Can you opt out of MTD? Exemption from Making Tax Digital

The short answer: opting out is not the same as being exempt

If you have been signed up to Making Tax Digital for Income Tax (MTD for IT) — either by yourself or automatically by HMRC — your first instinct might be to look for an opt-out button. There isn't one. MTD for IT has been mandatory since 6 April 2026 for sole traders and landlords with qualifying income over £50,000, and HMRC is now automatically enrolling people who met the threshold but had not signed up themselves.

What does exist is a formal exemption process. Exemption is different from opting out: it is a decision HMRC makes about you, based on specific criteria, and it is not granted simply because you would prefer not to use software. This article explains who qualifies, how to apply, and what happens if your application is refused.

Who qualifies for an exemption from MTD for Income Tax?

HMRC's exemption criteria are narrow. You must demonstrate that one or more of the following applies to you:

• Age, disability, or health condition — you are unable to use a computer, tablet, or smartphone because of a physical or mental health condition, a disability, or your age. The inability must be genuine and not simply a preference.
• Location — you live or work somewhere that has no reliable internet access and you cannot reasonably travel to obtain it. Rural broadband notspots can qualify, but HMRC expects you to demonstrate this, not simply assert it.
• Religious beliefs — your religion prohibits the use of computers. This is a narrow category and applies to very few people in practice.
• It is not reasonably practicable — a catch-all ground, but interpreted strictly. HMRC expects software costs or learning curves alone to fail this test.

Notice what is not on the list: finding the process inconvenient, preferring to use a paper ledger out of habit, using an accountant who has not yet switched to MTD-compatible software, or being a very small business just above the threshold. None of those circumstances amount to grounds for exemption.

The qualifying income threshold — and why it matters for exemption

Exemption only becomes relevant once you are within the scope of MTD for IT. The regime applies based on your qualifying income, which HMRC defines as the combined gross income from self-employment and property before any expenses or allowances are deducted.

The threshold that matters is your qualifying income in the previous tax year. So if your income from self-employment and property combined exceeded £50,000 in 2024/25, you were required to be in MTD for IT from 6 April 2026. If you are below the threshold in the prior year, you are simply not yet in scope — you do not need an exemption, because the rules do not apply to you yet.

The thresholds for 2027/28 and 2028/29 are based on the announced government roadmap as at September 2026; confirm the position for future years at gov.uk before acting.

How to apply for an MTD exemption

There is no online form to complete. HMRC's process requires you to contact them directly, explain your circumstances, and provide supporting evidence. The steps are:

1. Call HMRC's MTD helpline (0300 200 3600) or write to HMRC explaining the specific ground on which you are applying. Vague applications are refused.
2. Gather evidence before you call or write. For a health or disability exemption, that means a letter from your GP, a copy of a PIP or DLA award letter, or equivalent medical documentation. For a connectivity exemption, Ofcom coverage checker results, correspondence with your internet provider, or a letter from your local authority about broadband availability in your area can all help.
3. Keep a record of your application, including the date, the name of any HMRC agent you spoke to, and the reference number if one is given. If HMRC later claims you have not applied, you will need this.
4. Wait for a written decision. HMRC will write to you confirming whether exemption is granted or refused. Do not assume you are exempt simply because you have applied — you remain subject to MTD obligations until you receive confirmation.

If your exemption is granted, HMRC will remove you from the MTD for IT system. You will revert to submitting a Self Assessment tax return in the usual way.

What happens if HMRC refuses your exemption application

Refusal is possible, and if it happens you have two options. First, you can provide additional evidence and ask HMRC to reconsider. Second, you can appeal. Formal appeals against HMRC decisions go to the First-tier Tribunal (Tax Chamber), though in practice most disputes about MTD exemptions are resolved at the reconsideration stage rather than at tribunal.

Crucially, a refusal does not suspend your MTD obligations while you appeal. You must continue to submit quarterly updates on time or risk late-filing penalties. As of September 2026, the next quarterly update deadline is 7 November 2026, covering the period 6 July to 5 October 2026. Missing it while you wait for an appeal outcome will not be treated sympathetically.

