HMRC Exempts 661 Taxpayers from Making Tax Digital Requirements Ahead of Rollout

HM Revenue and Customs (HMRC) has approved exemptions for 661 taxpayers from the upcoming Making Tax Digital (MTD) for Income Tax requirements, representing approximately half of the 1,271 exemption applications received as of January 31, 2026. Treasury Minister Dan Tomlinson confirmed that 220 applications were rejected, with decisions pending on the remaining cases. This exemption applies to individuals unable to comply due to factors such as age or disability.

The exemptions affect less than 0.1% of the 780,000 sole traders and landlords required to adopt MTD for Income Tax starting April 6, 2026. This mandate applies to those earning over £50,000 during the 2024-25 tax year. Under MTD, taxpayers must:

• Submit quarterly income and expense reports through HMRC-approved software
• Replace annual paper returns or online submissions with digital reporting
• Maintain digital records throughout the tax year

Compliance deadlines are strictly defined:

• April 6, 2026: MTD requirements take effect
• August 7, 2026: First quarterly report deadline
• April 2027: Penalty point system begins (after four late submissions)

HMRC reports over 37,000 registrations and 13,500 test submissions to date. The tax authority is conducting 300+ educational events and will mail QR codes linking to official guidance at GOV.UK's MTD portal.

Approved software solutions include free options and bridging tools that integrate with spreadsheets. HMRC estimates transition costs at £350 per business with ongoing annual expenses of £115. The full financial impact projection includes:

• £561 million in one-time compliance costs
• £196 million in annual ongoing expenses
• £780 million in additional tax revenue by 2028-29 (partially through error reduction)

Future rollout phases will expand MTD requirements:

• April 2027: 970,000 taxpayers earning over £30,000
• April 2028: 975,000 taxpayers earning over £20,000

Businesses should immediately verify their eligibility, evaluate exemption criteria if applicable, select approved software from HMRC's official list, and establish quarterly reporting workflows before the April deadline.