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Making Tax Digital for farmers applies from 6 April 2026 to sole traders and landlords, including farming businesses, with qualifying gross income above £50,000. From that date, the annual Self Assessment return is replaced with four quarterly updates through MTD software and a Final Declaration in January. HMRC's rules make no allowance for seasonal income patterns, harvest timing, or diversified farm businesses, the thresholds and deadlines are the same for everyone. Miss enough quarterly deadlines and the penalty points accumulate quickly.
This guide covers who qualifies, what the deadlines require, how exemptions work, and what you need to do to stay compliant.
KEY TAKEAWAYS
MTD for agriculture and farming applies from April 2026 for qualifying income above £50,000, assessed on the 2024/25 Self Assessment return
Qualifying income is gross income from all self-employment and property sources before expenses, including subsidies, grants, diversification income, and rental income
Farmers who claimed averaging relief on their 2024/25 return have an automatic deferral to April 2027. Those expecting to claim it for the first time must apply
MTD requires digital record keeping, four quarterly updates, and a Final Declaration by 31 January each year
Late quarterly submissions are penalised on a points basis. Late payment of tax carries percentage-based penalties of 3% rising to 4%, plus daily interest. The two regimes are separate
No penalty points apply to late quarterly updates in the 2026/27 tax year only. All other penalties apply from year one
Your accountant needs an Agent Services Account to act for you under MTD. Confirm this and complete authorisation before your compliance date
What Is MTD for Agriculture and Farming?
Making Tax Digital is an HMRC initiative replacing paper records and annual Self Assessment returns with digital record keeping and regular reporting through HMRC-recognised software.
MTD affects farmers in two ways.
MTD for VAT has been mandatory for all VAT-registered businesses since April 2022. If you are VAT-registered, check whether your existing VAT software also supports MTD for Income Tax, you will need both to work together from April 2026.
MTD for Income Tax Self Assessment, known as MTD for ITSA, is the major new change arriving on 6 April 2026. Under it, the annual Self Assessment return is replaced by four quarterly updates and a year-end Final Declaration, all submitted through your MTD compliant software. You keep digital records throughout the year rather than gathering everything in January.
Does Making Tax Digital Apply to Your Farming Business?
MTD for Income Tax applies to you if you are registered for Self Assessment, receive income from self-employment or property, and your qualifying income is above the relevant threshold.
MTD for Farming Thresholds and Key Dates
Compliance Date | Qualifying Income | Who Is Affected |
|---|---|---|
6 April 2026 | Over £50,000 | Sole traders and landlords, based on 2024/25 return |
6 April 2027 | Over £30,000 | Sole traders and landlords, based on 2025/26 return |
6 April 2028 | Over £20,000 | Sole traders and landlords, based on 2026/27 return |
The threshold is based on gross qualifying income, not profit. HMRC looks at what you earned before any expenses, allowances, or deductions are applied. If your combined gross income from self-employment (farming activity) and property crosses the threshold, MTD applies regardless of what your taxable profit looks like.
For MTD purpose, What Qualifying Income Includes:
Counts toward threshold
UK self-employment
UK property income
Foreign property income
Does not count
Employment income (PAYE)
Dividends
Interest
Capital gains
Pension income
It is combined across all sources.
Joint Ownership
If you jointly own a farm or rental property, only your personal share of the gross income counts toward your threshold.
How Profit Averaging Affects Your MTD Start Date
Profit averaging allows farmers to smooth taxable income across two or five years. HMRC has built a deferral to April 2027 into the rules for farmers using this relief, but whether it is automatic depends on your circumstances.
Automatic — no application needed
You claimed averaging relief on your 2024/25 Self Assessment return. Your deferral to April 2027 applies automatically.
Application required
If you did not claim averaging relief on your 2024/25 return but reasonably expect to claim it on your 2026/27 return, the deferral is not automatic. You must apply to HMRC for the exemption.
The deferral is not a permanent exemption. After April 2027, standard threshold rules apply based on your qualifying income in the 2025/26 tax year.
If that income is above £30,000, you will need to comply from April 2027. If it falls between £20,000 and £30,000, your compliance date moves to April 2028. If it is £20,000 or below, you are automatically exempt. Use the extra time to choose software, set up digital records, and prepare properly.
