"You're Exempt from MTD"? The SA109 Rule Explained

You've heard Making Tax Digital is coming. You've done the sensible thing and gone to sign up early — and HMRC's own service has turned you away, telling you you're exempt. No explanation, no next step, just a polite refusal.

If that's happened to you, take a breath. It's confusing, but it's almost certainly correct. And it's usually down to one thing: a small set of pages called the SA109.

Why the sign-up service is refusing you

Making Tax Digital for Income Tax (MTD ITSA) is being rolled out in stages, starting with landlords and the self-employed whose gross income crosses certain thresholds. But alongside the phasing, HMRC has built in a set of automatic exemptions — groups who simply aren't required to join yet, without applying for anything.

The big one for landlords with overseas connections is the SA109. That's the residence and remittance basis supplement to your Self Assessment return. If your 2024/25 return included the SA109 pages — because you were non-UK resident, dual resident, claiming split-year treatment, or using the foreign income and gains regime — then you are automatically exempt from MTD for Income Tax until April 2027.

Notice that this is tied to the 2024/25 return specifically. If you did not file the SA109 pages for that year, this particular automatic exemption won't apply to you — even if your circumstances feel similar. It's the return HMRC has on file that does the work here.

No application. No form. HMRC already knows from your return, and the sign-up service will simply refuse to enrol you while that exemption applies. This is by design, not a glitch. You can see it set out in HMRC's exemption guidance.

So when the screen says you're exempt, it isn't an error to fight. It's the system working as intended.

What to do instead (spoiler: not much)

Here's the reassuring part. While you're exempt, you carry on exactly as you always have.

You file an ordinary Self Assessment tax return, by the usual deadlines. Nothing about digital records or quarterly updates applies to you yet. And crucially, no MTD late-submission penalties can arise while you're exempt — there's nothing to be late for.

The bit people get wrong: 'exemption ends' is not 'join MTD'

Here's the trap. The SA109 automatic exemption runs until April 2027. It's very tempting to read that as "so I join MTD in April 2027" — but that's not how it works.

When the exemption lifts, you're simply put back into the ordinary queue and assessed against whichever threshold and start date apply to your income, like everyone else:

• over £50,000: from 6 April 2026
• over £30,000: from 6 April 2027
• over £20,000: from 6 April 2028

So the exemption ending in April 2027 only means you join then if your income and the phasing happen to line up. Otherwise your actual start date could be later.

(You can read more on how these bands work in our MTD income thresholds guide, or on GOV.UK's who-and-when page.)

A quick worked example

Joe lives in Dubai and lets out a two-bed flat back in Leeds. His gross rent is £21,600 a year. His 2024/25 return included the SA109 pages because he's non-UK resident, so he's automatically exempt until April 2027.

When he tried to sign up voluntarily last month, the service refused him. Perfectly normal. For 2025/26 he just files his usual Self Assessment return as before.

Now the important part. When the exemption lifts in April 2027, Joe does not automatically join MTD. His income of £21,600 sits in the over-£20,000 band, and that band doesn't commence until 6 April 2028. So even after his SA109 exemption ends, Joe carries on with ordinary Self Assessment until the £20,000 band opens the following year.

(If Joe's gross rent were instead, say, £40,000, he'd land in the over-£30,000 band — which starts 6 April 2027 — and he genuinely could be mandated as soon as the exemption lifts. The point is: the exemption end date and your MTD start date are two separate things.)

What Joe shouldn't do is assume the refusal means he owes nothing or needn't file at all. The Self Assessment obligation continues throughout.

Other automatic exemptions

The SA109 rule isn't the only one, and a couple of others have no end date at all:

• Trustees who file the SA900 trust and estate return.
• Personal representatives dealing with the tax affairs of someone who has died.
• Lloyd's underwriters reporting on the SA103L pages.

If you fall into one of those categories, you're exempt from MTD for Income Tax indefinitely, again with no application needed.

There's also a separate exemption for digital exclusion — for people who genuinely can't use the required software or file digitally. Unlike the ones above, that exemption isn't automatic: you have to apply for it, and HMRC sets out the accepted grounds on that page. If you think it might apply to you, check the current GOV.UK wording rather than relying on a summary here.

Do you still need an accountant?

For most single-property landlords, no — the exemption actually simplifies life for now. You carry on with the return you already know. If your affairs are more tangled (multiple residences, split-year claims, foreign income), an accountant can be worth their fee, and MTD software is designed to work alongside one rather than replace them. Our note on using MTD software with an accountant covers how that split of work looks in practice.

But the headline is simple: being told you're exempt is not a problem to solve. It's a green light to keep doing what you're doing.

Keeping half an eye on the future

Exemption today doesn't mean exemption forever. When your SA109-based exemption ends, check your gross rental (plus any self-employment) income against the bands above to work out if and when you're actually caught. If you are, joining means keeping digital records, sending four cumulative quarterly updates a year, and making one tax return in place of the old return.

There's no need to rush the software decision now. But when the time comes, tools like Quarterwise are built to keep those digital records and file to HMRC without turning you into a bookkeeper — with a Free plan for a single property and no time limit, so you can get comfortable well before anything's mandatory. If you'd like the plain-English overview, start with What is Making Tax Digital.

For now, though: exempt means exempt. File your Self Assessment, work out your real start date against the bands, and enjoy one fewer thing to worry about.

This is general information, not tax advice. Please check your own position with HMRC or a qualified accountant.