HMRC is now accepting applications for exemption from Making Tax Digital for Income Tax (MTD for IT) if you qualify as ‘digitally excluded’.
To be exempt on the grounds of digital exclusion, an application has to be made to HMRC and approved by them.
What is digital exclusion?
Looking at HMRC’s definition and the current Making Tax Digital legislation, two broad groups qualify:
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- those for whom it is not ‘reasonably practicable’ to comply with Making Tax Digital for Income Tax due to age, disability, location or any other reason’;
- practising members of a religious society or order whose beliefs are ‘incompatible with using electronic communications or keeping electronic records’.
Note: it appears that any clients who have an existing exemption from Making Tax Digital for VAT will also need to reapply for that exemption to carry over into Making Tax Digital for Income Tax.
Details
HMRC’s new guidance states that being digitally excluded means that a taxpayer is unable to use compatible software to keep digital records or submit them to HMRC. The definitions above have been expanded slightly with these examples of why an individual could be digitally excluded:
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- their age, a health condition or disability stops them from using a computer, tablet or smartphone,
- they cannot get internet access at their home or business, and cannot get access at a suitable alternative location.
HMRC will not accept an application for digital exclusion if the only reason is one of the following:
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- a taxpayer has previously filed a paper return,
- is unfamiliar with accountancy software,
- has a small number of digital records to create each tax year,
- will incur extra time or cost for them to sign up to and use Making Tax Digital for Income Tax.
How to apply?
Taxpayers can either
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- apply themselves,
- or ask an authorised agent or friend/family member to apply on their behalf.
Applications must be made by either calling or writing to HMRC
All letters should have the heading ‘Making Tax Digital for Income Tax – digitally excluded application’.
Include details of
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- the taxpayer’s national insurance number, name and address,
- information on how they currently file their self-assessment return,
- whether or not they have an agent (and what that agent does),
- why they believe they are digitally excluded and any additional needs they may have.
Once received, HMRC will consider the application and send a letter confirming whether or not it has been accepted. If the taxpayer disagrees with their decision, they will have 30 days to appeal.
MTD for VAT exemption
Digital exclusion exemptions for Making Tax Digital for VAT will not automatically carry over to Making Tax Digital for Income Tax.
If the VAT exemption is due to insolvency, the taxpayer will be required to join Making Tax Digital for Income Tax.
For all other Making Tax Digital for VAT exemptions, the taxpayer or agent will need to call or write to HMRC self-assessment/general enquiries and inform them of the national insurance number, VAT registration number, reason the exemption was granted for VAT, and whether any circumstances have changed since then.
If circumstances haven’t changed, HMRC will confirm the exemption carries over to Making Tax Digital for Income Tax.
If anything has changed, the taxpayer will need to complete the full exemption application process, with the possibility that their existing Making Tax Digital for VAT exemption may be reconsidered.
Timing
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- Make sure a digital exclusion application is submitted before a taxpayer is mandated into HMRC.
- Applications can be made now for those coming into the regime from April 2026.
- Those coming in from April 2027 or 2028 should wait until the summer before their expected Making Tax Digital start date.
- Agents with clients who may qualify for exemption will be pleased to know that they can now submit applications.
Submit applications as soon as possible.
Contact
If you would like to discuss your situation with your accountant, please call our Leicester office on 0116 254 9262, or Loughborough office on 01509 263500. Alternatively, our contact form is here.