Making Tax Digital for Income Tax (MTD for ITSA) becomes mandatory for many sole traders and landlords from 6 April 2026.
However, several notable exemptions and easements are in place to ease the transition.
Some are permanent (e.g. digital exclusion), while others are temporary or will be phased in.
This guide covers the main ways individuals may be exempt from MTD or benefit from less stringent reporting rules during the early stages.
For a full breakdown of deadlines, see:
- ByteStart’s MTD ITSA Deadlines Explained
- Expert guide to Making Tax Digital for the Self-Employed
- GOV.UK: MTD Eligibility Guidance
1. Income threshold easement (phased rollout)
Not all self-employed people and landlords are affected straight away. MTD will apply in phases depending on your total gross income from self-employment and property combined.
| Gross income | Start date for MTD |
|---|---|
| Over £50,000 | April 2026 |
| £30,000 to £50,000 | April 2027 |
| Under £30,000 | Currently under review |
This easement gives smaller businesses more time to prepare. Your income is assessed using the most recent tax return submitted to HMRC.
2. Digital exclusion exemption
If you cannot reasonably use digital tools, you may apply for an exemption. This includes situations where you are:
- elderly or disabled
- living in a location without internet access
- restricted by religious beliefs that prevent the use of technology
HMRC considers each case individually. You’ll need to write to them explaining your circumstances and may be asked for supporting evidence. Exemptions are generally only granted for permanent or long-term conditions.
Apply for a digital exclusion exemption
3. Certain businesses and income types excluded
Some businesses and entities are currently excluded from MTD for ITSA:
- Partnerships (not mandated until at least 2027)
- Trusts and estates
- Lloyd’s underwriters
- Non-resident companies
- Trustees of registered pension schemes
4. Joint property income easement
If you jointly own a property (e.g. as a couple), a temporary easement allows one person to:
- Keep the digital records for that property
- Share summary updates with the other owner(s)
This reduces the burden on co-owners who would otherwise each need to maintain separate digital records.
5. Multiple businesses – simplified updates
If you have more than one sole trade, or a mix of trading and property income, you won’t need to submit a separate update for each individual business. Instead, you can:
- Submit one quarterly update for all trading income
- Submit one for all property income
This easement simplifies the process for self-employed people with multiple income streams.
6. Light-touch penalties during the first year
Although MTD introduces a new penalty system, HMRC has confirmed that enforcement will be lenient during the first year of mandation.
Penalties will follow a points-based system. You get a point each time you miss a submission. Once you reach a threshold (e.g. 4 points for quarterly updates), a £200 penalty applies. But first-year mistakes are unlikely to trigger immediate fines.
HMRC: Penalties for Late Submission
7. Other practical easements
HMRC has introduced several other practical measures to ease the transition:
- You can use spreadsheets with HMRC-recognised bridging software
- Quarterly updates are aligned to calendar quarters
- Free or low-cost MTD-compatible software is available for simple businesses
Summary table
| Type | Who qualifies / what it means |
|---|---|
| Income threshold easement | Only those earning over £50k mandated in 2026; £30k+ in 2027 |
| Digital exclusion | Long-term exemption for age, disability, remoteness or religion |
| Business type exclusion | Partnerships, trusts, Lloyd’s underwriters, pension trustees |
| Joint property easement | One joint owner can report for all |
| Multiple business update rule | One update per income type, not per business |
| Light-touch penalties | First-year mistakes unlikely to be penalised |
| Other easements | Spreadsheet bridging, quarterly alignment, free software |
For more official help preparing for MTD and finding out about easements and exclusions, visit:
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