HMRC Rejects Nearly Half of Digital Tax Exemption Applications
New figures obtained through a Freedom of Information request by the accounting firm Saffery show that HM Revenue and Customs has rejected almost half of all applications from taxpayers seeking exemption from the Making Tax Digital for Income Tax scheme. As of February 2026, more than 1,600 individuals had applied for exemption on the grounds of digital exclusion, with 855 approvals and 47 per cent of requests refused.
Breakdown of Approved Exemptions
The data provides a detailed breakdown of the successful applications. Of the 855 exemptions granted, 360 were approved for age or health-related reasons, 323 for digital capability issues, 150 for disability, and 22 for other unspecified factors. Taxpayers can apply for exemption if they are unable to use digital tools due to age, disability, health conditions, or religious beliefs, allowing them to continue filing traditional Self Assessment returns.
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 starting in April. This threshold will decrease to £30,000 in 2027 and further to £20,000 in 2028.
Zena Hanks, a partner at Saffery, commented on the figures, stating, "These numbers 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, noting that since the data was recorded in mid-February, the number of people applying for exemptions will almost certainly have increased significantly in the weeks leading up to the April rollout.
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 suggested this may explain the high rejection rate, pointing out that many cases of digital exclusion could be addressed with proper 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 concerns 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. In response, banks and software providers have begun rolling out tools to support the transition. For example, 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.
As the first phase of the government's long-delayed digital tax overhaul comes into force, the high rejection rate highlights ongoing issues with digital accessibility and the need for more comprehensive support for those struggling to adapt to the new requirements.
