Exemptions and digitally excluded clients
Some clients will not need MTD for Income Tax. GOV.UK splits exemptions into automatic ones and ones you must apply for.
Not tax advice. HMRC decides applications case by case.
Automatic exemptions (examples from GOV.UK)
- No National Insurance number before the start of the tax year — cannot sign up.
- Role-based: certain entities such as non-resident companies on SA700 and trusts on SA900 are automatically exempt.
If exempt, the client still reports via Self Assessment as normal.
Exemptions you apply for — digitally excluded
- A client may be digitally excluded if it is not reasonable for them to use compatible software to keep digital records or submit them.
- Agents can apply on the client’s behalf; the test is still the client’s personal circumstances.
- If the agent will meet the MTD requirements on the client’s behalf using compatible software, a digitally excluded exemption may not be needed — discuss before applying.
- Apply before the client’s MTD start date. If already signed up and circumstances change, apply and continue using MTD while waiting.
How agents apply (GOV.UK)
Agents should use the contact details in Agent Dedicated Line: Self Assessment or PAYE for individuals. Individuals use Self Assessment general enquiry contacts. Prepare the client to use MTD if the application is refused.
Practice checklist
- Flag possible digitally excluded clients early in the £50k cohort.
- Document whether the practice will operate software on their behalf.
- Diary HMRC response; Agent Update has referenced ~28-day processing aims when information is complete.
Sources:
https://www.gov.uk/guidance/find-out-if-you-can-get-an-exemption-from-making-tax-digital-for-income-tax
https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax
Related: who needs MTD