Making Tax Digital: Updated exemption rules explained

HMRC has issued updated guidance on exemptions from Making Tax Digital (MTD) for Income Tax, refining how and when taxpayers can step outside the regime.

While the underlying rules haven’t fundamentally changed, the latest updates bring more certainty, particularly for those with more complex tax affairs.

A key theme running through the revisions is clarity. HMRC has drawn firmer lines between exemptions that happen automatically and those that depend on a successful application, while also reinforcing that some reliefs are time-limited and others continue until circumstances change.

A clearer position for internationally complex taxpayers

Much of the update focuses on individuals who need to complete the SA109 supplementary pages -typically those with cross-border tax considerations.

The position is now more straightforward. Where SA109 formed part of a 2024/25 return, exemption from MTD for 2026/27 follows automatically. There is no longer any requirement to justify whether that position is expected to continue.

For those who did not include SA109 in that year, there is still a route to exemption, but it hinges on a reasonable expectation that it will be needed in a later return (either 2025/26 or 2026/27).

Wider adjustments across the exemption framework

Beyond SA109, HMRC has used the update to tidy up several other areas that have historically caused uncertainty.

Certain claims made in a tax return – such as averaging relief – can trigger a temporary exemption where MTD would otherwise apply.

In other cases, administrative factors come into play; for example, individuals without a National Insurance number at the start of the year remain outside the regime altogether for that period.

There is also more consistent language around taxpayers who rely on others to manage their affairs, such as through formal legal authority. The guidance now aligns more closely with how these roles are defined in legislation.

How exemptions now operate in practice

Stepping back, the framework is becoming more structured:

• Some taxpayers will be excluded from MTD automatically based on information HMRC already holds.
• Others will need to actively request exemption, particularly where eligibility depends on future circumstances rather than past filings.
• Timing remains important, with certain exemptions only deferring MTD obligations rather than removing them entirely.

Separate rules continue to apply for those who are unable to engage digitally, although these are assessed individually rather than through a blanket approach.

Why this matters now

As MTD for income tax moves closer, these refinements highlight the importance of reviewing your position early. What’s included in your tax return (and what you expect to include next) can directly impact your obligations.

For many, the detail will determine whether MTD applies in the short term.

Speak to Verallo

If you’re unsure how these changes affect you, or whether you may qualify for an exemption, the team at Verallo can help. Get in touch to discuss your position and plan ahead with confidence.