(UNITED KINGDOM) — HM Revenue and Customs (HMRC) has approved 661 exemptions and denied 220 as the Making Tax Digital (MTD) for Income Tax rollout progresses, with thresholds and dates shaping who must digital-report and how exemptions work for mobile workers and landlords.
1) Overview: HMRC exemptions from MTD for Income Tax
MTD for Income Tax changes how some people complete Self Assessment. Instead of keeping records in a mix of spreadsheets, paper, or ad hoc notes, affected taxpayers must keep digital records in compatible software and send quarterly updates to HMRC. A final end-of-year step still applies. So an exemption can be a big deal.
An MTD for Income Tax exemption, means you may be allowed not to follow the digital record-keeping and quarterly update rules that would otherwise apply to you. In many cases, you remain in Self Assessment. You just do it without the new digital steps.
Numbers show how tightly exemptions are applied. By January 31, 2026, HMRC had made 881 decisions on exemption applications and granted 661, while denying 220. UK Treasury Minister Dan Tomlinson disclosed the figures in a parliamentary answer.
Mobile workers feel this pressure early. Digital nomads with UK self-employment income, and landlords living abroad with UK property income, can still have UK reporting duties. Quarterly updates mean more frequent deadlines while you may be in another time zone. That changes the day-to-day burden.
2) MTD for Income Tax rollout: scope, thresholds, and key dates
MTD for Income Tax first targets sole traders and landlords, based on “qualifying income.” For many people, that broadly means gross income from self-employment and/or property income that counts for the MTD test. It is not a test of profit. A low-profit business can still be pulled in if gross income is high.
The rollout works in phases. A higher-income group enters first, then lower thresholds follow in later years. Once you are in, the workflow changes. You keep digital records, send quarterly updates, and complete an end-of-year submission alongside the usual Self Assessment cycle.
April 6, 2026 is the key start for digital record keeping for the first cohort. The first quarterly update is expected on July 7, 2026, based on the usual quarterly pattern. The Self Assessment deadline of January 31, 2027 still matters for the annual return cycle.
For people working abroad, mechanics matter as much as rules. Receipts arrive by email while you travel. Bank transactions span currencies. Agents may need access while you are offline on a flight. Cloud software can help, but it also requires planning around logins, permissions, and reliable record capture.
3) Who must comply and current registration activity
HMRC estimates more than 780,000 taxpayers are in scope for the 2024-25 tax year under the first phase rules. Early uptake is far lower so far. HMRC has reported 37,000+ registered, with 13,500+ having tested quarterly updates.
Those figures can be read two ways. Some taxpayers are waiting until closer to April 6, 2026. Others may be relying on agents to do setup later. Either way, it suggests many people have not yet rehearsed the quarterly rhythm. That matters for digital nomads, because travel plans often collide with admin tasks.
Limited companies are not part of MTD for Income Tax. A contractor operating through a company may still face other digital reporting duties, and VAT-registered businesses have dealt with MTD for VAT since 2019. Still, the Income Tax rollout described here is aimed at individuals with self-employment and/or property income in Self Assessment.
Common cross-border scenarios include:
- A UK self-employed person who spends most of the year overseas but remains within UK Self Assessment.
- A UK landlord living abroad who uses a letting agent, yet still needs records for quarterly updates.
- A travelling freelancer who wants an accountant to submit updates, but must share clean transaction data each quarter.
4) Exemption criteria and process
Exemptions come in two types: automatic exemptions and applied-for exemptions.
Automatic exemptions generally mean you do not need to apply. The exemption follows from your status or situation, and it typically lasts unless circumstances change. Examples HMRC has described include cases where qualifying income is at or below £20,000, and certain specific categories such as some trustees, ministers of religion, or people without a National Insurance number.
Applied-for exemptions require you to submit a request to HMRC. They can be permanent or time-limited. A common ground is “digital exclusion,” which is about whether using digital tools is not reasonably practical for you. The reason could be location and connectivity, disability, or a combination of barriers.
Reasons that often fail are preference-based. “I don’t like software” or “my records are simple” usually will not meet a digital exclusion test on its own. In many cases, HMRC looks for concrete obstacles, not convenience arguments.
Preparation tends to make the difference. A strong application usually:
- Describes the barrier in plain detail, with dates, places, and what you tried.
- Connects the barrier to the MTD tasks, like keeping digital records and sending quarterly updates.
- Explains why help from friends, family, or an agent does not solve the core issue.
Digital nomads should be careful with the “I travel” argument. Travel alone may not equal digital exclusion. Many remote workers have strong connectivity and can use cloud tools. On the other hand, some people spend long stretches in areas with limited access. Facts matter.
5) Exemption outcomes and impact
By January 31, 2026, HMRC had decided 881 exemption applications. Approvals totalled 661 and denials totalled 220. That approval rate may look generous at first glance. The bigger picture makes it look tighter.
Start with scale. HMRC has said 780,000 people are in scope for the first phase. Even 661 approvals are a tiny slice of that population. So exemptions are not a broad escape route.
Next, consider the usual approval reasons. Age, disability, and digital exclusion are frequently linked to successful outcomes. That pattern suggests HMRC is focusing on capability and access barriers, rather than personal preference.
6) Economic impact and HMRC expectations
HMRC’s case for MTD for Income Tax is about reducing errors and improving reporting. The department has tied the change to an expected £780 million in additional tax by 2028-29, linked to fewer mistakes and better productivity.
Quarterly updates also change what HMRC can see, and when. More frequent submissions can bring earlier visibility of income trends. That can affect how quickly problems are spotted, especially where figures do not match other data HMRC receives.
Day-to-day, the upside is more regular bookkeeping. Many people end up with cleaner records and fewer year-end surprises. The downside is simple. You have more deadlines. Busy periods happen four times a year, not once.
⚠️ If you rely on bridging tools or offline records, plan now for quarterly updates starting in the first eligible quarter to avoid last-minute scrambling.
7) Practical next steps for taxpayers and advisors
Start with a scope check. Confirm whether your qualifying income puts you into the first cohort from April 6, 2026, or a later phase. If you are near the threshold, you may want a professional to confirm what counts as qualifying income.
Next, pick a record-keeping approach that you can keep up while travelling. Many people use compatible cloud accounting software. Others use bridging tools connected to spreadsheets. Either way, set categories early, and test your workflow before the first quarterly deadline arrives.
A simple readiness sequence often works well:
- Confirm you are in scope for MTD for Income Tax and still in Self Assessment.
- Choose software or bridging, then set up users and agent access.
- Connect bank feeds where possible, and decide how you will capture receipts.
- Run a trial quarterly update using test data, then fix gaps in coding.
- Agree with your accountant who does what each quarter, especially if you cross time zones.
Digital nomads can reduce friction with a few habits. Separate business and personal spending. Store receipts in a shared cloud folder. Track multi-currency income at the time you invoice, not months later. If you will be off-grid, give an agent authority and access in advance.
Key milestones are fixed for the first group. Digital record keeping starts April 6, 2026. The first quarterly update is expected on July 7, 2026. The annual deadline of January 31, 2027 still anchors the Self Assessment year.
✅ For digital nomads and landlords: verify whether you are in scope for MTD for Income Tax and check if you qualify for automatic exemptions (e.g., digital exclusion) or if you should prepare an applied-for exemption submission.
This article provides informational guidance only. Tax rules are subject to change; consult HMRC or a qualified tax advisor for personalized advice.
UK tax compliance can have significant financial consequences; ensure you verify current thresholds and deadlines on HMRC’s official site.
