Quick answer:
You are exempt from MTD for Income Tax if your qualifying income is below the threshold or you have no qualifying income (automatic exemption), or if HMRC agrees you are “digitally excluded” because age, disability, location or religious belief makes using software impractical (an exemption you must apply for).
HMRC applies a strict test, and preferring paper or finding software costly does not qualify. Here’s who’s actually exempt and how it works.
Who is automatically exempt from MTD?
Some people don’t need to do anything, the exemption applies automatically. This includes those who:
- Have qualifying income below the relevant threshold for the tax year (see MTD qualifying income explained)
- Have no qualifying income from self-employment or property
- Do not have a National Insurance number by 31 January before the tax year starts
If you’re automatically exempt, you continue with Self Assessment as normal. Check your position in am I affected by Making Tax Digital?
What is digital exclusion?
Digital exclusion means it’s not reasonably practicable for you to use MTD-compatible software. HMRC may grant this exemption where:
- Your age, health condition or disability prevents you using a computer, tablet or smartphone
- You’re a practising member of a religious society whose beliefs are incompatible with digital record-keeping
- You live somewhere without reliable internet access
This exemption is not automatic, you must apply to HMRC by phone or in writing, ideally well before your start date.
What does NOT qualify for an exemption?
HMRC explicitly rejects applications based on:
- Simply preferring paper records
- Disliking or being unfamiliar with accounting software
- Having only a small number of transactions
- The cost or extra time of MTD
Using an accountant also does not make you exempt, your agent can file digitally on your behalf.
What if you’re not exempt?
If you don’t qualify, you’ll need MTD-compatible software and to follow the rules from your start date. Modern AI tools remove most of the difficulty that people fear, see bookkeeping without an accountant and how AI bookkeeping works.
How CleanBooks AI lowers the barrier
Much of the worry behind exemption requests is fear of complex software. CleanBooks AI is built for non-accountants: connect your bank, let Keeva™ do the categorising, and confirm your quarterly updates. For many who assumed they couldn’t cope with digital tools, that simplicity removes the problem entirely.
Worried MTD is too complex? See how simple CleanBooks AI makes it.
