MTD Exemptions After Q1: When You Can Delay Your Quarterly Updates

Missing a quarterly update deadline feels serious. If Q1 has already passed and you did not file, or if you are wondering whether you genuinely qualify for an exemption from Making Tax Digital altogether, you are not alone. The good news is that HMRC does have a framework for this - both formal exemptions and something called reasonable excuse, which can protect you from penalties even after the deadline has passed. This post explains who qualifies, how to apply, and what your realistic options are if you are now planning around Q2 or Q3 rather than Q1.

What Is an MTD Exemption?

An MTD exemption means HMRC formally agrees that you do not have to comply with Making Tax Digital for Income Tax, either permanently or for a specific period. It is different from simply being below the income threshold - if you are exempt, you continue to file a traditional tax return instead of quarterly updates.

Exemptions are not automatic. You have to apply for one, and HMRC decides whether your circumstances qualify. Before assuming you might qualify, it is worth checking whether you actually need to be in MTD at all - our guide on MTD threshold and eligibility myths explains who is actually required to sign up.

Who Can Apply for an MTD Exemption?

HMRC recognises a limited set of circumstances where an exemption from MTD may be granted. These fall into a few broad categories.

Age and Disability

If you are unable to use digital tools because of a disability, a serious or long-term health condition, or because you are elderly and find digital technology genuinely unmanageable, you may qualify. This is not a low bar. HMRC expects you to demonstrate that the difficulty is real and ongoing - not just that you find software inconvenient.

No Internet Access or Reliable Connectivity

If your location means you cannot get a reliable broadband or mobile internet connection, and there is no practical way for you to file digitally, that can support an exemption application. HMRC accepts that some rural areas have genuine connectivity problems. You would typically need to show that no reasonable alternative exists - for example, that you cannot travel to use a library or other public internet facility regularly.

Religious Objection

Some religious communities restrict the use of technology in certain contexts. HMRC does recognise this as a potential basis for exemption, though applications on these grounds are relatively rare and HMRC examines them carefully.

Insolvency or Exceptional Circumstances

If your business is in formal insolvency proceedings, or your personal circumstances are genuinely exceptional, HMRC has discretion to grant temporary relief. This is assessed case by case.

Note: An exemption is not the same as an extension. An extension delays a deadline; an exemption removes the MTD obligation altogether. If you are looking for a short-term delay rather than a permanent removal from the MTD regime, the reasonable excuse route (explained below) is more likely to apply to you.

How to Apply for an MTD Exemption

You apply directly to HMRC. The process is straightforward but requires you to explain your circumstances clearly.

  1. Contact HMRC's MTD helpline or write to them setting out your reasons. You can reach the Income Tax general enquiries line on GOV.UK.
  2. Explain why digital filing is not possible for you. Be specific. Vague explanations are less likely to succeed.
  3. Provide any supporting evidence you have - a letter from a GP if a health condition is involved, for example, or documentation of your broadband situation.
  4. Keep a record of your application and any responses.

HMRC will assess your application and write to you with a decision. If they grant an exemption, you will continue to file a traditional tax return. If they refuse, they will normally explain why, and you can appeal.

What Counts as Reasonable Excuse?

If you missed the Q1 deadline and do not qualify for a formal exemption, reasonable excuse is the more relevant concept for most people. A reasonable excuse is not an exemption - it does not remove your MTD obligation. What it does is protect you from penalties for a late quarterly update, if HMRC accepts that your reason for missing the deadline was genuine.

HMRC applies a common-sense test: would a reasonable person in your circumstances have missed the deadline? The bar is not high, but it is real. Forgetting, being busy, or finding the software confusing are not normally accepted as reasonable excuse. The following kinds of circumstances typically are:

If HMRC services were actually down on a deadline day, that is worth noting specifically - our post on what to do if HMRC services affect your deadline covers that in detail.

What Does Not Count as Reasonable Excuse

HMRC is explicit that the following are not accepted reasons:

Warning: Do not assume that a late filing will go unnoticed. HMRC's MTD penalty system uses a points-based approach. Each late quarterly update earns a penalty point. Once you reach a threshold - currently four points for quarterly filers - a financial penalty is triggered. Points accumulate across the tax year, so a missed Q1 followed by further late updates in the same year compounds the problem quickly. You can read more in our MTD penalties explained guide.

How to Claim Reasonable Excuse After Missing Q1

If you believe your circumstances amount to a reasonable excuse, here is what to do.

