Making Tax Digital for Partnerships: What We Know So Far
Last updated: February 2026
HMRC has confirmed that partnerships are deferred indefinitely from Making Tax Digital for Income Tax Self Assessment (MTD ITSA). There is no mandation date for general partnerships, limited partnerships, or limited liability partnerships (LLPs). But that does not mean individual partners can ignore MTD entirely. If a partner has qualifying income from a sole trade or rental property — separate from their partnership income — they may still be required to comply. This article sets out the current position, explains who is and is not affected, and covers what HMRC has said about future plans for partnerships.
The current position: partnerships are excluded from MTD ITSA
When HMRC announced the phased rollout of MTD for Income Tax, partnerships were explicitly excluded from all three mandation phases:
- 6 April 2026 — sole traders and landlords with qualifying income above £50,000
- 6 April 2027 — sole traders and landlords with qualifying income above £30,000
- 6 April 2028 — sole traders and landlords with qualifying income of £20,000 or more
None of these phases apply to partnership tax returns. The partnership itself does not file under MTD, and partnership income is not counted when calculating an individual partner’s qualifying income for MTD purposes. This applies to all partnership types: general partnerships (GPs), limited partnerships (LPs), and limited liability partnerships (LLPs).
HMRC has not set a date for bringing partnerships into MTD. The original plan, announced back in 2015, included partnerships from the outset. That was abandoned after consultation feedback highlighted the complexity of partnership structures, profit-sharing arrangements, and the interaction between partnership returns and individual partner returns. Partnerships have remained deferred ever since.
Why partnerships are more complex for MTD
A sole trader files one Self Assessment return covering their entire business. A partnership requires two layers of reporting: the partnership return (SA800), which reports the overall business results, and each individual partner’s return (SA104), which reports their allocated share of profit. Under the current Self Assessment system, the nominated partner files the SA800, and each partner includes their share on their personal SA100.
Translating this into quarterly digital updates creates several practical problems that HMRC has not yet resolved:
- Who submits the quarterly updates? The nominated partner? Every partner individually? The partnership’s accountant? HMRC has not decided.
- How are profit shares allocated quarterly? Many partnerships only finalise profit allocations at year end, based on performance, capital contributions, or discretionary decisions by senior partners.
- What about changes in partners? Partners joining or leaving mid-year changes profit allocation. Quarterly reporting would need to accommodate this.
- LLP complexity: LLPs have members rather than partners, often with salaried member rules, and some members may be corporate entities rather than individuals.
These issues are genuine, and HMRC has acknowledged that further consultation is needed before partnerships can be brought into MTD. No consultation on partnership inclusion has been published or scheduled as of February 2026.
What “qualifying income” means — and why it matters for partners
Qualifying income for MTD ITSA is the combined gross income (turnover, not profit) from self-employment and UK property. The critical point for partners is what counts and what does not:
- Partnership profit share — does NOT count. A partner’s allocated share of partnership profits is not self-employment income for MTD qualifying income purposes. It is partnership income, reported on the SA104 supplementary pages, not the SA103 (self-employment pages).
- Sole trade income — DOES count. If a partner also runs a separate sole trade business, that business’s gross income counts towards their qualifying income threshold.
- UK property income — DOES count. If a partner owns rental property in their own name (not through the partnership), the gross rental income counts towards qualifying income.
This distinction catches some people out. A partner earning £200,000 per year entirely from their partnership share has zero qualifying income for MTD purposes. But a partner earning £40,000 from a partnership and £12,000 gross rent from a buy-to-let flat has £12,000 of qualifying income and would be within the MTD Income Tax rules once the £20,000 threshold takes effect from April 2028.
Worked example: a partner with mixed income sources
Priya is a partner in a general partnership that runs a consulting firm in Birmingham. Her share of partnership profit for 2026/27 is £80,000. She also owns a two-bedroom flat in Manchester that she lets out, generating gross rental income of £14,400 per year (£1,200 per month).
Is Priya within MTD ITSA?
Partnership income: £80,000 — excluded from qualifying income. Partnership returns are deferred from MTD with no mandation date.
UK property income: £14,400 gross rent — this is qualifying income.
Total qualifying income: £14,400
For the 2026/27 tax year (Phase 1, threshold £50,000), Priya is not within MTD. Her qualifying income of £14,400 is well below £50,000.
For the 2027/28 tax year (Phase 2, threshold £30,000), Priya is still not within MTD. £14,400 remains below £30,000.
From the 2028/29 tax year onwards (Phase 3, threshold £20,000 or more), Priya is still not within MTD. £14,400 is below £20,000.
If Priya’s rental income were to increase — say she acquires a second property and her gross rental income rises to £26,000 — she would be within MTD from 6 April 2028, but only for her property income. She would need to keep digital records of her rental business and submit quarterly updates through MTD-compatible software. Her partnership income would remain outside MTD entirely.
