MTD for partnerships: What you need to know and how to prepare

Published Tuesday 16 December 2025

Table of contents

• Are partnerships affected by MTD for Income Tax?
• When do partnerships need to sign up for MTD?
• Why was MTD postponed for partnerships?
• How can partnerships prepare for MTD?
• FAQs on MTD for partnerships

Key takeaways

• Making Tax Digital for partnerships has been delayed with no confirmed start date. This gives you more time to prepare without immediate pressure.
• Start using HMRC-recognised software and keeping digital records now. This will make the transition smoother when MTD for partnerships becomes mandatory, and you'll benefit from automation straight away.
• Stay up to date with MTD developments by checking HMRC's official guidance and sign-up pages regularly. The government still plans to introduce the legislation in the future.
• Individual partners will have separate MTD requirements for their personal income reporting. If you have multiple income sources, you may need to submit up to eight quarterly updates per year.

Are partnerships affected by MTD for Income Tax?

Yes, partnerships are affected by MTD for Income Tax. However, HMRC hasn't confirmed when partnerships need to start following MTD rules. They were removed from the scope in December 2022, and no new date has been set.

Different partnership types have different timelines:

• General partnerships: HMRC planned to include these in Making Tax Digital from 2025, but this has been postponed
• Limited liability partnerships (LLPs): No start date announced
• Partnerships with corporate partners: No start date announced

When do partnerships need to sign up for MTD?

There's no confirmed sign-up date for partnerships yet. HMRC hasn't announced a new start date since the delay to MTD for Income Tax.

Stay updated through:

• HMRC's official guidance: Check their sign-up page for announcements
• Xero updates: Get new information from Xero as it becomes available

Why was MTD postponed for partnerships?

HMRC postponed Making Tax Digital for Income Tax in December 2022 to give businesses more time to prepare during a difficult economic period.

The delay helps businesses by giving them:

• More time to prepare: Get familiar with Making Tax Digital requirements, like understanding how to keep digital records of your income and expenses, and learning what quarterly updates you'll need to submit
• Time to choose software: Research and set up HMRC-recognised software that can track your transactions, generate reports, and submit updates directly to HMRC – such as cloud accounting platforms like Xero
• Less immediate pressure: Focus on current priorities without urgent MTD obligations, whether that's managing your cash flow, serving clients, or planning for business growth

The UK government introduced a phased rollout of MTD for Income Tax instead. Sole traders and landlords earning above £50,000 a year will join first in April 2026. Those earning over £30,000 will need to join from April 2027, affecting a further 900,000 taxpayers.

How can partnerships prepare for MTD?

Starting to prepare for Making Tax Digital now will save you time and make things easier when it becomes mandatory for partnerships.

Key steps to prepare:

• Use cloud-based software: Start using HMRC-recognised software today to get prepared for Making Tax Digital
• Keep digital records: Learn to record and manage transactions electronically
• Submit through software: Practice submitting returns through approved software
• Automate invoicing: Use built-in features to improve cash flow and get paid faster

HMRC-recognised software gives you benefits beyond MTD compliance. Partnerships gain practical advantages through automation and app integrations that transform how you manage your finances. Cloud accounting platforms like Xero help you track income and expenses in real-time, reconcile bank transactions automatically, and generate financial reports instantly. You'll have a clear view of your partnership's financial health at any moment, making it easier to make informed business decisions.

Benefits for your business:

• Speed: Automate routine admin tasks
• Efficiency: Streamline your daily financial management
• Focus: Spend more time growing your business

Here's what you need to know about Making Tax Digital requirements for partnerships:

• Digital record keeping rules: Learn about MTD record-keeping requirements
• Penalties: Understand MTD penalties and how to avoid them
• Technical terms: Use our MTD jargon buster for clear definitions

For more on MTD for Income Tax legislation, head to our MTD for Income Tax advice hub.

FAQs on MTD for partnerships

If you have questions about Making Tax Digital for partnerships, you're not alone. Here are clear answers to the most common questions.

What's the difference between general partnerships and LLPs for MTD?

General partnerships are currently included in the future MTD for Income Tax rules. However, HMRC has not yet confirmed the timeline or specific rules for limited liability partnerships (LLPs), especially those with corporate partners. Check HMRC's official guidance regularly so you always have the latest information.

What happens if partnerships don't comply when MTD becomes mandatory?

Once MTD for partnerships is mandatory, not complying can lead to penalties. You could face fines for late submissions or for not keeping digital records. Getting familiar with the requirements now helps you avoid any future issues.

Can partnerships use the same software as sole traders for MTD?

Yes, many HMRC-recognised software products, like Xero, work for both sole traders and partnerships. The software will guide you through the specific requirements for your business structure.

Do individual partners have separate MTD requirements?

The partnership itself will need to meet MTD requirements for its business income. Individual partners must also report their share of the profits, along with any other personal income, through their own Self Assessment, which will fall under MTD for Income Tax rules. This can mean more reporting. For example, if you have two separate income sources, you may need to submit eight quarterly updates a year. However, with digital records and cloud-based software, it's easier to compile and organise your information for reporting.

How does MTD for partnerships differ from MTD for VAT?

MTD for VAT applies to VAT-registered businesses and deals with VAT returns. MTD for partnerships falls under MTD for Income Tax, which focuses on submitting quarterly income and expense updates and a final declaration for income tax purposes.