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MTD Exemptions

Who Can Opt Out of Making Tax Digital?

Find out who qualifies for MTD exemptions or deferrals. Learn how to apply and whether you can legally opt out of Making Tax Digital for VAT or income tax.

This page will explain who qualifies, how to apply, and what you need to know before assuming you’re exempt.

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Making Tax Digital (MTD) is now mandatory for most VAT-registered businesses and will soon apply to self-employed individuals and landlords. However, in certain circumstances, HMRC allows MTD exemptions or deferrals meaning you may not have to comply.

What Is an MTD Exemption?

An MTD exemption is when HMRC formally confirms that you do not need to comply with Making Tax Digital (MTD) requirements for VAT or Income Tax.

Exemptions are only granted in specific circumstances and must be applied for directly with HMRC. You cannot simply decide not to follow the rules you must receive official approval before being treated as exempt.

Who Can Qualify for an MTD Exemption?

HMRC only grants exemptions in specific circumstances. These generally fall into three categories:

Digital Exclusion

If it is not reasonably practical for you to use digital tools, you may qualify for exemption. This can include:

  • Age – where it prevents you from using technology.
  • Disability – if it makes digital record-keeping impractical.
  • Remote location – with no reliable internet access.
  • Serious IT limitations – where access to equipment or skills is not feasible.

This is often referred to as digital exclusion and is the most common reason for exemption.

Religious Grounds

If your religious beliefs prevent you from using computers or the internet (for example, in communities that avoid modern technology), HMRC may grant an exemption.

  • You will need to provide a written explanation when applying.

Other Exceptional Circumstances

In rare or temporary situations, HMRC may agree to an exemption or deferral. Examples include:

  • Temporary illness or emergency that prevents digital filing.
  • Administrative or legal barriers specific to your situation.

In these cases, HMRC may allow a temporary deferral rather than a full exemption.

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MTD Quick Links

What is Making Tax Digital
Do I Need to Register for Making Tax Digital?
Making Tax Digital Timeline and Rollout
How to Sign Up for Making Tax Digital
Making Tax Digital Deadlines and Dates
Making Tax Digital for VAT
MTD Income Tax (MTD for ITSA)
Making Tax Digital for Corporation Tax
Making Tax Digital Exemptions
Common MTD Mistakes and Avoiding Them
Making Tax Digital for Partnerships
Making Tax Digital for Limited Companies
Making Tax Digital for Sole Traders
Making Tax Digital for Landlords
Making Tax Digital Compliant Software
Making Tax Digital Bridging Software
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Important Notes on MTD Exemptions

  • Approval is not automatic – applying does not guarantee exemption; you must wait for official confirmation from HMRC.
  • Exemptions are usually permanent, while deferrals are temporary and granted only in specific short-term situations.
  • You must notify HMRC if your circumstances change – for example, if you move to an area with internet access or your health situation improves.

Risks of Assuming You’re Exempt

A common mistake is assuming you qualify for an exemption without going through HMRC’s formal process. Doing so can result in:

  • Missed filing deadlines if you don’t submit via the required digital route.
  • Penalties for non-compliance under HMRC’s points-based system.
  • Invalid returns if they are filed outside of MTD-compliant software without official exemption.

Key takeaway: Don’t rely on assumptions – always apply to HMRC and wait for written confirmation before opting out of Making Tax Digital.

What Is an MTD Deferral?

An MTD deferral is when HMRC allows you to delay compliance with Making Tax Digital for a limited period. Unlike exemptions, which are often permanent, deferrals are temporary and usually granted in exceptional circumstances.

You may be eligible for a deferral if you are experiencing:

  • Complex business structures – such as large corporate groups or businesses with overseas branches.
  • Transitional difficulties – for example, restructuring or significant changes to your business model.
  • Software migration challenges – if you are in the process of moving to MTD-compatible systems and need additional time.

Note: HMRC no longer offers blanket deferrals for VAT (these ended in 2021). However, you can still apply for an individual deferral if you face genuine technical or operational barriers.

How to Apply for an MTD Exemption or Deferral

You must write to HMRC and include:

  • Your business name and contact details
  • Your VAT registration number or UTR (for ITSA)
  • Your reason for requesting exemption or deferral
  • Supporting evidence (if applicable)

Send your application to:

VAT Exemptions (Making Tax Digital)
HM Revenue and Customs
BX9 1GL
United Kingdom

Or contact HMRC by phone if you need help with the process. HMRC may ask for additional information before approving your request.

Let Accounting Wise Help

We can:

  • Assess your eligibility for exemption or deferral
  • Assist with drafting and submitting your application
  • Help you explore bridging software or simplified digital solutions
  • Ensure you remain compliant if you don’t qualify

Our goal is to simplify MTD whether that means opting out legitimately or supporting your transition.

Unsure If You Qualify?

If you think you might be eligible for an MTD exemption, don’t wait. Let us guide you through the process or explore alternative ways to comply with minimal disruption.

Get in touch to discuss your situation with an MTD specialist.

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Making Tax Digital Exemptions FAQ

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You may qualify for an MTD exemption if it’s not practical for you to use digital tools due to age, disability, location (e.g. no internet access), or religious beliefs. Each case is assessed individually by HMRC.

You can apply for an exemption directly with HMRC, either online or by calling their helpline. You’ll need to explain your circumstances and provide evidence if requested. HMRC will confirm in writing if your application is successful.

No. Filing online alone is not enough to opt out of MTD. You must use MTD-compatible software that keeps digital records and submits VAT returns through a digital link  unless HMRC grants you an exemption.

Temporary deferrals were offered when MTD for VAT was first introduced, mainly for complex businesses. These deferrals are no longer widely available. Most VAT-registered businesses must now comply unless exempt.

Yes. Charities and not-for-profits that are VAT-registered still need to follow MTD rules, unless they’ve been formally exempted by HMRC. The same exemption criteria apply to them.

Yes. If you’re unable to use digital tools due to age, disability, or remoteness, you may qualify as digitally excluded. You’ll need to apply to HMRC and demonstrate why digital compliance isn’t reasonable for you.

No. Even if you’re exempt from MTD, you’re still required to file VAT returns — just not through the MTD digital system. You’ll continue filing using HMRC’s existing non-MTD methods.

There’s no automatic exemption for landlords or sole traders. However, if they meet HMRC’s exemption criteria (such as digital exclusion or religious grounds), they may apply for one.

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