MTD for Income Tax

HMRC has released clarification on what constitutes an exemption from Making Tax Digital (MTD) for Income Tax.

MTD for Income Tax is due to come into effect April 2024. This is a year later than originally planned, as the initiative was delayed due to the effects of the pandemic. The changes will mean that landlords and sole traders will have to report their income in quarterly returns as opposed to the traditional annual tax return. We have discussed the upcoming MTD rules in detail if further clarification is sought.

Exemption criteria

Taxpayers will be able to apply for an exemption from taking part in MTD for Income Tax for the following reasons:

  • It is not practical to use software to keep digital records or submit them — this may be due to your age, disability, or location etc.
  • You are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records.

HMRC require that you explain how these reasons apply to your own circumstances. This is so HMRC can make an informed decision on if you qualify for an exemption.

HMRC will review the information provided and will contact taxpayers to let them know that they have agreed that they are exempt from using MTD. However, if HMRC has determined that the taxpayer is not exempt, they will provide details of how to appeal this decision.

What’s next?

Furthermore, it is important to note that if HMRC has already confirmed a taxpayer is exempt from Making Tax Digital for VAT for one of the above reasons, then they will not need to apply for an exemption for Making Tax Digital for Income Tax.

If you are deemed to be exempt for participating in MTD, but the reason for exemption changes, you must inform HMRC within three months.

As always, if you would like any further information regarding any of the current or upcoming stages of the Making Tax Digital scheme, please feel free to contact our offices by email