What would Priya’s quarterly updates look like?
If Priya did cross a threshold through her property income, her quarterly updates would cover only her rental business. She would report rental income received and allowable property expenses (mortgage interest within the restrictions, repairs, insurance, agent fees) for each quarter. Her £80,000 partnership share would not feature in her MTD submissions at all — it would continue to be reported through the partnership return and her SA104 pages as it is now.
Partnerships and MTD for VAT
While partnerships are deferred from MTD for Income Tax, they are not exempt from MTD for VAT. Any partnership registered for VAT (mandatory above the £90,000 VAT registration threshold) must already be keeping digital VAT records and submitting VAT returns through MTD-compatible software. MTD for VAT has been mandatory for all VAT-registered businesses since April 2022, regardless of structure.
If your partnership is VAT-registered, you should already be compliant with MTD for VAT. If you are not, you are already late — and penalties may apply. The VAT position is entirely separate from the Income Tax deferral.
What HMRC has said about future partnership inclusion
HMRC has consistently stated that partnerships will eventually be brought into MTD for Income Tax, but has not committed to a timeline. The key statements from official publications are:
- The December 2022 announcement that confirmed the revised MTD ITSA rollout explicitly stated that partnerships would be “kept under review” and would not be included in the initial phases.
- HMRC’s published guidance on GOV.UK states that the government will “consider the position of partnerships at a later stage” and will consult before making any decisions.
- No consultation document on partnership MTD has been published. No draft legislation has been introduced. No indicative date has been given.
In practical terms, partnerships will not be subject to MTD for Income Tax for several years at the earliest. HMRC must first complete the rollout of the three individual phases (2026, 2027, 2028), assess how those are working, consult specifically on partnership structures, draft legislation, and provide a reasonable lead-in period. Even an optimistic reading suggests partnership mandation is unlikely before the 2030s.
What partners should do now
Although partnership returns are deferred, there are practical steps partners should consider:
1. Check your personal qualifying income
Review whether you have any sole trade or property income separate from your partnership. If your gross self-employment plus UK property income exceeds the relevant threshold, you are personally within MTD for that income — regardless of the partnership deferral. Use our MTD FAQ page if you are unsure how qualifying income is calculated.
2. Continue filing partnership returns as normal
The SA800 partnership return and SA104 partner pages continue under the existing Self Assessment system. Filing deadlines remain unchanged: 31 October for paper returns, 31 January for online returns.
3. Consider adopting MTD-compatible software voluntarily
Even though it is not required, using cloud accounting software for your partnership has practical benefits: real-time financial data, easier collaboration between partners, and a head start if and when HMRC does mandate MTD for partnerships. If your partnership is already VAT-registered and using MTD-compatible software for VAT returns, extending that to cover your full accounts is straightforward.
4. Keep records that would satisfy MTD requirements
MTD requires digital records with date, amount, and category for each transaction. Good accounting practice already demands this. Partnerships that maintain proper digital records now will face minimal disruption whenever MTD is eventually extended to them.
Frequently asked questions
- Are partnerships required to comply with Making Tax Digital for Income Tax?
- No. Partnerships — including general partnerships, limited partnerships, and LLPs — are deferred from MTD for Income Tax indefinitely. HMRC has not set a mandation date and has stated that further consultation will take place before any decision is made.
- Does my partnership profit share count as qualifying income for MTD?
- No. Partnership profit share is not included in the qualifying income calculation for MTD ITSA. Qualifying income only includes gross income from self-employment (sole trades) and UK property income held in your own name. A partner earning entirely from partnership income has zero qualifying income for MTD purposes.
- I am a partner but also have a rental property. Am I within MTD?
- Possibly. Your rental property’s gross income counts as qualifying income. If your gross UK property income (plus any sole trade income) exceeds the relevant threshold — £50,000 from April 2026, £30,000 from April 2027, or £20,000 from April 2028 — you are within MTD for that income. Your partnership income remains outside MTD.
- Does my partnership still need to comply with MTD for VAT?
- Yes. MTD for VAT applies to all VAT-registered businesses regardless of structure. If your partnership is VAT-registered (mandatory above the £90,000 threshold), it must already be keeping digital records and submitting VAT returns through compatible software. This has been mandatory since April 2022.
- When will HMRC bring partnerships into MTD for Income Tax?
- No date has been set. HMRC has said it will consult on partnerships at a later stage, after the individual phases of MTD ITSA have been rolled out (2026–2028). No consultation has been published or scheduled. Partnership mandation is unlikely for several years at the earliest.
Need help with MTD?
Jack Ross Chartered Accountants advises partnerships, sole traders, and landlords on Making Tax Digital. Whether you need to check if you are personally caught by MTD through property or sole trade income, or you want to prepare your partnership for eventual mandation, our experienced MTD team can help. Contact us