  1. File as soon as you possibly can. HMRC expects you to have remedied the failure without unreasonable delay once the excuse no longer applies. If you were ill, file as soon as you have recovered. If there was a technical problem, file once it is resolved.
  2. Keep evidence. If you were in hospital, keep letters or discharge paperwork. If there was a technical failure with software or HMRC's systems, take screenshots and note the date and time.
  3. Wait for the penalty notice. HMRC issues penalty notices after the fact. When you receive one, that is the point at which you formally appeal and provide your reasonable excuse.
  4. Appeal in writing. You can appeal a late filing penalty using HMRC's formal appeal process. Explain clearly what happened, when it happened, and how that prevented you from filing on time.

You have 30 days from the date on a penalty notice to appeal it. Do not leave this. If you miss the 30-day window you may still be able to appeal late, but you will need to give a reason for the further delay.

Post-Q1 Scenarios: What Happens Now

The Q1 quarterly update covers the period from 6 April to 5 July, with a filing deadline of 7 August. If that has now passed, your situation depends on where you are.

You Missed Q1 and Have Not Filed

File now. A late filing is better than no filing. The penalty point system does not care how late you are once a deadline is missed - the point is issued regardless - but filing promptly demonstrates that you are trying to comply and keeps your record cleaner. If you have a genuine excuse, document it.

Our post on what happens if you miss the 7 August deadline goes through the immediate steps in more detail.

You Filed Q1 Late With Errors

If you filed but the figures were wrong, you can amend the update. The process and the limits of what you can change are explained in our guide to amending your quarterly update after the deadline.

You Are Now Planning for Q2

Q2 covers 6 July to 5 October, with a deadline of 7 November. If Q1 was difficult and you want Q2 to go smoothly, the best thing you can do now is get your records properly set up. Our Q2 record organisation guide is a good starting point.

Longer-Term Compliance Planning: Beyond Q1

If you are thinking further ahead - perhaps Q1 was a wake-up call - it is worth approaching the rest of the tax year systematically rather than crisis-managing each deadline.

Set Up a Simple Record-Keeping System Now

You do not need elaborate software to stay on top of this. The core requirement is to track your income and expenses in a digital format that can be submitted to HMRC-compatible software. Our post on how to set up a record-keeping system for quarterly updates walks through exactly what that looks like in practice.

Understand What Each Quarterly Update Actually Requires

A quarterly update is not a full tax return. It is a summary of your income and expenses for the quarter. You are not finalising anything at this stage - that happens at the end of the year in your final declaration. If you have been treating quarterly updates as more complicated than they are, our post on what to include in a quarterly update should help.

Know When the Remaining Deadlines Are

For the 2026-27 tax year, the four quarterly deadlines are:

The full deadline calendar is on our MTD quarterly deadlines page.

A Note on Partial Exemptions and Specific Income Types

Some people assume that if only part of their income comes from self-employment or property, they might qualify for partial relief. This is not how MTD works. If your total qualifying gross income (from self-employment and property combined) is above the threshold, you are in scope for all of it. You cannot exempt one income stream while reporting another through MTD.

If you have mixed income - for example, both self-employment and rental income - our post on multiple income sources and MTD explains how the threshold applies and how to report each type correctly.

What If You Are Genuinely Struggling With the Software?

Finding MTD software complicated is not a reasonable excuse for a late filing, but it is a real problem worth solving before the next deadline. Many people who feel overwhelmed by MTD are using software designed for larger businesses with full accounting teams. If that is you, it is worth looking at whether your software actually fits your situation.

AffordableMTD is built specifically for sole traders and landlords who are doing this themselves, without an accountant. It uses CSV import and AI-assisted categorisation to reduce the manual work involved - you can read more about how that works in our CSV and AI categorisation guide.

Start Your Q2 Filing on Solid Ground

AffordableMTD is HMRC-recognised bridging software built for sole traders and landlords filing without an accountant. Import your records, categorise your expenses, and submit your quarterly update - without needing a full accounting package.

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Summary

MTD exemptions are available but only in genuinely limited circumstances - disability, lack of internet access, religious objection, or exceptional situations. Most people who have missed a deadline are better served by the reasonable excuse route, which protects against penalties if your reason for missing the deadline was genuine and you file as soon as possible afterwards. If Q1 is behind you and Q2 is approaching, the focus should shift to getting your records and software in order now, understanding what each quarterly update actually requires, and making sure the remaining three deadlines this year go without a problem.