From 6 April 2026, farmers with gross income over £50,000 stop filing one annual tax return and start filing quarterly instead. The threshold falls again in 2027 and again in 2028, and it is measured on turnover, not profit. Here is exactly who is caught, when, and the profit-averaging exemption written specifically for farms.
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) phases in on gross combined income from self-employment and property, not profit. Farmers with gross income over £50,000 join from 6 April 2026, over £30,000 from April 2027, and over £20,000 from April 2028. Gross means gross: livestock and crop sales, machinery hire, subsidies and rental income all count in full before a single expense is taken off. A farm can turn over a large number and still show a modest profit, and it is the turnover figure that decides whether MTD applies.
HMRC is rolling MTD ITSA out in three stages, each one lowering the gross income figure that pulls a farm into the regime. The stages apply UK-wide and use the same test throughout: combined gross income from self-employment and property in a tax year.
For most working farms, the date that actually matters is the first one. A holding with any meaningful acreage or herd size will usually clear £50,000 in gross sales long before it clears it in profit, which is exactly the point covered in the next section.
This is the single most common point of confusion for farmers checking whether they are affected, and it is worth stating plainly: the MTD threshold is tested against gross income, before any expenses or tax reliefs are deducted. It is not a profit test, and it is not a test on what ends up in your pocket at the end of the year.
Gross income means everything coming into the business: crop sales, livestock sales, machinery hire, agri-environment and other subsidy payments, and any rental income from cottages or diversified lets, all added together and counted in full. None of your input costs come off that figure for the purposes of the threshold, not diesel, not feed, not fertiliser, not vet bills, not machinery finance.
Take a mixed arable and beef holding turning over £220,000 a year between crop sales, store cattle and a stewardship payment. After diesel, seed, fertiliser, feed, vet costs and machinery repayments, the actual taxable profit for the year might land at £18,000, comfortably under all three thresholds if profit were the test. It is not the test. The £220,000 gross figure is what HMRC looks at, so this holding is inside MTD ITSA from 6 April 2026 even though its real profit sits well below £20,000. Margins can be thin and turnover can still be large, and on a farm those two things are almost always true at once.
One more wrinkle worth flagging: the threshold looks at self-employment and property income combined. If the farm business turns over £40,000 and a let cottage on the holding brings in a further £15,000 of rental income, those two figures are added together for the test, not assessed separately. Farms already registered on the Flat Rate Scheme for VAT should note that MTD ITSA is a wholly separate regime for income tax, so being on the Flat Rate Scheme has no bearing on whether these thresholds catch you.
Once a farm is inside MTD ITSA, the annual self-assessment return is replaced by a different rhythm. Instead of one return filed after the tax year ends, the farm submits four quarterly summaries of income and expenses through the year, each one building on the last, followed by a final declaration once the year closes that confirms the complete tax position.
The quarterly summaries are lighter than a full return, essentially a running total of what has come in and gone out, filed through compatible software rather than typed into HMRC's online portal. The final declaration is where any reliefs, adjustments and the full year's figures come together into the number that is actually owed. In practice this means record-keeping shifts from an annual scramble to something closer to a habit: a photo of a receipt or an invoice logged as it happens, rather than a shoebox sorted every January.
There is one exception written specifically with farms in mind. Farming income is notoriously volatile, a good harvest or a strong store price one year followed by a poor one the next, and profit averaging is the long-standing mechanism that lets farmers smooth their taxable profit across two or five years to soften that swing.
GOV.UK now treats this as a temporary exemption for the 2026 to 2027 tax year. You do not need to use Making Tax Digital for Income Tax that year if your 2024 to 2025 return claimed averaging as an individual on the SA103 supplementary page, and you do not need to contact HMRC. If you claimed averaging as a partner on the SA104 page, or you did not claim in that return but reasonably expect to claim in 2025 to 2026 or 2026 to 2027, you must apply for the exemption.
It is a pause, not an escape. GOV.UK says that if your qualifying income is above £30,000 in 2025 to 2026, you will need to use Making Tax Digital for Income Tax from 2027 to 2028. Check your filed 2024 to 2025 return to see which group you are in, and take it to your accountant. Our guide to profit averaging covers the rules in full.
Once a farm is inside MTD ITSA, quarterly summaries and the final declaration have to be filed through software that HMRC recognises as compatible, not through the general self-assessment portal. HMRC keeps a live list of compatible software at its compatible-software finder, and it is worth checking any product against that list before relying on it for a filing deadline.
Not every piece of farm software that talks about MTD has actually been through HMRC's recognition process, so it is worth reading our what to look for in software checklist before choosing one for the switch. FarmHQ has been built HMRC-recognition-ready from day one, so quarterly summaries and the final declaration sit on the same record as the receipt capture and VAT-coded bookkeeping a farm is already doing, rather than in a separate system that needs its own reconciliation. For more on the dates and deadlines that affect a working farm, our other farm paperwork guides cover the statutory side of the calendar as well as the money side.
Staff wages are a separate record from VAT and Making Tax Digital, but they carry their own retention rule: see farm wage records: what the law says you must keep.
MTD for Income Tax Self Assessment phases in over three years. Farmers with gross income over £50,000 from self-employment or property are in from 6 April 2026. The threshold drops to over £30,000 from April 2027, then to over £20,000 from April 2028.
It applies to gross income, not profit. That means total sales and receipts, including livestock and crop sales, machinery hire, subsidies and rental income, before any expenses or reliefs are deducted. A farm with thin margins can still be caught if its turnover is high.
Farmers who claimed profit averaging as an individual on the SA103 page in their 2024 to 2025 return do not need to use MTD for Income Tax in the 2026 to 2027 tax year, and need not contact HMRC. Partners who claimed on SA104, or who expect to claim, must apply for the exemption. It is temporary: if qualifying income is over £30,000 in 2025 to 2026, MTD applies from 2027 to 2028.
You need software recognised by HMRC as compatible with Making Tax Digital for Income Tax, capable of sending quarterly summaries and a final declaration. HMRC publishes a list of compatible software at gov.uk.