Making Tax Digital (MTD) for partnerships has been in the works for a while now, originally due to start back in April 2025. However, it’s faced lengthy delays, leaving partnerships questioning when the rules will fully take effect. To learn more about MTD for partnerships in the UK, continue reading.
What are Partnerships?
A partnership, including general partnerships, limited partnerships, and Limited Liability Partnerships (LLPs), is when two or more individuals or companies go into business together to share profits, each governed by its own legislation:
- General Partnerships – The Partnership Act 1890
- Limited Partnerships – The Limited Partnerships Act 1907
- LLPs – The Limited Liability Partnerships Act 2000
Once profits are shared within a partnership, each partner must pay Income Tax on their share through Self Assessment. Despite partners using Self Assessment, the upcoming MTD rules don’t apply to profits made from partnerships. Only high-income sole traders paying over £50,000 through this system must use MTD from April 2026.
What is Making Tax Digital for Partnerships?
MTD for Partnerships is an upcoming HMRC requirement to maintain digital records and submit quarterly updates using compatible software rather than paper or spreadsheets. As of April 2026, MTD for Income Tax (ITSA) begins, but specific rules for partnerships are currently delayed.
Does Making Tax Digital for Income Tax Apply to Partnerships?
Making Tax Digital for Income Tax does not currently apply to partnerships, but it will in the future.
So, while partnerships aren’t included in the initial MTD rollout for Income Tax starting in April 2026, they will be once the Government sets a start date.
It’s important to note that individual partners must use MTD for Income Tax if their personal qualifying income from separate sources, such as sole trader businesses or property income, exceeds the £50,000 threshold. However, their profit share from partnerships doesn’t need to be counted towards this right now.
Why is Making Tax Digital for Partnerships Delayed?
MTD is delayed for partnerships to allow HMRC more time to develop and improve their systems.
Partnerships have a more complex tax return process, unlike sole traders, such as SA800 partnership returns and shared profits. Therefore, HMRC requires additional time to develop the software and guidance for them to use. The delay could actually benefit partnerships in the UK, allowing for easier preparation and a chance to hire an accountant to help them transition to using MTD.
How Partnerships Can Prepare for Making Tax Digital
Although MTD doesn’t apply to partnerships yet, this delay gives you extra time to prepare.
1 – Check Your Income
Check if any individual partner’s separate business or property income exceeds HMRC’s £50,000 threshold. If it does, you or your partner may be required to comply with MTD rules from April 2026. Profit made from your partnership is excluded from this calculation.
2 – Appoint a Partner
Appoint one partner from your partnership to manage MTD compliance. They must also handle all other MTD-related tasks, such as keeping digital records and organising future submissions on time to avoid potential penalties (unless hiring an accountant). We recommend finding an accountant to help you start MTD voluntarily, or nearer the time when the rules apply.
3 – Select Compatible Software
Research and trial different HMRC-compatible software that meets your needs and supports MTD updates. By hiring an accountant, they can handle the selection and set up your software on your behalf to ensure it works with your partnership’s size and tax process.
4 – Voluntarily Switch to Digital Records
Start moving your partnership transactions to a digital format voluntarily to prepare early and familiarise yourself with the new process and software. At this stage, MTD preparation is advised to ensure a smooth transition later.
5 – Stay Updated
Stay updated with HMRC announcements to find out when MTD rules will apply to your partnership. Your accountant will do this on your behalf and update you with any threshold changes or related news to keep you informed.
Prepare Your Partnership for Making Tax Digital
At LJS Accountants, our expert MTD accountants are ready to guide partnerships smoothly into digital record-keeping. We’ll select the best-suited software, prepare you for upcoming changes, and help you familiarise yourself with the new processes to ensure confidence and compliance when the rules eventually start for partnerships operating in the UK.
To find out more about how we can help your partnership prepare for MTD, please contact us on 0151 601 0000.
FAQs
Can partnerships use the same MTD-compliant software as sole traders?
Can partnerships use the same MTD-compliant software as sole traders?
What happens if my partnership fails to comply with MTD rules?
Do I need an accountant for my partnership under MTD?
You don’t legally need an accountant for your partnership under MTD, but it’s highly recommended. Your partnership can manage MTD compliance independently using software, but it will likely prove difficult.
Accountants simplify complex tasks, ensure compliance, and avoid penalties. Most importantly, they ensure a seamless transition for partnerships when MTD rules become mandatory.
Is MTD also delayed for Limited Liability Partnerships (LLPs)?
Yes, MTD for Income Tax is also delayed for Limited Liability Partnerships (LLPs), which follow the same timelines as general partnerships. Therefore, LLPs also have an unconfirmed start date for using MTD.
Accountants simplify complex tasks, ensure compliance, and avoid penalties. Most importantly, they ensure a seamless transition for partnerships when MTD rules become mandatory.
When will MTD for partnerships likely come into effect?
There’s no confirmed or likely rollout date for MTD for partnerships, including LLPs. HMRC will make announcements when necessary, so look out for updates.
Accountants simplify complex tasks, ensure compliance, and avoid penalties. Most importantly, they ensure a seamless transition for partnerships when MTD rules become mandatory.
