Digitally excluded can apply for MTD for Income Tax exemption now

From next April, people who are self-employed and landlords, and declare more than £50,000 of gross income in their 2024-25 self assessment tax return, will be legally required to follow the new Making Tax Digital (MTD) for Income Tax rules from April 2026 onwards, with lower income thresholds following in 2027 onwards.

The Low Incomes Tax Reform Group (LITRG) is urging taxpayers who cannot manage their tax affairs online and have to use MTD for Income Tax to check whether they can apply for an exemption.

Anyone who thinks they may be eligible for exemption must phone or write to HMRC, and ‘use the title “Making Tax Digital for Income Tax — digitally excluded application”’ on the letter. Third parties such as relatives and agents can do this on behalf of taxpayers if they are authorised.

It takes up to 28 days for HMRC to respond with a decision, and this time must not be wasted, HMRC stressed: ‘You should prepare to use Making Tax Digital for Income Tax whilst you’re waiting for us to respond, in case your application is not accepted.’ 

HMRC has published new guidance for people who are digitally excluded, setting out how they can obtain an MTD exemption. This states: ‘For [MTD], digitally excluded means it’s not reasonable for you to use compatible software to keep digital records or submit them to HMRC.’

This is in addition to automatic exemptions already in place for certain groups, including for people without a National Insurance number.

LITRG is also urging taxpayers already exempt from MTD for VAT to check with HMRC that their exemption will be extended to cover the income tax programme.

Sharron West, LITRG technical officer, said: ‘MTD is the biggest change to the tax system since self assessment and with its start date on the horizon, it’s time for taxpayers to get ready if they haven’t yet done so.

‘Even if they have passed the income threshold and are not automatically exempt, it might still be possible to claim an exemption on the grounds that they are digitally excluded.

‘Because HMRC will deal with applications on a case-by-case basis, we don’t yet know how generous their interpretation of the rules will be, but we know that HMRC are keen to see as many people as possible manage their taxes online.

‘If you are already exempt from MTD for VAT, HMRC say you should contact them when the exemption application process opens so they can check your circumstances and confirm if you’ll also be exempt from Making Tax Digital for Income Tax.

‘The clock is ticking and it’s time to get ready.’

 Nearly 900,000 taxpayers are expected to be subject to MTD from April 2026 based on previous year’s tax returns.

Around a quarter of these (216,000) are believed to not use the services of an accountant or tax adviser, LITRG warned. This will likely include some on low or modest incomes who will be particularly reliant on HMRC for help and guidance.

Timetable for requesting exemption

For taxpayers falling under phase one of MTD for Income Tax, with £50,000 income, the exemption application dates are as follows:

• 6 April 2026 — open for exemption applications – need to apply in advance to have application considered before this date; 
• 6 April 2027 —apply from summer 2026 onwards; 
• 6 April 2028 —apply from summer 2027 onwards.

Who can complete the request?

The HMRC guidance states that individual taxpayers can apply for an exemption, as well as making a submission on behalf of someone else, either by a family member, friend or tax agent with an authorisation to do so.

However, anyone using an accountant or tax adviser for their tax affairs is very unlikely to be eligible for an exemption. This of course will mean that the taxpayer incurs fees for accountancy and tax services, but would save the costs of software and for the digitally excluded and elderly an exemption request seems vital.

HMRC stressed: ‘If your agent will use compatible software to keep digital records and submit them to HMRC on your behalf, you can meet the requirements for Making Tax Digital for Income Tax. You should speak to your agent about this, as you may not need to apply for an exemption.’

Please contact us if you need help or further information about MTD for Income Tax.

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