Making Tax Digital Exemption for the Digitally Excluded

The Making Tax Digital exemption for the digitally excluded is granted only where HMRC accepts that it is not reasonably practicable for you to keep digital records or file electronically, on grounds of age, a health condition or disability, your location and internet access, or religious belief. It is an application carrying a real evidential burden, not an opt-out you elect into.

What the digital exclusion exemption actually is

Making Tax Digital for Income Tax replaces the single annual filing rhythm with digital record keeping in compatible software, quarterly updates to HMRC and an end-of-year finalisation. The digital requirements are mandatory once your qualifying income crosses the relevant threshold, and mandation is staged: from April 2026 for qualifying income above £50,000, from April 2027 above £30,000, and from April 2028 above £20,000. Qualifying income is gross trading and property income before expenses, which is why so many landlords and consultants who consider themselves modest filers are caught.

Sitting inside that framework is a narrow relief. The digital requirements do not apply to a person for a tax year if that person is digitally excluded, has given notice to HMRC that they are digitally excluded, and HMRC has confirmed it is satisfied that they are. All three limbs matter. Being genuinely unable to use software does not, by itself, exempt you; the exemption crystallises only when HMRC says so in writing. Until it does, you are inside the regime.

At Jungle Tax we see this misunderstood in both directions. Some clients assume that a stated inability to cope with software is self-executing and quietly do nothing. Others assume the door is effectively closed and buy software they will never operate. Neither is right. The exemption is real, it is permanent once granted unless circumstances change, and it is decided on evidence.

What is the legal test for being digitally excluded?

The statutory condition is that it is not reasonably practicable for the person to use electronic communications or to keep electronic records, for any reason including age, disability or location. Two words carry the weight. Practicable is not the same as convenient, comfortable or preferred. Reasonably imports an objective standard: HMRC asks what a reasonable person in your actual circumstances could do, not what you would rather do.

Because the test is drawn from the older online-filing regime, the case law and administrative practice around VAT online filing informs how HMRC approaches it. The consistent theme is that the exemption exists to protect people for whom digital compliance is genuinely out of reach, not to provide an alternative route for those who simply dislike it. That is the bar an application has to clear.

Age, health condition or disability

This is the most commonly used ground and the most commonly under-evidenced. HMRC is not persuaded by age alone; there is no threshold birthday at which exemption follows. What persuades is a described functional limitation: severe visual impairment that makes screen-based record keeping unworkable, a degenerative neurological condition affecting fine motor control, a cognitive impairment, a mental health condition where the administrative burden of quarterly digital reporting is clinically counter-indicated, or profound frailty. The application must connect the condition to the specific act required, which is keeping digital records and transmitting them, rather than asserting general ill health.

Note that a separate route already exists where a person is physically or mentally incapable of managing their own affairs and someone holds a power of attorney or legal guardianship. That situation is treated as an automatic exemption and does not require this application. Where capacity is deteriorating but no formal authority is yet in place, the digital exclusion application is the correct instrument, and it is worth putting the attorney arrangements in hand in parallel.

Location and lack of reliable internet access

The location ground applies where you cannot get internet access at your home or business because of where it is, and there is no reasonable alternative. HMRC will interrogate the alternative. Mobile data, a satellite service, a nearby property or a business premises with connectivity will all be considered. Remote Highland estates, some island properties and a number of genuinely not-spotted rural addresses will qualify; a property with slow but functional broadband generally will not.

This is also the ground most often mishandled by internationally mobile clients, where the relevant location is not in the UK at all. We return to that below.

Religious belief

The narrowest ground. It applies to practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records. HMRC looks for membership of an identifiable body with a settled doctrinal position on the use of technology, and it is normal for a supporting letter from the society or order to be requested. A personal conviction about data privacy, surveillance or the direction of digital government, however sincerely held, does not engage this ground.

Does unfamiliarity with software count as digital exclusion?

No. This is the single most important thing to understand before applying. Not being familiar with accounting software, not having used it before, finding it stressful, or being a confident user of email and online banking but not of bookkeeping packages, are none of them grounds for exemption. HMRC's position is that where a person is capable of learning to use software, or of appointing an agent or family member to operate it for them, digital compliance remains reasonably practicable.

The presence of a viable proxy is decisive. If a spouse, adult child, bookkeeper or accountant can maintain the digital records and file the quarterly updates on your behalf, HMRC will generally consider that it is reasonably practicable for the obligations to be met, even if you personally could never operate the software. This surprises people, and it is the reason a large proportion of instinctive exemption claims fail. The exemption asks whether compliance can be achieved, not whether you can achieve it unaided.

