Find out how to Apply for HMRC’s New Digital Exemption from MTD 

HMRC has launched new steering for eligible companies to use for an exemption from Making Tax Digital (MTD) on the grounds of being “digitally excluded.”

For a lot of sole merchants and micro-companies, complying with new and impending MTD rules has added yet one more layer of stress to working a enterprise.

Now, those that genuinely can’t go digital could also be allowed to proceed submitting self-assessment tax returns within the conventional method.

However what precisely does it imply to be “digitally excluded”? And extra importantly, how can taxpayers make a profitable case for exemption?

What’s Making Tax Digital?

Making Tax Digital (MTD) for Revenue Tax is HMRC’s new digital system for reporting revenue from self-employed work or property. It’s being launched in levels, affecting:

• These incomes over £50,000 from self-employment or property from April 2026
• These incomes between £30,000 and £50,000 from April 2027
• These incomes between £20,000 and £30,000 from April 2028

Even when you’re not legally required to affix but, you may choose in voluntarily. MTD is designed to assist taxpayers minimise errors and make returns extra correct. However whereas there are long-term advantages, for a lot of, its adoption can also be creating new challenges within the short-term.

MTD requires taxpayers to undertake appropriate accounting software program, hold digital information, and submit quarterly updates to HMRC, which could be a steep studying curve for smaller companies that won’t already be working with software program.

Whereas the introduction is phased, failing to conform when you’re required to take action may result in penalties, curiosity expenses, and extra administrative complications.

What are the brand new digital-exclusion exemption guidelines?

HMRC recognises that not everybody can realistically make the transfer to digital reporting. Due to this fact, its new “digital-exclusion” exemption is designed for taxpayers who genuinely can’t use digital instruments to report their revenue.

In line with steering from the ICAEW’s Tax School, those that imagine they’ll qualify ought to apply properly earlier than April 2026 in the event that they fall beneath the primary MTD rollout group, to present HMRC sufficient time to evaluate their case.

Whereas HMRC continues to encourage all taxpayers to arrange for MTD, the ICAEW advises that even these making use of for exemption ought to hold their paper accounting information updated, simply in case they finally do want to change to a digital format.

If initially profitable, exemptions can nonetheless be reviewed or withdrawn if circumstances change, as an illustration, if a taxpayer features dependable web entry or help utilizing digital instruments.

Are you eligible for MTD exemption?

Chances are you’ll qualify for exemption on the grounds of being “digitally excluded” if:

• You belong to a non secular group whose beliefs forestall using digital communications or digital record-keeping; or
• It’s not moderately sensible so that you can use digital instruments because of causes resembling age, incapacity, or location (for instance, poor web entry from a distant space).

The deadline for exemption is dependent upon when MTD turns into necessary to your revenue:

• MTD begins April 2026: Apply now to permit sufficient time for assessment
• MTD begins April 2027: Apply from summer time 2026
• MTD begins April 2028: Apply from summer time 2027

Find out how to apply for MTD exemption

To use, you’ll want:

• Your Nationwide Insurance coverage quantity, title, and tackle
• Particulars of the way you at present file your tax return (and whether or not anybody helps you)
• Your causes for digital exclusion, with supporting proof if potential
• Particulars of any agent or accountant you utilize
• Details about any extra wants so HMRC can supply the correct help

In the event you suppose you qualify, you may apply by calling or writing to HMRC. HMRC goals to course of purposes inside 28 days, so ensure that to take action properly prematurely of your begin date in an effort to obtain a well timed choice.

Remember that HMRC can problem purposes, particularly in borderline conditions. In case your exemption is refused, you may enchantment the choice, search assist from a tax adviser, or steadily transition to digital instruments to develop into MTD-compliant.