Worked example: does Priya need an exemption?

Priya is a freelance graphic designer and also rents out a flat. In 2024/25, her self-employment turnover was £38,000 and her rental income (before expenses) was £14,500. Her combined qualifying income was therefore £52,500 — above the £50,000 threshold.

HMRC automatically enrolled her in MTD for IT in summer 2026, after she did not sign up herself. She does not have a disability, she has a broadband connection, and no religious objection applies. She simply dislikes using software and has always done her accounts in a spreadsheet.

Priya does not qualify for exemption. Her only compliant option is to use MTD-compatible software to keep digital records and submit quarterly updates. Many bridging software products can read data from a spreadsheet and submit it to HMRC digitally, so she does not necessarily have to abandon spreadsheets entirely — but she cannot opt out of MTD itself.

Now suppose Priya's circumstances were different: she has severe rheumatoid arthritis that makes it impossible for her to use a keyboard or touchscreen for more than a few minutes at a time, and she cannot afford assistive technology. In that scenario, she would have grounds to apply for exemption, supported by medical evidence from her rheumatologist. Even then, HMRC might first ask whether voice-recognition or other assistive software would make compliance possible before granting full exemption.

MTD exemption versus MTD deferral: are they different?

Yes. A deferral is not the same as an exemption. In earlier phases of Making Tax Digital (for VAT), HMRC granted some businesses more time before they had to join the regime, but they still had to join eventually. For MTD for Income Tax, the government has not announced a general deferral mechanism for individuals who simply prefer more time — the threshold-based rollout (£50,000 in 2026, £30,000 in 2027, £20,000 in 2028) is itself the phased approach.

If your qualifying income puts you below the current threshold, you are not deferred — you are simply not yet in scope. You do not need to do anything until you cross the threshold. But once you cross it, there is no grace period to apply for: you are expected to be compliant from the start of the relevant tax year.

What about partnerships and limited companies?

MTD for Income Tax applies to sole traders and individual landlords. It does not currently apply to general partnerships or limited liability partnerships, and it has never applied to limited companies (which are subject to a separate, still-developing Making Tax Digital for Corporation Tax regime). If you operate through a limited company, MTD for IT is not your concern — your company's director salary and dividends are reported through PAYE and Self Assessment in the normal way, and the company itself files corporation tax returns under the existing regime.

General partnerships were originally expected to join MTD for IT after 2026, but no confirmed start date has been legislated as at September 2026. Check gov.uk for updates if you are in a partnership.

Practical steps if you are in scope and cannot get an exemption

If exemption is not available to you, the practical answer is to get compliant as quickly as possible. The steps are straightforward:

• Choose MTD-compatible software. HMRC maintains a list of approved products on gov.uk, ranging from full accounting packages (such as QuickBooks, Xero, FreeAgent, and Sage) to simpler dedicated MTD apps designed for sole traders with straightforward finances.
• Set up your software to record income and expenses digitally from 6 April 2026 (or from the date you come into scope in a later year).
• Submit quarterly updates by the four deadlines each year: 7 August (covering 6 April–5 July), 7 November (covering 6 July–5 October), 7 February (covering 6 October–5 January), and 7 May (covering 6 January–5 April).
• Submit your end-of-period statement and final declaration after the tax year ends, replacing what was previously your Self Assessment tax return.

If cost is the barrier, note that several MTD-compatible products have free tiers or low-cost entry plans aimed at sole traders. The quarterly updates themselves contain summary figures, not every individual receipt — so the record-keeping burden is lower than many people expect once the software is set up.

Summary

You cannot opt out of MTD for Income Tax on grounds of preference. Exemption exists, but it is granted only where compliance is genuinely impossible — because of disability, lack of internet access, or religious belief. The process requires you to contact HMRC directly, provide evidence, and wait for a written decision. Until exemption is confirmed, your MTD obligations continue. If you are below the £50,000 qualifying income threshold, you are not yet in scope and need not apply for anything. If you are in scope and do not qualify for exemption, the answer is to choose compatible software and meet your quarterly deadlines — the next one is 7 November 2026.

Next step: Check which MTD deadlines apply to you.