Is your farm ready for Making Tax Digital for Income Tax?

By Heather Bright, Partner and ARA specialist

HM Revenue and Customs (HMRC) is making a concerted effort to transform and modernise the UK’s tax system. They have introduced Making Tax Digital (MTD), which is designed to improve the accuracy of data and reduce mistakes.

Farmers are already getting to grips with the new MTD initiative, with MTD for VAT already having been in place for relevant businesses for several years now.

However, MTD for Income Tax Self-Assessment (ITSA) will be introduced from 6 April 2026, and it’s important to clarify if this will apply to you and, if it does, to prepare for the changes.

Who will MTD for Income Tax apply to?

MTD for Income Tax will apply to self-employed farmers and their businesses.

However, your farm’s turnover will determine when exactly you will need to follow the new regulations in place.

From April 2026, farmers with a trading or property income above £50,000 will need to keep digital records and submit quarterly updates to HMRC. The threshold for liability then reduces to £30,000 from April 2027 and to £20,000 from April 2028.

Please note these thresholds relate to income levels and not profit levels.

What is important to remember is that your Income Tax return from 2024/25 will determine when the MTD for Income Tax rules will apply to you.

How will MTD for Income Tax affect farmers?

The introduction of MTD for Income Tax is a major change farmers will need to adapt to quickly.

With one annual return removed, farmers must submit quarterly reports, an end-of-period statement, and declare their tax position at the end of the financial year.

It may be tricky to navigate, especially because farming revenue can be volatile due to ever-changing factors like the weather and changes in season, but it’s a significant shift in reporting to HMRC that must be adhered to.

You will also need to get comfortable using software to keep digital records. Under the new laws, paper records will not be accepted by HMRC, so you will need to implement digital accounting software into your processes.

It is a lot to take on board, but you can prepare ahead of time with the new regulations not taking effect until April.

How can I prepare for the upcoming changes?

With the arrival of MTD for Income Tax, not far away, now is the best time to prepare.

First and foremost, you need to clarify your financial position and confirm if and when MTD for Income Tax applies to you.

Clarifying your position will help you prepare, implement measures, and stay a step ahead. These measures may include introducing digital software into your report processes.

Our MTD for Income Tax teams should already have been in contact with you if you are expected to be within the new regime from 6 April 2026.

They will explain the MTD for Income Tax in detail, help you work out if MTD for Income Tax applies to you, and prepare a plan so you understand your financial position.

Be MTD for Income Tax ready. Contact our team for expert financial advice.