Note
Averaging relief does not reduce your qualifying income. HMRC assesses your gross income before averaging is applied. If your gross income is above the threshold, you are in scope.
MTD for Farmers: What You Are Required to Do
Keep Digital Records Throughout the Year
From the date MTD applies to you, all self-employment and property income and expenses must be recorded digitally using HMRC-recognised software. Paper records and unlinked spreadsheets are not compliant. Records must be kept for a minimum of five years after the 31 January submission deadline of the relevant tax year.
Submit Quarterly Updates
Four times a year, you send a summary of your income and expenses to HMRC through your software. These are not tax returns. They are quarterly summaries that keep HMRC informed throughout the year.
By default, quarters follow the standard tax year dates. If you prefer to align your submissions with calendar months, you can elect to use calendar quarters through your software before you submit your first update of the tax year. This election cannot be changed mid-year.
Standard quarterly deadlines
Quarter | Period | Submission Deadline |
|---|---|---|
Q1 | 6 April to 5 July | 7 August |
Q2 | 6 July to 5 October | 7 November |
Q3 | 6 October to 5 January | 7 February |
Q4 | 6 January to 5 April | 7 May |
Calendar quarterly deadlines
Quarter | Period | Submission Deadline |
|---|---|---|
Q1 | 1 April to 30 June | 7 August |
Q2 | 1 July to 30 September | 7 November |
Q3 | 1 October to 31 December | 7 February |
Q4 | 1 January to 31 March | 7 May |
Quarterly updates work cumulatively. Each update you submit reflects the running total of your income and expenses from the start of the tax year up to the end of that quarter. You are not starting from zero each time. This means if you miss a figure in one quarter, it can be captured in the next submission.
Note: If you have both self-employment income and property income, you submit a separate quarterly update for each. The deadlines are the same for both.
Submit a Final Declaration by 31 January
The Final Declaration replaces your Self Assessment tax return. It must be submitted through your MTD software by 31 January following the end of the tax year.
This is the stage where your full tax position is calculated and your tax liability is confirmed.
Your quarterly updates only cover self-employment and property income. The Final Declaration is where everything else is brought together. Income sources not included in quarterly updates must be declared here, including, pension, dividend, interest income and so on.
This is also the stage where you claim your allowances and reliefs. For farmers specifically, this is where profit averaging elections and loss carry-forwards are applied, which can make a significant difference to your tax bill given the seasonal and unpredictable nature of farming income.
Choosing MTD Software for Your Farming Business
HMRC does not provide its own software for MTD for Income Tax. You must choose a compatible product yourself and connect it to HMRC before you can make any submissions. Its better if your chosen software supports all your income sources, let you send quarterly updates, and submit your Final Declaration.
There are two routes available.
Dedicated MTD software
Purpose-built accounting or bookkeeping applications that create and store your digital records and submit directly to HMRC. They handle quarterly updates and the Final Declaration within a single product. This is the most straightforward route for most farm businesses, particularly those with both trading income and property income that need to be tracked and submitted separately.
Bridging software
If you currently use spreadsheets to record farm income and expenses, bridging software connects to your existing records and makes your submissions to HMRC on your behalf. This allows you to continue using spreadsheets without switching systems entirely. However, your spreadsheet and the bridging software must be digitally linked so data transfers automatically. Manually copying or re-entering figures between the two is not compliant.
What to check before choosing
For farm businesses managing both self-employment and property income , for example, a farmer who also rents out a cottage or farmland, you need software that handles both income streams and submits separate quarterly updates for each. RentalBux is HMRC recognised for all three MTD qualifying income categories: sole trader income, UK property income, and foreign property income. Use our MTD Software Finder to compare available options for your farming business.
MTD Exemptions and Deferrals for Farmers
MTD for Income Tax applies to most self-employed farmers and farming landlords above the qualifying income threshold, but not everyone is required to comply. HMRC recognises that certain circumstances make digital record keeping and quarterly reporting genuinely impractical or inappropriate. In those cases, income tax exemptions and deferrals are available. Some are granted automatically with no application needed. Others require you to contact HMRC directly.
