Making Tax Digital Exemptions UK: Which Sole Traders Don’t Have to Comply?
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Not Everyone Has to Comply
Making Tax Digital for Income Tax went live on 6 April 2026 for sole traders and landlords with qualifying income above £50,000, and HMRC has since started signing up people who should have joined and had not. If you have had a letter, or seen the headlines, it is easy to assume the rules now catch everyone who files a Self Assessment return.
They do not. There are real exemptions, some applied automatically and some you have to ask for, and there are groups outside the regime altogether. This guide sets out which is which, how to apply where an application is needed, and the trap that catches people running more than one thing at once.
What You Would Be Opting Out Of
For anyone inside the regime, MTD for Income Tax replaces the annual Self Assessment return with digital record-keeping, four quarterly updates through recognised software, and a Final Declaration by 31 January.
There is no End of Period Statement. That part of the original design was removed following the 2023 Autumn Statement and folded into the Final Declaration before mandation began, so any guidance still describing an EOPS as a live requirement is out of date.
The phases run on qualifying income, tested against a return you have already filed:
| MTD starts | Qualifying income | Tested on your return for |
|---|---|---|
| 6 April 2026 | More than £50,000 | 2024/25 |
| 6 April 2027 | More than £30,000 | 2025/26 |
| 6 April 2028 | More than £20,000 | 2026/27 |
The April 2028 phase has a confirmed date rather than being a proposal.
Being Below the Threshold Is a Deferral, Not an Exemption
The simplest reason not to be in MTD is that your qualifying income is below the threshold for the current phase. Qualifying income is gross, before expenses, and it adds together every self-employment business and every let property you have.
Two things follow. First, it is tested on an earlier year’s return, so the figure that decides your position is one you have already reported. Second, it is not permanent. As the thresholds step down to £30,000 and then £20,000, income that was comfortably outside the regime gets caught without anything about your business changing.
It also runs the other way once you are in. Coming back out requires qualifying income below your cohort’s threshold for three consecutive tax years, followed by a notification to HMRC.
Automatic Exemptions: No Application Needed
Some exemptions apply without you doing anything, and HMRC works them out from your tax return. These fall into two quite different groups, and the distinction matters more than most guidance admits.
Exemptions That Last Until Your Circumstances Change
These include having no National Insurance number at the relevant date, being a trustee, including charitable trustees, being a personal representative dealing with someone’s estate, non-resident companies, and Lloyd’s underwriters in respect of their underwriting. People whom HMRC cannot provide with a digital service, and who already file on paper as a result, are also exempt automatically and do not need to apply.
Non-UK residents are handled through the residence pages. If you included the SA109 page in your 2024/25 return, you were automatically exempt for 2026/27. If you did not, but reasonably expect to include it in your 2025/26 or 2026/27 return, you can apply.
One-Year Waivers Based on Your 2024/25 Return
This is the group people misread as a permanent carve-out. Where your 2024/25 return included certain entries, HMRC granted an automatic exemption for 2026/27 only:
- Qualifying care relief, typically claimed by foster carers and kinship carers
- Averaging relief, claimed by farmers, market gardeners and creators of literary or artistic work, on the SA103 or SA104 pages
- Trust and estate income reported on the SA107 page
A waiver of this kind buys a year, not an escape. A foster carer whose 2025/26 qualifying income was above £30,000 can expect to be brought in from April 2027 in the normal way. Anyone relying on one of these categories should be planning on that basis rather than assuming the position holds.
Partners who would otherwise be in MTD because of trading or property income outside the partnership, and who claimed averaging relief on the SA104 page, have to apply for the temporary exemption rather than receiving it automatically. The same applies to anyone who did not claim averaging relief in 2024/25 but reasonably expects to in 2025/26 or 2026/27.
Digital Exclusion: The Exemption You Have to Ask For
This is the route for people who cannot reasonably use digital tools, and it is decided case by case.
You may qualify if you belong to a religious group whose beliefs are incompatible with electronic communications or digital record-keeping, or if it is not reasonably practical for you to use digital tools because of age, disability, location, including genuinely inadequate internet access, or another comparable reason.
HMRC is clear about what does not qualify. Being unfamiliar with accounting software, having only a small volume of records, objecting to the cost, or simply preferring paper will all be rejected. The test is whether compliance is unreasonable, not whether it is unwelcome.
One point that catches people: an exemption from MTD for VAT on digital exclusion grounds does not carry across to MTD for Income Tax. They are separate regimes and you have to apply again.
Outside the Regime Altogether
General partnerships are not in the current rollout. HMRC has always said partnerships will follow, but no date has been set and no legislation mandates them, so a partnership has no quarterly obligation at present.
