2026/27, during which no penalty points will be issued for late quarterly updates, giving Phase 1 taxpayers time to adjust.

Corporation Tax and VAT: separate rules

The exemptions discussed in this article apply to MTD for Income Tax only. MTD for VAT has been mandatory since April 2022 for VAT-registered businesses with turnover above £90,000 (and since November 2022 for all VAT-registered businesses). The VAT digital exclusion exemption follows a similar process but is assessed separately.

Corporation Tax MTD has no mandatory start date. HMRC has not announced when, or whether, companies will be required to submit corporation tax returns digitally under MTD. Do not assume that any exemptions from MTD for Income Tax carry across to other taxes.

Frequently asked questions

Can my accountant apply for digital exclusion on my behalf?

Yes. Your accountant or tax agent can contact HMRC and make the application on your behalf. They will need your UTR and National Insurance number, plus details of why you qualify for digital exclusion.

If I am granted digital exclusion, do I still need to file Self Assessment?

Yes. Digital exclusion exempts you from MTD quarterly reporting only. You still need to file an annual Self Assessment tax return and pay any tax owed by the usual deadlines.

I am a foster carer with rental income above £50,000. Am I exempt from MTD?

Your foster care income is exempt from MTD. However, if you have separate qualifying income (self-employment or property income) above the threshold, that non-foster income may still bring you within scope. Check with HMRC or your accountant for your specific circumstances.

My partnership income is £80,000. Do I need to join MTD in April 2026?

No. Partnerships are deferred from MTD for Income Tax with no start date set. Your partnership income does not count towards the qualifying income threshold for MTD. If you also have sole trader or rental income separately, that income is assessed on its own merits.

Can HMRC revoke a digital exclusion exemption?

HMRC expects you to notify them if your circumstances change — for example, if you move to a location with internet access or acquire digital skills. If HMRC becomes aware that your grounds for exemption no longer apply, they can bring you within MTD. The exemption is ongoing but not irrevocable.

Sources

• GOV.UK: Making Tax Digital for Income Tax
• GOV.UK: Find software that’s compatible with Making Tax Digital for Income Tax
• GOV.UK: Penalties for failing to meet obligations under Making Tax Digital for Income Tax
• GOV.UK: Sign up your business for Making Tax Digital for Income Tax
• GOV.UK: Making Tax Digital for Income Tax – exemptions