Making Tax Digital – Exempt Businesses

Is navigating the labyrinth of the UK’s ‘Making Tax Digital’ (MTD) initiative keeping you up at night? You’re not alone. As a business owner, it’s crucial to grasp the ins and outs of this new tax legislation.

But what if I told you that your business might be exempt from this digital transformation? Certain exemptions exist under the MTD initiative, ranging from those related to business type and turnover, to personal factors such as age or disability.

We’re about to unravel the often overlooked world of MTD exemptions, potentially saving you time, money, and a whole lot of tax headaches.

Intrigued? Let’s move forward, together.

Key Takeaways

  • Businesses with gross receipts of £10,000 or less are not mandated to use MTD for Income Tax Self Assessment (ITSA).
  • Businesses under the UK VAT threshold are exempt from MTD requirements.
  • Flat Rate Scheme registrants are also exempt from MTD obligations.
  • Businesses that are exempt from filing VAT are not required to comply with MTD.


As we explore the topic of exempt businesses in Making Tax Digital, it’s important to understand the key criteria for exemptions and the guidance for MTD compliance.

You’ll find that certain businesses, due to their unique circumstances, aren’t required to follow the standard MTD protocols.

Let’s shed some light on these exemptions and the steps to ensure your business adheres to the MTD requirements, if applicable.

Key MTD Exemption Criteria

Diving into the key exemption criteria for Making Tax Digital (MTD), it’s essential to note that individuals with gross receipts of £10,000 or less aren’t mandated to use MTD for Income Tax Self Assessment (ITSA), although they can choose to do so voluntarily.

Key MTD exemptions include:

  • Businesses under the VAT threshold
  • Flat Rate Scheme registrants
  • Those exempt from filing VAT
  • Previously granted exemption holders

MTD Compliance Guidance

Now that we’ve explored the key exemptions for Making Tax Digital, let’s shift our focus to an overview of MTD compliance guidance, a crucial aspect for businesses navigating this digital tax landscape.

You, as VAT registered businesses, must consider each application of compatible software to continue filing VAT Returns under Digital (MTD) for VAT, unless you fall under an exemption category.

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Frequently Asked Questions

Can I Submit VAT Without Mtd?

Yes, you can submit VAT without MTD if you’re exempt. Exemptions may include being below the VAT threshold, insolvency, religious objections, and issues with adopting digital methods due to disability, age, or location.

What Is MTD Software?

MTD software is a digital tool you’d use to maintain records, submit reports, and make final declarations to HMRC. It’s crucial for those mandated under MTD, especially for filing VAT returns digitally.

Is There VAT on Software Licenses Uk?

Yes, software licenses in the UK are generally subject to VAT at the standard rate of 20%. However, it’s essential you check each case as there can be exceptions based on specific circumstances.

What Is the Digital Tax in the Uk?

The digital tax in the UK, known as Making Tax Digital, is an initiative requiring businesses to maintain digital records and submit taxes digitally, modernizing and streamlining the overall tax process for efficiency.


In conclusion, as a business owner, understanding MTD exemptions is crucial. Whether you’re below the VAT threshold, deal in second-hand goods, or based in a remote area, you may be exempt.

Avalara’s solutions can help you navigate these complexities, ensuring you’re MTD compliant and avoiding unnecessary stress. Stay ahead of the curve with our comprehensive guide and make the UK’s digital tax transformation easier to manage.

Barry Caldwell

Barry Caldwell

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