Making Tax Digital for IT Exemptions

Making Tax Digital (MTD) is a significant shift for many businesses and landlords, requiring digital record-keeping and online submission of tax reports. However, not all businesses are required to comply with MTD. There are specific exemptions that may apply to you, depending on your circumstances.

In this article, we’ll explain who can apply for MTD exemptions, the types of exemptions available, and how to apply for one if applicable to your business.

Who Can Be Exempt from MTD for IT?

While the majority of landlords earning above the £30,000 or £50,000 thresholds are required to comply with MTD for Income Tax (IT), some landlords may be able to claim an exemption.

1. Age-Related Exemption

Landlords who are 75 years old or older may be exempt from MTD for IT if they meet the following conditions:

• They cannot use digital tools (either due to lack of technology access or disability).
• They cannot manage digital accounts on their own.

If this applies to you, you may be able to apply for an exemption.

2. Serious Illness or Disability

Landlords who are severely ill or disabled, and cannot comply with digital record-keeping and submission due to their condition, can apply for an exemption.

3. Low Income/Low Activity

Landlords with a low level of income or minimal business activity may also be exempt from MTD for IT. This typically applies if:

• Your rental income is below £30,000 (starting from 2027).
• Your main income source is from pensions or employment, and rental income is supplementary.

4. Religious Beliefs

In some cases, individuals with religious beliefs that prevent them from using digital technologies (such as certain religious groups) may apply for an exemption from MTD for IT.

5. Access to Internet or Software Issues

Landlords who cannot access the internet or have limited access to the necessary technology may be eligible for an exemption. This typically applies if you:

• Live in a remote area with poor internet access.
• Do not have access to a device capable of handling MTD submissions.

How to Apply for an Exemption

If you believe you are eligible for an exemption, you must apply through HMRC. Here's how:

Step 1: Check if You Qualify

Before applying for an exemption, make sure you meet one of the qualifying criteria listed above.

Step 2: Apply Online (If Applicable)

Most exemptions can be applied for online via the HMRC website. If your circumstances meet any of the exemption criteria, you can apply by:

• Visiting the HMRC MTD for IT page.
• Logging into your HMRC account.
• Filling in the necessary details about your situation.

Step 3: Wait for HMRC Approval

Once submitted, HMRC will assess your application and let you know if your exemption is approved.

Step 4: Maintain Your Exemption Status

If approved, you won’t need to submit quarterly updates for MTD, but you must stay aware of your exemption status. Should your situation change, you may need to reapply or comply with MTD in the future.

What Happens if You Don’t Apply for an Exemption When Eligible?

Failing to apply for an exemption when you’re eligible could result in you being required to comply with MTD when you shouldn’t have to.

Penalties could apply if you submit late or incorrectly, so it’s crucial to ensure you are either complying with MTD or officially exempted.

Final Thoughts

While MTD for IT applies to most landlords, exemptions are available for those with specific circumstances. If you think you qualify for an exemption, it’s important to act quickly to avoid unnecessary penalties.

In the next article, we’ll discuss the penalties for non-compliance with MTD and how to avoid them.