Making Tax Digital Exemptions
Making tax digital (MTD) has been introduced to promote more accurate and timely record-keeping with the aim of reducing errors and mistakes. If your turnover total from rental income and self employment was in excess of £50,000 in 2024/25 you now need to use MTD compatible Government-approved software to file four quarterly returns and a final year end declaration.
Tax Exemptions and deferrals
MTD only applies to individuals – Limited Companies, LLPs and Partnerships are exempt at present. Although it is anticipated that Partnerships and LLPs will be included at some point in the future, no time scales have been announced to date.
You may be digitally excluded from MTD for the following reasons:
- Your age, health condition or disability prevents you from using a computer, tablet or smartphone to keep digital records or submit them to HMRC
- You are a practising member of a religious society or order whose beliefs are incompatible with using digital communications or keeping digital records
- Due to your location, you cannot get internet access at your home or business, and you are not able to get access at a suitable alternative location.
If any of the above apply, you can request exemption from MTD from HMRC for an unlimited time. Once approved by HMRC, the digital exemption will apply until further notice. Please note that in this circumstance, the tax payer has an obligation to inform HMRC within 3 months if the reason for the approval being granted ceases to apply.
If you have received an exemption for MTD for VAT from HMRC you will need to apply again to confirm whether the exemption applies for MTD for income tax.
All MTD sources ceased
If your income falls within MTD for 2026/27 (based on your 2024/25 tax return) but all MTD sources ceased before 2026/27 you (or your agent) should call HMRC or use webchat to inform HMRC of the cessation. HMRC will confirm that you are not required to file under MTD for income tax and a note will be made on your records. Written confirmation should also be issued but there may be a delay in receiving this.
The cessation should then be recorded on the 2025/26 tax return.
Partial cessation of MTD sources
If one source of MTD income ceased prior to 2026/27 but you have at least one other source continuing in 2026/27, you must sign up for MTD and file quarterly returns (even if the continuing sources are below the threshold).