Recent clarification from HMRC has confirmed that partnerships are currently exempt from the Making Tax Digital (MTD) requirements for Income Tax. While landlords and self-employed individuals face mandatory MTD compliance from April 2026, partnerships have not yet been included in this rollout, with no confirmed start date announced.

Current Status of Making Tax Digital for Partnerships

HMRC has indicated that ordinary partnerships do not have to comply with Making Tax Digital for Income Tax at present. This exemption contrasts with the broader MTD rollout affecting landlords and self-employed individuals, which is set to begin in April 2026. The delay in including partnerships has caused some confusion, as official communications often highlight the upcoming requirements for landlords and self-employed taxpayers without explicitly addressing partnerships.

According to HMRC guidance, “Partnerships will need to use Making Tax Digital for Income Tax in the future. But for now, you’ll carry on doing a Self Assessment tax return.” This means that if a rental business is operated through a traditional partnership structure, the partnership’s income is currently outside the scope of mandatory MTD compliance.

Implications for Individual Partners

While the partnership itself is exempt, individual partners may still need to comply with MTD personally if they have other qualifying income streams. For example, if a partner owns rental property personally, operates as a sole trader, or earns freelance or self-employed income outside the partnership, they must consider MTD obligations for those income sources.

HMRC’s developer guidance explicitly states that a partner does not need to register for MTD “unless they have other MTD qualifying income, such as sole trader income or property income.” This distinction is important for partners who may have multiple income streams, as compliance requirements will vary accordingly.

Thresholds and Future Expectations

The mandatory MTD rollout from April 2026 primarily targets individuals with more than £50,000 gross self-employment and/or property income. This threshold is set to reduce to £30,000 from April 2027, with plans to lower it further to £20,000 at a later date. These thresholds apply to individuals rather than partnerships, reinforcing the current exemption for partnership entities.

Despite the current exemption, HMRC expects partnerships to be included in the MTD regime eventually. However, no commencement date has been announced, leaving partnerships outside mandatory compliance for the foreseeable future.

What this means for landlords

Landlords operating their rental businesses through traditional partnerships can currently continue submitting Self Assessment tax returns without adopting MTD for Income Tax. This provides a temporary reprieve from the digital reporting requirements that individuals face from April 2026.

However, landlords who are partners but also have personal income from rental properties or self-employment should prepare for MTD compliance in those areas. Careful consideration of individual income streams is essential to ensure timely adherence to HMRC’s digital reporting rules.

Useful HMRC Guidance

HMRC provides detailed guidance on eligibility and sign-up for Making Tax Digital for Income Tax, including information on how the system works and who must comply. Landlords and agents should consult these resources to stay informed of any updates regarding partnerships and other income sources.

Source: Based on reporting from Property118

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TLA update

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