Making Tax Digital: Exemptions You Need to Know

If you’ve been hearing about Making Tax Digital (MTD), you might think it applies to everyone. In reality, there are some cases where businesses can apply for an exemption — or may even be automatically excluded. Understanding these exemptions now can save you confusion and stress later.

What is Making Tax Digital?

From April 2026, most sole traders and small businesses earning over £50,000 will need to use MTD-compatible software and submit quarterly updates instead of just one annual tax return. This change is part of HMRC’s ongoing drive to make tax reporting digital, more accurate, and easier to manage.

But not everyone is required to comply — and that’s where exemptions come in.

Who Can Apply for an Exemption?

Some taxpayers can apply if they are digitally excluded. This means you can’t reasonably comply with MTD for reasons such as:

1. Religious beliefs that prevent you from using computers

2. Disability or age that makes digital filing impractical

3. Poor internet access or living in a location without reliable broadband

Applications for the April 2026 cohort are open now, so it’s important to check if you qualify.

Who is Automatically Excluded?

Certain groups do not need to apply for exemption — they are automatically excluded. These include:

1. Trustees filing returns for someone who has died

2. Non-resident companies

3. Individuals without a National Insurance number before a certain date

Being automatically excluded means you can continue filing your returns annually and do not need to use MTD software.

Why You Should Check Now

Even if you think you might be exempt, it’s wise to review your status now. Why?

1. Waiting until the last minute could lead to missed deadlines or unnecessary penalties.

2. If you’re a subcontractor under CIS or a small business with side income, it’s easy to assume MTD won’t apply — but turnover thresholds may catch you.

3. Planning ahead gives you time to either apply for an exemption or start preparing your business for MTD compliance.

Quick Tips for Small Businesses and Subcontractors

Keep records digitally where possible – even if you apply for an exemption, good record-keeping will save time and stress.

Check your software options now – many MTD-compatible tools make filing quarterly updates much easier, especially for CIS subcontractors or side hustlers.

Ask for help – an accountant or support package can guide you on whether you qualify for an exemption and help you set up your bookkeeping properly.

Next Steps

1. Review your eligibility for MTD exemptions

2. Decide whether to apply or start preparing your business for compliance

3. Consider software and support to make the transition smooth

Making Tax Digital doesn’t have to be stressful. With a little planning, you can stay compliant, save time, and avoid last-minute panic.

Need help checking whether you qualify for an exemption or preparing for MTD?

Reply to this post or contact us today — we’ll guide you through the process and make it simple.

Get in touch here to see how we can help you.