HMRC Exemptions from MTD: Who Qualifies and How to Apply

Not every landlord who crosses the Making Tax Digital income threshold has to comply. HMRC recognises that some individuals genuinely cannot keep digital records or use compliant software, and it has set out clear categories of exemption alongside a formal application process for digital exclusion. This guide explains who automatically qualifies, who must apply, and exactly how the application process works for property landlords.

Who MTD for Income Tax Applies to in the First Place

MTD for ITSA applies to self employed individuals and landlords with UK or overseas property income where combined gross qualifying income reaches the relevant threshold. From 6 April 2026, this means landlords with gross income from property or self employment of £50,000 or more in the 2024 to 2025 tax year, falling to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income means turnover before expenses, and it excludes employment income, pensions and dividends. If your rental income sits below the relevant threshold for that year, you are automatically outside MTD and do not need to apply for anything.

Automatic Exemptions That Require No Application

Several categories are automatically excluded from MTD for ITSA and never need to apply to HMRC, since these exemptions are built directly into the legislation. For property landlords, the most relevant automatic exemptions include:

• Landlords whose qualifying income falls below the relevant threshold for that tax year.
• Trustees and personal representatives filing returns in that capacity, including charitable trust trustees.
• Individuals who do not have a National Insurance number by 31 January before the start of the relevant tax year.
• Landlords operating through a limited company, since MTD for ITSA does not currently apply to companies.
• Non resident companies and Lloyd’s underwriters, in respect of underwriting income only.
• Foster or kinship carers whose income comes only from qualifying care relief.
• Individuals who lack physical or mental capacity, where someone else is legally authorised to act on their behalf.

If you fall into one of these categories, no application is required and you simply continue filing your normal Self Assessment return.

Digital Exclusion: The Exemption Landlords Must Apply For

Beyond the automatic categories, HMRC allows a separate route called digital exclusion, which must be actively applied for rather than assumed. The legislation defines digital exclusion as circumstances where it is not reasonably practicable for someone to use electronic communications or keep electronic records, for reasons including age, disability or location. Landlords may qualify on the following grounds.

Age, health or disability. Where a physical or mental condition, or age related difficulty, genuinely prevents someone from using a computer, tablet or smartphone to keep or submit digital records. HMRC also extends this to situations where a landlord’s support network cannot reasonably assist with digital compliance either.

Lack of reliable internet access. Where a landlord’s home or business premises has no broadband or mobile internet, and there is no practical alternative location nearby. This can genuinely affect landlords managing rural rental properties with limited connectivity.

Religious belief. Where someone is a practising member of a religious society whose beliefs are incompatible with using electronic communications or digital record keeping.

Importantly, HMRC has explicitly stated what will not qualify. An application based solely on previously filing paper returns, unfamiliarity with accounting software, having only a small number of records each year, or concern about the time or cost of MTD will be rejected. Digital exclusion exists for genuine practical barriers, not personal preference.

How to Apply for Digital Exclusion

Applications must be made in writing or by phone, and ideally before your MTD start date, either by the landlord directly or through an authorised accountant or agent. A written application should be titled “Making Tax Digital for Income Tax digitally excluded application” and sent to Self Assessment, HM Revenue and Customs, BX9 1AS. Your application must include the following information.

• Your full name, address and National Insurance number.
• Details of how you currently submit your tax return, including whether an agent or family member assists you.
• A clear explanation of why you believe you are digitally excluded, with supporting evidence such as a medical letter or proof of unavailable internet access.
• Whether you have an accountant or agent, and what role they play in your affairs.
• Any additional needs HMRC should be aware of when providing support.

HMRC aims to respond within 28 days, but landlords are expected to continue preparing for MTD while a decision is pending. If your application is refused, you have the right to appeal in writing within 30 days of the decision letter, titled “Making Tax Digital for Income Tax digitally excluded appeal”, including any new supporting evidence.

If You Already Hold an MTD VAT Exemption

Landlords who are already recognised as digitally excluded for MTD VAT purposes do not need to submit a fresh application from scratch. Provided your circumstances have not changed, you should contact HMRC in writing or by phone, quoting your VAT registration number and National Insurance number, and HMRC will normally carry that exemption across to MTD for Income Tax. If your circumstances have changed since your VAT exemption was granted, you will need to explain this clearly in your new application.

What Happens if Your Circumstances Change

Exemptions are not necessarily permanent. If HMRC confirms you are digitally excluded and your situation later changes such that MTD becomes reasonably practicable, you are required to inform HMRC. Equally, if you voluntarily signed up to MTD and later become digitally excluded, you can opt out through your HMRC online services account. Automatic exemptions, such as falling below the income threshold, are also reviewed year by year rather than granted once and forgotten.

How UK Property Tax Accountants Can Help

Working out whether you genuinely qualify for an MTD exemption, and building a watertight application HMRC will accept, is not something to get wrong on your own. Our landlord focused accountants handle the entire process for you, from eligibility checks through to formal correspondence with HMRC.

• We assess your qualifying property income against the correct year’s threshold to confirm whether MTD even applies to you yet.
• We identify whether you fall into an automatic exemption category, so you avoid unnecessary compliance work entirely.
• We prepare and submit digital exclusion applications on your behalf, with the evidence and wording HMRC expects to see.
• We manage the appeal process if an initial exemption request is refused, strengthening your case with additional supporting evidence.
• We monitor your income year on year, flagging exactly when a previously exempt landlord is likely to fall within scope as thresholds fall to £30,000 and then £20,000.
• We handle full MTD compliant bookkeeping and quarterly submissions for landlords who are not exempt, so the whole process runs smoothly regardless of the outcome.

Frequently Asked Questions