Automatic exemptions — no application required
You are automatically exempt from MTD if any of the following apply:
Your qualifying income is £20,000 or below
You do not have a National Insurance number
You are acting as a trustee, personal representative of a deceased person, or filing on behalf of a non-resident company, in those specific roles only
Automatic temporary deferrals to April 2027 — no application required
You receive an automatic deferral until April 2027 if your 2024/25 Self Assessment return included any of the following:
A claim for averaging relief
A claim for qualifying care relief
The SA107 supplementary page for trust or estate income
The SA109 supplementary page for non-residents and dual residents
Exemptions requiring an application
If none of the above apply but you believe digital compliance is genuinely impractical for you, you can apply for a digital exclusion exemption. HMRC will consider applications where:
Your age, health condition, or disability makes using digital tools genuinely impractical
Your religious beliefs are incompatible with digital record keeping
You genuinely cannot access the internet at your home or business location
Note
HMRC will not accept applications based on unfamiliarity with software, previous paper filing, having few transactions, or the cost or time of switching to digital.
How the MTD Penalty System Works for Farmers
There are two separate penalty regimes. Understanding them separately matters because they work very differently.
Late quarterly submissions : Points Based
Each missed quarterly update deadline earns one penalty point
You can only receive one point per deadline, even if you have more than one business and multiple updates are late in the same quarter
At four points, a £200 fine is issued automatically
Every subsequent missed deadline after the four-point threshold adds a further £200 fine
Losing points below the threshold | Clearing points once the threshold is reached |
|---|---|
If you have not yet reached four points:
| Once you have reached four points and received the £200 fine, automatic removal no longer applies. To clear your points entirely, you must meet both of the following conditions:
Both conditions must be satisfied. Meeting one without the other is not sufficient to reset your points record. |
Late payment of tax : percentage based
These penalties are not points based and apply to each late payment individually.
Period | 2026/27 | 2027/28 onwards |
|---|---|---|
Up to 15 days late | No penalty | No penalty |
16 to 30 days late | 3% of tax owed at day 15 | 4% of tax owed at day 15 |
31 days or more | Add 3% of tax owed at day 30, plus 10% per year daily from day 31 | Add 4% of tax owed at day 30, plus 10% per year daily from day 31 |
Late payment interest runs from day one, not from the penalty thresholds. In the first joining year of the new regime, you have 30 days from the payment due date to pay in full or set up a payment plan before penalties begin This means the penalty structure only starts from day 31. After the first year, this window reduces to 15 days and above mentioned penalty structure continues to apply.
Grace period for 2026 to 2027
HMRC will not issue penalty points for late quarterly updates during the first year of mandation, covering the 2026 to 2027 tax year. This MTD grace period applies to quarterly update submissions only. Late payment penalties and a late Final Declaration penalty still apply in full from April 2026.
Working With an Accountant or Tax Adviser Under MTD
Under MTD, your accountant needs access to your records throughout the year, not just at year end. Before your compliance date, confirm the following.
Your accountant must have an Agent Services Account to act for you under MTD ITSA. This is a specific HMRC account separate from the standard agent login used for Self Assessment. Not all accountants have set one up yet. If they do not have one, they cannot sign you up or submit on your behalf.
Once your accountant has an Agent Services Account, your existing Self Assessment authorisation needs to be transferred into it using your SA agent code. Alternatively, you can complete a direct digital handshake online. Either way, this step must happen separately from the MTD sign-up itself. Transferring authorisation does not automatically sign you up for MTD ITSA.
Your accountant will act either as your main agent or as a supporting agent under MTD. These roles carry different permissions, so confirm with your adviser which applies and what that means for your quarterly review process.
MTD Compliance Checklist for Farmers
Use this checklist to confirm you have covered every step before your MTD compliance date.
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Conclusion
MTD for farmers is not a future consideration for those above the £50,000 threshold, it is a current obligation. Digital records, compatible software, and confirmed agent authorisation are the baseline. The farmers who prepare now will find the first quarterly deadline straightforward. Those who don't will find themselves scrambling. Start by checking your qualifying income and choosing HMRC-recognised MTD software before the April 2026 deadline.
FAQ Section