That is about the structure, not about you. If you also trade as a sole trader in your own right, or let property personally, that income is tested on its own and can bring you into MTD even while the partnership sits outside it.
Limited companies are outside MTD for Income Tax entirely. MTD for Corporation Tax is a separate programme with no confirmed start date. Limited liability partnerships and limited partnerships raise their own questions, so check your specific structure rather than assuming the general partnership position applies.
If HMRC has formally confirmed that you do not need to file a Self Assessment return at all, MTD for Income Tax cannot apply to you, since it sits on top of the Self Assessment framework.
How to Apply for an Exemption
Where an application is needed, assuming the exemption applies and doing nothing is the one approach guaranteed to fail.
Who can apply. You can apply yourself. An authorised agent can apply for you, and so can a friend or family member with your authorisation.
How. Applications are made by phone or in writing, using the contact details on HMRC’s Self Assessment general enquiries page. Agents use the Agent Dedicated Line instead. A written application should be headed as a Making Tax Digital for Income Tax digitally excluded application so it reaches the right team.
What to include. Your National Insurance number, name and address, how you currently file your return and who helps you with it, the reason you believe you are digitally excluded with anything that supports it, whether you have an agent and what they do for you, and any additional needs so HMRC can support you properly.
When. Apply before the date you would otherwise have to start. HMRC aims to decide within 28 days, and longer if the application is incomplete. For the April 2027 cohort the window opened in summer 2026, so if you expect to be caught by the £30,000 threshold, now is the time rather than next spring. For April 2028, applications open from summer 2027.
Afterwards. Get the outcome in writing and keep it. If compliance notices arrive later, that letter is what resolves it.
HMRC’s current guidance sits at Apply for an exemption from Making Tax Digital for Income Tax if you are digitally excluded, and it is the authoritative source if anything here has moved on.
If HMRC Signs You Up Anyway
From September 2026, HMRC began automatically signing up people who were required to use MTD for 2026/27 but had not joined, working from the qualifying income on their 2024/25 returns.
If that happens and you believe you are exempt, do not ignore it. Check the figures HMRC used against your own return, and if you have an exemption or an application in progress, say so. Being signed up in error is a fixable problem; being signed up and silent is not.
One Trap: Exemptions Do Not Travel Between Businesses
If you run more than one thing, treat each one separately.
Digital exclusion attaches to you as a person, so if it is granted, it covers your position rather than one business. The automatic exemptions above work the other way round: they attach to a particular source of income, and they say nothing about anything else you do.
The foster carer case is the clearest example. The qualifying care relief waiver covers the fostering income. If the same person also runs a consultancy, that consultancy is assessed on its own and can pull them into MTD, even though the fostering income sits outside.
And whichever exemption applies, the threshold test still aggregates. Gross income from every self-employment and every property is added together to decide whether you are over the line in the first place.
FAQ
My income is below the threshold. Do I need to apply for anything?
No. Being under the threshold is automatic and needs no application. Keep an eye on it, though, because the test uses an earlier year’s return and the thresholds are still stepping down. If your 2025/26 qualifying income was above £30,000, you are in from April 2027 whatever this year looks like.
Does HMRC know I am digitally excluded?
Not unless you tell them. There is no automatic identification for this category. You apply, you supply the supporting detail, and you wait for a decision.
I am in a general partnership. Are we off the hook?
The partnership is, for now. You personally may not be. Any sole trader or property income you have in your own name is tested separately and can bring you into MTD regardless of the partnership’s position.
I have an MTD for VAT exemption. Does that cover Income Tax?
No. You have to apply separately for Income Tax, even where the grounds are identical.
What happens if I ignore MTD and have no formal exemption?
Late submission runs on points: one point per late quarterly update, £200 at four points, and another £200 for each late submission after that. The first cohort had a soft landing for 2026/27 with no points for late updates, and it is understood that this does not extend to those joining in April 2027 or April 2028. Late payment of tax is charged separately again.
Making Tax Digital Exemptions: The Bottom Line
The exemptions are real, but they are narrower and more structured than they first appear. Below the threshold is a deferral. Trustees, personal representatives, people without a National Insurance number and a handful of other categories are exempt automatically. Foster carers, farmers claiming averaging relief and people reporting trust income got a waiver for the first year only, not a permanent pass. Digital exclusion is a genuine route with a high bar and a formal application.
If you think one applies to you, check whether it is automatic or something you have to claim, and if it is the latter, apply well before your start date and keep the answer. If you are unsure, an accountant will settle it faster than the guidance will, and if you have concluded you are in scope, the next question is which software to use.
This article is general information about UK tax rules, not advice, and it does not take account of your circumstances. Exemption categories, deadlines and application routes change, and HMRC has updated this guidance several times. Check the current position on GOV.UK and speak to a qualified accountant or tax adviser before acting on anything here.