MTD for ITSA Exemptions: Who Doesn't Have to Sign Up?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is coming — but it doesn't apply to everyone. If you're a sole trader or landlord wondering whether you actually need to comply, this guide breaks down exactly who's exempt and who isn't.

A Quick Recap: What Is MTD for ITSA?

From 6 April 2026, HMRC is requiring sole traders and landlords with gross income above £50,000 to keep digital records and submit quarterly updates using MTD-compatible software. It's the biggest change to self-assessment in decades.

The rollout happens in waves:

• 6 April 2026 — gross income above £50,000
• April 2027 — gross income above £30,000
• April 2028 — gross income above £20,000

But plenty of people fall outside these rules entirely. Here's who.

Who Is Exempt from MTD for ITSA?

1. Anyone Below the Income Threshold

The most straightforward exemption: if your gross self-employment or property income is below the threshold for your wave, you don't need to comply yet. As of April 2026, that means anyone earning under £50,000 gross is not required to sign up.

Note the word gross. This is your total income before expenses, not your profit. A sole trader turning over £55,000 but only profiting £25,000 is still caught by Wave 1.

2. Limited Companies and Partnerships

MTD for ITSA applies to individuals — sole traders and individual landlords filing Self Assessment tax returns. If you operate through a limited company, you're outside the scope of MTD for ITSA entirely. Your obligations fall under Corporation Tax, which has its own separate (and much later) digital plans.

General partnerships were originally included in HMRC's plans but have been deferred indefinitely. There is currently no confirmed start date for partnerships. LLPs and limited partnerships are also excluded for now.

3. Trusts and Estates

Income received by trustees or personal representatives of deceased persons is not within the scope of MTD for ITSA. If you're administering an estate or managing a trust that receives rental or trading income, you won't need MTD software for that income.

4. Foster Carers Using the Qualifying Care Relief

Foster carers who use the Qualifying Care Relief (also known as foster care relief) to calculate their taxable income are exempt from MTD for ITSA. Since this relief replaces the need to track actual income and expenses in the normal way, HMRC has confirmed these individuals don't need to keep digital records under MTD.

5. People with a Reasonable Excuse (Digital Exclusion)

HMRC recognises that not everyone can go digital. You may be able to claim an exemption if:

• Your age, disability, or health condition makes it unreasonably difficult to use digital tools
• Your location means you can't get a reliable internet connection (e.g. remote rural areas)
• You have a religious objection to using electronic communications

This is the same "digital exclusion" exemption that already exists for MTD for VAT. You'll need to contact HMRC to apply — it's not automatic. But if you genuinely cannot use a computer or smartphone, you won't be forced to.

6. Non-UK Residents with No UK Self-Assessment Obligation

If you're not UK-resident and don't file a UK Self Assessment tax return, MTD for ITSA doesn't apply to you. However, non-UK residents who do have UK property income and file Self Assessment are likely caught — the rules follow the tax return, not your physical location.

7. Ministers of Religion with Certain Income Types

HMRC has confirmed that ministers of religion who receive a stipend (rather than trading income) and whose only self-employment income falls below the threshold are not required to join MTD for ITSA. This is a niche exemption, but it matters to those it affects.

8. Lloyd's Underwriters

Members of Lloyd's of London (Names) are specifically excluded from MTD for ITSA. Their syndicate income is reported through a different mechanism and doesn't fall within the MTD framework.

Common Situations That Are NOT Exempt

Some people assume they're exempt when they're not. Watch out for these:

"I Only Have One Small Rental Property"

If the gross rental income from that property pushes you above the threshold, you're in scope. It doesn't matter that it's "only" one property or that your profit after mortgage interest and repairs is modest. HMRC looks at gross income.

"I'm Already on MTD for VAT"

Being registered for MTD for VAT doesn't exempt you from MTD for ITSA — they're separate obligations. If you're VAT-registered and also a sole trader above the income threshold, you'll need to comply with both. The good news is that most MTD-compatible software handles both VAT and Income Tax in a single package.

"I Use an Accountant"

Having an accountant doesn't exempt you. Your accountant can use MTD software on your behalf (and many will), but the legal obligation to maintain digital records and submit quarterly updates sits with you. It's worth having a conversation with your accountant now about how they plan to handle MTD.

"My Income Fluctuates"

If your income was above £50,000 in the 2024/25 tax year (the reference year for Wave 1), you'll need to comply from April 2026 — even if your income drops below the threshold afterwards. HMRC uses your most recent tax return to determine whether you're in scope.

What If You're Close to the Threshold?

If your gross income hovers around the £50,000 mark, it's worth preparing now rather than scrambling later. Getting set up with MTD-compatible software early means you'll already be comfortable with digital record-keeping if and when you cross the line.

Many software providers offer free trials or discounted introductory pricing — some with savings of up to 90% for new users. There's no penalty for starting early, and the transition is much smoother when you're not doing it under pressure.

How to Check If You Need to Comply

Here's a simple checklist:

• Are you a sole trader or individual landlord? If no → not in scope
• Do you file a UK Self Assessment tax return? If no → not in scope
• Is your gross self-employment or property income above the threshold for your wave? If no → not yet in scope
• Do any of the specific exemptions above apply to you? If yes → you may be exempt

If you answered yes to the first three and no to the fourth, you'll need to sign up for MTD for ITSA and start using compatible software.

The Bottom Line

MTD for ITSA casts a wide net, but it doesn't catch everyone. Limited companies, partnerships (for now), those below the income threshold, digitally excluded individuals, and a handful of specific groups are all outside its scope.

If you are in scope, the smartest move is to start early. Choose your software now, get familiar with digital record-keeping, and you'll barely notice when the deadline arrives. Our software comparison page breaks down the best MTD options by price, features, and the deals currently available — it takes five minutes and could save you a lot of stress later.