HMRC Rejects Nearly Half of Digital Tax Exemption Requests as MTD Launch Nears
Newly released data has shown that HM Revenue and Customs (HMRC) has turned down almost half of all applications for exemption from the upcoming Making Tax Digital (MTD) for Income Tax system. The figures, obtained through a Freedom of Information request by the accountancy firm Saffery, indicate a significant rush by taxpayers to avoid the new digital requirements.
Over 1,600 Applications Submitted for Digital Exclusion
As of February 2026, more than 1,600 individuals had applied for exemption from MTD on the grounds of digital exclusion. Out of these applications, only 855 were approved by HMRC, resulting in a rejection rate of 47 percent. This high refusal rate suggests that the tax authority is taking a stringent approach, granting exemptions only in the most clear-cut cases.
Zena Hanks, a partner at Saffery, commented on the findings, stating, "These figures suggest HMRC is only granting exemptions from MTD for Income Tax to those with the most clear-cut cases for digital exclusion, despite the fact that digital exclusion is quite a difficult concept to define and evidence."
Making Tax Digital Set to Begin in April
The MTD for Income Tax system is scheduled to launch in April this year. Under the new rules, individuals with self-employment or property income exceeding £50,000 will be required to maintain digital records and submit quarterly updates to HMRC. This marks a significant shift from the traditional annual Self Assessment process.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasized the benefits of the new system, saying, "MTD for Income Tax is a generational change and support is there for everyone who needs it. The quarterly updates aren’t tax returns – they’re simple summaries your software auto-populates, spreading the admin throughout the year, rather than leaving it all towards the January Self Assessment deadline."
Concerns Over Transition Challenges and Increased Applications
Hanks further noted that the number of exemption applications is likely to have increased significantly since the data was recorded in mid-February, as the April rollout date approaches. She expressed concern that a substantial group of taxpayers may find the transition challenging, despite the intended modernization of the tax system.
"In many cases, digital exclusion should be possible to overcome with the right support, training, or guidance," Hanks added, highlighting the potential for assistance to ease the transition for those struggling with the digital requirements.
Broad Impact Beyond Landlords
The changes under MTD for Income Tax extend beyond landlords to include anyone reporting 'sole trader' income to HMRC. This encompasses self-employed individuals working within the property industry, estimated at around 3,000 people, as well as an additional 400,000 people across various other sectors. The wide-reaching impact underscores the importance of the exemption process and the need for adequate support mechanisms.
As the launch date draws nearer, the high rejection rate for exemptions raises questions about how HMRC will manage the transition for those deemed ineligible for exclusions, ensuring that the move to a digital tax system does not disproportionately affect vulnerable taxpayers.
