Making Tax Digital Exemptions: What you need to know

Making Tax Digital is a government initiative to modernise the tax system, by requiring unincorporated businesses to keep and submit records of their property income and allowable expenses digitally.  

If you fall under the remit of the scheme you will need to use special Government-approved software that is Making Tax Digital-compatible to file your tax return digitally.  

You can read more about Making Tax Digital and other tax-related issues in our complete guide to MTD, as well as explore related guidance in our main tax hub.

If you are eligible, failure to use Making Tax Digital to report your income can lead to significant financial penalties imposed by HMRC.  

Making Tax Digital for Income Tax is a new digital reporting system for those with self-employed and/or property income.  

It will require you to submit quarterly updates – rather than just the annual return that is standard at present – with documents due for submission on the 7th of August, November, February and May each year.  

An additional final declaration, similar to the current Self Assessment return, will then need to be submitted via MTD-compliant software by the current 31 January deadline to confirm the accuracy of your submissions, and to allow you to claim any allowances or reliefs.  

You can read more about what Making Tax Digital for Income Tax is, and how it affects landlords, on our main guide. 

From 2026, unincorporated landlords who had an annual gross income from property or self-employment of £50,000 or more in the 2024-2025 tax year must comply with the new reporting rules.  

From 2027, this will then decrease to those who earn a gross income from property or self-employment of £30,000 or more in the 2025-2026 tax year.  

From 2028, the new rules will then apply to landlords with a gross income from property or self-employment of £20,000 or more in the 2026-2027 tax year.  

Only self-employed and property income is included in the above figures, with employment (PAYE) and pensions not contributing to the income threshold. For example: 

• In tax year 2024-2025, Landlord A earns £20,000 per year gross in property income, and £50,000 from PAYE. Despite a total income of £70,000, only the £20,000 of property income will be counted towards the income threshold for MTD. Landlord A will therefore not be required to use MTD for the 2026 tax year.  
   

• Landlord B is self-employed with an income of £30,000 and a property income of £20,000 in the 2024-2025 tax year. Landlord B also receives a pension of £10,000. Whilst the pension is not counted towards the MTD threshold, the self-employed and property income add to £50,000, and therefore Landlord B will be required to report income using MTD starting April 2026.  

If you are a landlord who is also self-employed, you will need to record both income streams separately.  

For properties that are jointly owned, gross income will be determined by the share of income from the property, which is usually based on the ownership share. You can read more about Making Tax Digital and joint-ownership rules in a breakdown from NRLA Policy Director Chris Norris.

There are a number of different exemptions from the Making Tax Digital requirements. We have broken them down below into income, digital and other exemptions or exclusions.  

Income Exemptions

Making Tax Digital for Income Tax is being introduced in tranches, dependent on gross income. Limited company landlords are not affected and will continue to pay corporation tax. You are automatically exempt from using Making Tax Digital if you do not meet the gross income threshold.  

• From 2026: Landlords with gross annual income from property or self-employment of £50,000 or more in the 2024-2025 tax year must comply  

• From 2027: This is extended to landlords earning £30,000 or more gross annual income from property or self-employment in the 2025-2026 tax year. 

• From 2028: The new rules apply to landlords with gross annual income from property or self-employment of £20,000 or more per year in the 2026-2027. 

You can use your HMRC online services account to cease a source of self-employment or property income. You can do this by entering the date the income source stopped. After you’ve notified HMRC, you will not need to send any quarterly updates once the business has ended.

Business partnerships will also need to use Making Tax Digital for Income Tax in the future. HMRC will set out the timeline for this at a later date. 

Digital Exclusion

When the applications process opens, you will be able to apply for an exemption if it’s not practical for you to use software to keep digital records or submit them this may be due to your age, disability or location. You can find out it you can get an exemption from MTD here. 

HMRC will determine applications for exemption on a case-by-case basis. The exemption is based on the your circumstances, not those of an agent, friend, or family member who may help you with the application. 

If HMRC has already confirmed you are exempt from Making Tax Digital for VAT, you should contact them when the application process opens. HMRC will perform some checks, and if your circumstances have not changed, they will confirm you're also exempt from Making Tax Digital for Income Tax.  

• From 2027: This is extended to landlords earning £30,000 or more gross annual income from property or self-employment in the 2025-2026 tax year. 

• From 2028: The new rules apply to landlords with gross annual income from property or self-employment of £20,000 or more per year in the 2026-2027. 

Business partnerships will also need to use Making Tax Digital for Income Tax in the future. HMRC will set out the timeline for this at a later date. 

Temporary Exemptions until April 2027

Temporary Exemptions will delay when you need to start using Making Tax Digital for Income Tax. In some cases, you will need to apply for this exemption with HMRC. Below are some of the temporary exemptions available. 

• Claimed averaging relief – you will be automatically exempt until April 2027 if your 2024-2025 tax return showed this. 

• Claimed qualifying care relief (such as a foster carer, adult placement carers, kinship carers or staying put carers) - you will be automatically exempt until April 2027 if your 2024-2025 tax return showed this. 

• Received income from trusts or estates - you will be automatically exempt until April 2027 if your 2024-2025 tax return showed this. 