There is one important qualification. Where the practical obstacle is not skill but the physical or cognitive act itself, and delegation would not cure it because the underlying records cannot be created or verified digitally by anyone, the argument is materially stronger. Framing matters enormously here, and it is the part of the application that rewards professional drafting.

What your application must actually evidence

There is no online form. The application is made by telephone or in writing to HMRC, and where it is made in writing the letter should carry the subject line "Making Tax Digital for Income Tax — digitally excluded application". A written application is almost always preferable for a substantial case, because it creates a documented record of exactly what was put before HMRC, which is the foundation of any later appeal.

A complete application contains, at minimum:

• Your National Insurance number, full name and address.
• A clear statement of which ground or grounds you rely on, and the date from which the digital exclusion condition is met.
• A narrative connecting the ground to the specific digital requirements: keeping records digitally, using compatible software, and submitting quarterly updates.
• Supporting evidence, proportionate to the ground relied on.
• How you currently file your tax return, and whether an agent acts for you.
• Any additional support needs HMRC should record.

On evidence, calibrate to the ground. For health and disability, a letter from a treating clinician describing functional limitation carries far more weight than a diagnosis code; where the condition is longstanding, evidence of relevant benefit awards can corroborate. For location, coverage data for the specific address, correspondence from providers declining to supply a service, and evidence that mobile and satellite alternatives have been tested rather than assumed. For religious belief, confirmation of membership and a statement of the society's position. A third party may apply for you, whether an authorised agent or a family member or friend acting with your authority, and the application is judged on the taxpayer's circumstances rather than the applicant's.

When should the application be made?

Before the start of the tax year in which you would otherwise be mandated, with margin. HMRC aims to respond within 28 days of receiving a notice, and longer where it comes back for further information. Practically, an application lodged in the autumn or by the end of January before an April start date gives you a decision in time to act on it; an application lodged in March does not. If the decision has not arrived by the mandation date, the obligations still bite, so a contingency plan for the first quarterly update is part of any competent filing strategy.

One trap for clients who already hold an exemption from filing VAT returns through MTD-compatible software: it does not carry across automatically. You need to contact HMRC with your National Insurance and VAT registration numbers and confirm that the same grounds still apply, at which point HMRC can confirm the position for Income Tax. Assuming the VAT exemption travels with you is a common and avoidable error.

What happens if HMRC refuses the application?

HMRC must notify you whether or not it is satisfied that you are digitally excluded. A refusal letter is the start of the appeal route, not the end of the matter. The appeal is made in writing to the address on the decision letter, using the subject line indicated in that letter, and the ordinary window is 30 days from the date of the decision. HMRC has indicated that appeals against exemption decisions are processed from 1 April 2026, with a transitional window for decisions issued before that date. From there the normal escalation applies: an internal HMRC review, and if the matter is still unresolved, an appeal to the First-tier Tribunal.

A refusal is frequently a documentation failure rather than a merits failure. The most productive response is usually not to re-argue the same case louder, but to supply the functional evidence that was missing, which is precisely why the original submission should have been in writing.

The point almost every guide misses: exemption is not the end of filing

Being exempt from Making Tax Digital does not exempt you from tax. It removes the digital record keeping, the compatible software and the quarterly updates. It leaves entirely intact your obligation to report all your income and gains through a Self Assessment tax return in the ordinary way, to keep records and supporting documents, and to face the existing Self Assessment penalty regime for late filing and late payment.

For a high-net-worth household this is a meaningful distinction. The return still has to capture UK and foreign property income, dividends and interest from a global portfolio, chargeable gains, offshore fund disposals, pension flexibility and any remittance or residence positions in play. Exemption reduces the cadence of reporting, not the complexity of it. In our experience, filers who obtain an exemption and then relax into an annual paper routine are more, not less, likely to under-report foreign source income, precisely because nothing prompts them quarterly. If anything, an exemption raises the case for a disciplined annual review with your cross-border accountants.

Where does this leave a US-connected filer living abroad?

This is the fault line generalist guidance does not address. A US citizen or green card holder resident outside the UK who receives UK rental income, or a UK-resident American with a UK trade or property portfolio, sits inside two reporting systems that treat digital exclusion very differently.

On the UK side, non-UK residence does not remove you from Making Tax Digital. Qualifying income is tested on gross UK trading and property income irrespective of where you live, so an overseas landlord above the threshold is in scope. Certain non-resident filers benefit from separate deferral arrangements that are outside the scope of this guide and covered in our other cross-border filing guides; here the question is narrower, namely whether an overseas address can support a digital exclusion claim.

