Who is exempt from Making Tax Digital?
Answered 11 March 2026
Who is Exempt from Making Tax Digital?
The answer differs depending on whether you are looking at MTD for VAT or MTD for Income Tax (ITSA). Here is a comprehensive breakdown:
MTD for Income Tax (ITSA)
What the law says
The digital reporting and record-keeping requirements in Schedule A1 TMA 1970 do not apply to the following categories of person:
- Trustees of a charitable trust
- Trustees of an exempt unauthorised unit trust (within the meaning of the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819)) — unless they elect for the Schedule to apply
- Persons carrying on excluded activities, which include:
- The underwriting business of a member of Lloyd's
- Holding shares in a Real Estate Investment Trust (REIT) where distributions are chargeable under Part 3 ITTOIA 2005
- Participating in an open-ended investment company making property income distributions
- Non-resident companies chargeable to tax under Part 3 of ITTOIA 2005
- Trustees (including executors or administrators liable to income tax under s.74(1) TMA 1970)
- Persons providing qualifying care (as defined in Chapter 2 of Part 7 of ITTOIA 2005) in respect of that provision
- Persons without a National Insurance number — the digital requirements do not apply for a tax year if, on 31 January before the start of that tax year, the person did not have a national insurance number
MTD for VAT
What the law says
The retrieved sources do not contain the specific VAT legislation (e.g. the Value Added Tax (Amendment) Regulations) setting out the statutory exemption grounds. The HMRC guidance below reflects the operative position.
HMRC guidance / practice
HMRC will grant an exemption from MTD for VAT (i.e. from keeping an electronic account and filing via compatible software) where it is satisfied that:
- It is not practical for the business to use digital tools to keep records or submit VAT Returns — for example due to age, disability or location
- The business (or person) is subject to an insolvency procedure
- The business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records
- The business is already exempt from filing VAT returns online
Businesses that are already exempt or have applied for exemption will not be automatically signed up by HMRC.
To claim a VAT exemption, a business must contact HMRC (VAT: general enquiries) providing its VAT Registration Number, business name, reason for exemption, and details of how it currently files. HMRC will confirm the decision in writing, and the business should continue filing as normal while awaiting a decision.
Citation sources
All VAT registered businesses should now be signed up for Making Tax Digital for VAT. You no longer need to sign up yourself. HMRC will sign up all new VAT registered businesses to Making Tax Digital for VAT automatically unless they are already exempt or have applied for exemption. You should now keep VAT records and submit VAT Returns using compatible software. Find software that’s compatible with Making Tax Digital for VAT.
adjusted proportionately on a time basis, or, if it appears that that method would work unreasonably or unjustly, on a just and reasonable basis. Election not to be exempt 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-resident company exemption 24 The digital requirements do not apply to a company which is chargeable to tax under Part 3 of ITTOIA 2005. Trustee exemption 25 1 The digital requirements do not apply to a person acting as a trustee. 2 For the purposes of para
You do not need to keep an electronic account if HMRC is satisfied that: it’s not practical for you to use digital tools to keep your business records or submit your VAT Returns — this may be due to reasons such as age, disability or location you (or your business) are subject to an insolvency procedure your business is run entirely by practising members of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records you’re alre
PART 4 Administration, avoidance and enforcement Reporting and record-keeping Digital reporting and record-keeping for income tax etc 60 1 TMA 1970 is amended as set out in subsections (2) and (3). 2 After section 12B insert— Digital reporting and record-keeping Digital reporting and record-keeping 12C Schedule A1 (digital reporting and record-keeping) has effect. 3 Before Schedule 1AA insert— SCHEDULE A1 Digital reporting and record-keeping Section 12C PART 1 Application Application: persons 1
To make a claim for exemption, contact VAT: general enquiries. You’ll need: your VAT Registration Number your business name and principal place of business the reason for your exemption request details about how you currently file your VAT Returns the reasons why you would not be able to file returns through software or keep digital records (even if you can file using VAT online services) any other reason why you cannot follow the requirements You can ask an agent, friend or family member to ask