You will also be exempt from MTD for Income Tax until April 2027 if: 

• Included the SA109 supplementary page in your 2024 to 2025 tax return and you think it’s likely you’ll include it again for the 2026 to 2027 tax year - if this is the case you are automatically exempt 

• Did not include the SA109 supplementary page in your 2024 to 2025 tax return but you expect to include it for the 2025 to 2026 or your 2026 to 2027 tax year - if this is the case you will need to apply for an exemption 

You will also be able to apply for exemptions to Making Tax Digital for Income Tax for certain temporary exemptions: 

If you are a non-UK resident foreign entertainer or sportsperson, you will need to apply for an exemption until April 2027, even if you included this income in your 2024 to 2025 tax return. 

HMRC has yet to publish how you can apply for this exemption, but we will share it with members when it becomes available.  

Other Exclusions

According to the guidance, you're automatically exempt from, and cannot sign-up for, Making Tax Digital for Income Tax if you are a:   

• Trustee, including a charitable trustee or a trustee of non-registered pension schemes  

• Person that does not have a National Insurance number — this only applies for a tax year where you do not have a National Insurance number on 31 January before the start of that tax year  

• Personal representative of someone who has died  

• Person submitting a tax return on behalf of a taxpayer because you have enduring power of attorney or lasting power of attorney to act on their behalf because they’re not physically or mentally capable of filing a tax return; or appointed by a UK court to act on their behalf because they lack mental capacity. 

• Lloyd’s member, in relation to your underwriting business, are permanently exempt and Lloyd’s members with self-employment or property income are exempt beyond April 2027 if they submitted their 2024 to 2025 tax return on this basis

• Non-resident company 

You will also be able to apply for an exemption if you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records. This will be determined by HMRC on a case-by-case basis. 

What if my exemption application is rejected?

If you disagree with the decision

If your application is not accepted, your decision letter will explain why and how to appeal.

When you must appeal depends on when you receive a decision letter.

If you get a decision before 1 April 2026

You can appeal at any time before 1 April 2026, but you must do so by 30 April 2026. HMRC will start to review these appeals from 1 April 2026.

If you get a decision on or after 1 April 2026

You can appeal up to 30 days after the date on the letter.

If you need more time to appeal, you need to tell HMRC why by contacting:

• Self Assessment: general enquiries, if you’re appealing for yourself or on behalf of a friend or family member
• the Agent Dedicated Line: Self Assessment or PAYE for individuals, if you’re an agent

Making Tax Digital will require you to sign up to approved digital reporting software to record and submit your income and expenses.  

You can find relevant approved software on the HMRC website. The NRLA are also developing our own MTD reporting software, integrated into Portfolio, which will be ready for April 2026. 

The NRLA are also developing our own MTD reporting software, integrated into Portfolio, which will be ready for April 2026. You can learn more about NRLA Portfolio and its Making Tax Digital features.

You can read more about important dates in our guide that breaks down the key dates around Making Tax Digital

You should make sure you are ready for Making Tax Digital for Income Tax. Failure to prepare may eventually lead to financial penalties from HMRC. 

You should confirm if they are required to comply with Making Tax Digital using the thresholds provided above. You can comply voluntarily if your income does not meet the threshold. 

You will then need to sign up for MTD on the HMRC website and complete the relevant registration. 
 
You are required to choose a making tax digital compatible software – you can check for suitable systems on the HMRC website. 
 

The NRLA has developed an exciting feature within its Portfolio property management software that will help you stay compliant with Making Tax Digital. Find out more about NRLA Portfolio and how it can help you prepare for Making Tax Digital.

With your NRLA membership, you can login to organise and categorise your transactions for free to store them in compliance with Making Tax Digital. You can also upgrade to automate categorisation, and handle quarterly updates and the final declaration by their respective deadlines.

You can start preparing now by signing into Portfolio, uploading your properties and connecting your bank accounts using the Open-Banking technology.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is a new income reporting system being implemented in phases between now and 2028. It will replace the old Self Assessment return. If you earn over £50,000 in gross property or self-employment income in the 2024-2025 tax year, you will be required to use it from April 2026. The threshold is then lowered to £30,000 or more gross property or self-employment income in the 2025-2026 tax year to begin Making Tax Digital reporting in April 2027. This is then further lowered to £20,000 or more in gross property or self-employment income in the 2026-2027 tax year, to begin reporting using MTD in April 2028. 

Can landlords get a Making Tax Digital exemption?

Certain landlords may be eligible for a Making Tax Digital for Income Tax exemption. For a list of possible exemptions, please review our exemption guide here. You can aslo find the full list on HMRC's website.

How does jointly-owned property work with Making Tax Digital for Income Tax?

If a property is jointly-owned, gross income will be determined by the share of the income from the property – which is usually based on the ownership share. You can read more about jointly-owned property on our definitive Making Tax Digital for Income Tax guide. NRLA policy director Chris Norris also breakdowns Joint ownership and other tricky topics realting to Making Tax Digital

Does the NRLA have a Making Tax Digital for Income Tax reporting software?

The NRLA has developed an exciting feature within its Portfolio property management software that will help you stay compliant with Making Tax Digital. Find out more about NRLA Portfolio and how it can help you prepare for Making Tax Digital.

With your NRLA membership, you can login to organise and categorise your transactions for free to store them in compliance with Making Tax Digital. You can also upgrade to automate categorisation, and handle quarterly updates and the final declaration by their respective deadlines.

You can start preparing now by signing into Portfolio, uploading your properties and connecting your bank accounts using the Open-Banking technology.