It can, but the analysis is unforgiving. If you live somewhere with genuinely unreliable connectivity, that is a location ground and the evidence is the same in kind as for a remote UK address. But HMRC will ask whether an agent in the UK could keep the digital records and file the updates for you, and for most internationally mobile clients the honest answer is yes, which defeats the claim. Where an application does succeed on health or capacity grounds, it succeeds for the same reasons it would domestically.

On the US side there is no analogue to the digital exclusion exemption, because there is no general electronic filing mandate on individuals. The pressure points are different, and the table below sets them out.

Issue	UK — HMRC	US — IRS and FinCEN
Is electronic filing mandatory for the individual?	Yes, once within Making Tax Digital for Income Tax, unless exempt	No general mandate on individuals; a paper Form 1040 remains permissible
Is there a digital exclusion exemption?	Yes, on application, decided by HMRC on evidence	No equivalent income tax exemption, because none is needed
How are paid preparers treated?	Agents file through compatible software for non-exempt clients	Preparers above the specified annual return count must e-file; a client who chooses paper is documented by the preparer
Foreign account reporting	Reported within the Self Assessment return	FBAR must be filed electronically through the BSA E-Filing System
Route to a paper alternative	Digital exclusion application to HMRC; 28-day target response	Request an alternative filing method from FinCEN's Resource Center, which issues the paper form if approved
Effect of the exemption	No digital records, no quarterly updates; full Self Assessment return still due	Medium changes only; every return and information report remains due in full

The practical consequence is that a client who is genuinely digitally excluded in the UK sense usually still needs an electronic FBAR filed on their behalf, because the FBAR e-filing requirement is absolute unless FinCEN separately approves an alternative filing method on request. The two exemptions are unconnected: an HMRC letter confirming digital exclusion has no effect whatsoever on FinCEN or the IRS, and vice versa. Coordinating both is routine work for our private client team, and it is the sort of interaction that falls between the cracks when UK and US advisers work in isolation.

Exemption and a compliance catch-up are different problems

A digital exclusion exemption looks forward. It says nothing about years already missed. If the same circumstances that make digital compliance impracticable have also produced late or incomplete UK returns, unreported UK pension or investment income on the US side, or missed FBAR and Form 8938 filings, those are separate matters requiring their own remedy.

For US-connected filers, that remedy is usually a formal disclosure programme rather than quiet amendment. Our work on IRS streamlined filing frequently begins with a client whose UK affairs have drifted for exactly the reasons that support a digital exclusion claim: age, ill health, bereavement, or a household where one spouse handled everything and no longer can. Handled together, the exemption application and the catch-up reinforce each other, because the narrative that explains one often explains the other. Handled separately, they can contradict each other, and that is an avoidable risk.

After the exemption is granted: the duty you must not forget

An exemption confirmed on digital exclusion grounds runs indefinitely, but it is conditional. If the reason the application was approved ceases to apply, you must tell HMRC, and the expected window for doing so is three months. A health condition that resolves, a move from a not-spotted property to a connected one, or a change in the household that puts a capable proxy in place, can all end the basis for the exemption. Keeping a short file note of the grounds and evidence, and reviewing it annually alongside the return, is the discipline that keeps the position defensible if HMRC ever revisits it.

A practical sequence

• Establish whether you are in scope at all: test gross trading and property income against the relevant threshold for the year in question, before expenses.
• Identify the ground honestly, and test it against the proxy question: could an agent or family member discharge the digital obligations for you?
• Assemble evidence that describes function, not just status.
• Apply in writing, with the prescribed subject line, well ahead of the April start date.
• Plan for the first quarterly update as though the application will be refused, and stand that plan down when the decision arrives.
• Separately confirm your US position: returns, FBAR, Form 8938 and any catch-up required.
• Diarise an annual review of the grounds, and the three-month notification duty if they change.

Primary sources

HMRC's own guidance on applying for an exemption if you are digitally excluded sets out the application mechanics, and its guidance on who can get an exemption from Making Tax Digital for Income Tax distinguishes automatic from applied-for exemptions. On the US side, the IRS guidance on the Report of Foreign Bank and Financial Accounts confirms the electronic filing requirement and the route to an alternative, and Form 8948 covers the preparer position where a return is filed on paper.

Speak to us before you apply

A digital exclusion application is a one-shot document. It is read by an officer who will decide, largely on the paper in front of them, whether your circumstances clear an objective standard, and a thin application invites a refusal that then has to be unwound through review and appeal. If you or a family member may be digitally excluded, and particularly if there is a US filing history running alongside the UK one, contact our cross-border team for a confidential consultation. We will assess the strength of the grounds, build the evidence file, draft and lodge the application, and make sure that whatever HMRC decides, your UK and US filings stay complete and on time.