HMRC rejects nearly half of digital tax exemptions
HMRC has rejected almost half of applications from taxpayers seeking exemption from Making Tax Digital (MTD) for Income Tax.
Figures obtained via a Freedom of Information (FoI) request by Saffery show that as of February 2026 more than 1,600 people had applied for exemption on the grounds of “digital exclusion”.
Of those, 855 applications were approved, meaning 47 per cent were refused.
The data comes just weeks before the first phase of the government’s long-delayed digital tax overhaul comes into force in April.
Taxpayers can apply for exemption if they are unable to use digital tools due to factors such as age, disability, health conditions or religious beliefs.
Those granted an exemption can continue filing traditional Self Assessment returns.
A breakdown of successful applications shows 360 exemptions were granted for age or health-related reasons, 323 for digital capability, 150 for disability and 22 for other reasons.
Surge expected as deadline looms
The majority of approved exemptions, 759 cases, relate to taxpayers due to enter the system in April 2026, with far fewer linked to later phases of the rollout.
Under the new rules, individuals earning more than £50,000 from self-employment or property will be required to keep digital records and submit quarterly updates to HMRC from April.
The threshold will fall to £30,000 in 2027 and £20,000 in 2028.
Zena Hanks, partner at Saffery, said: “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”.
She added that applications are likely to rise sharply as awareness of the deadline increases.
“Given these numbers were recorded in mid-February, with the first phase of the roll-out approaching in April, the number of people applying for exemptions will almost certainly have increased significantly in the weeks since.”
Push toward digital despite concerns
HMRC has argued that the shift to digital reporting will ultimately simplify the tax system, reducing errors and administrative burden over time.
Hanks said this may explain the high rejection rate, noting that many cases of digital exclusion could be addressed with support.
“In many cases, digital exclusion should be possible to overcome with the right support, training, or guidance”, she said.
“While Making Tax Digital is intended to modernise the tax system, these figures suggest there is still a substantial group of taxpayers who may find the transition challenging.”
The findings come amid wider concern about readiness for the new regime.
Many landlords and sole traders remain underprepared, with some still relying on paper records or basic spreadsheets that do not meet HMRC’s requirements.
Banks and software providers have begun rolling out tools to support the transition.
HSBC recently launched a digital tax service within its business banking platform, while accounting firms have stepped up efforts to guide clients through the changes.