There is a widely repeated claim that partnerships with corporate members face a Making Tax Digital for Income Tax Self Assessment (MTD ITSA) mandate of April 2026. This claim is incorrect. HMRC has deferred all partnerships from the current MTD ITSA rollout, and partnerships with corporate members are particularly far from any confirmed obligation. No date has been set for them.
This article explains what the current rules actually say, what the deferral means for your partnership, how corporate partners are taxed under the existing system, and what individual partners should check for their own personal position.
What MTD ITSA Is and Who It Currently Applies To
Making Tax Digital for Income Tax Self Assessment requires those in scope to keep digital records of their business and property income and to submit quarterly updates to HMRC through compatible software, replacing the traditional annual self assessment return.
The mandate currently covers individuals with qualifying income from self-employment and property. Qualifying income is gross trading income plus gross property income. The phased rollout is as follows:
- From 6 April 2026: individuals with qualifying income exceeding £50,000 per year.
- From 6 April 2027: individuals with qualifying income exceeding £30,000 per year.
- From 6 April 2028: individuals with qualifying income exceeding £20,000 per year.
These are thresholds for individuals: sole traders, individual landlords, and others within the charge to income tax on their business or property income. The mandate does not currently extend to partnerships as entities.
Partnerships With Corporate Members Are Deferred
HMRC has confirmed that partnerships are not included in the April 2026, April 2027, or April 2028 rollout. This covers all partnership types, including partnerships where one or more partners is a limited company or other corporate entity.
HMRC's published position is that general partnerships (where all partners are individuals) may join MTD ITSA at a later date to be confirmed. For partnerships with corporate members, no date has been set and no specific plans have been published. These partnerships are structurally more complex because partners are subject to two different tax regimes: individual partners pay income tax while corporate partners pay corporation tax. HMRC has not determined how to require quarterly digital reporting across that split, and has made no announcement about when it will do so.
The result is straightforward: a partnership with at least one corporate member has no MTD ITSA obligation arising from the April 2026 rules.
How the Corporate Partner's Share Is Taxed (and Why That Does Not Change)
A corporate partner's share of partnership profits has always been taxed through corporation tax, not income tax. The company reports its allocated share of the partnership's profits on its CT600 corporation tax return, as it does under existing rules. MTD ITSA is an income tax programme. It does not change how a company accounts for its partnership income, and it does not create any new quarterly reporting obligation for the corporate partner's share.
The individual partners in the same partnership continue to report their own shares on their personal self assessment returns. MTD ITSA will eventually change that for individual partners (replacing the annual return with quarterly updates), but only when and if the partnership mandate is introduced. Until then, the existing self assessment return process continues for individual partners' partnership income.
The Nuance: Individual Partners With Their Own Separate Income
The partnership deferral applies to the partnership as an entity. But an individual partner who also has qualifying income from their own separate sole-trade activity or from property they hold personally can still be caught by the individual MTD ITSA mandate.
If you are an individual partner in a partnership with corporate members and you also run your own sole-trade business, or you own rental property in your personal name (outside the partnership), and that separate income exceeds the relevant threshold, you are subject to the individual mandate from the applicable date.
To be precise about what counts and what does not:
- Your own separate sole-trade income above the threshold: covered by the individual mandate.
- Your own rental income from property held in your personal name (not via the partnership): covered by the individual mandate.
- Your profit share from the partnership: not brought into MTD ITSA by the April 2026 rules. The partnership deferral covers this income.
If your only significant income comes from the partnership, you have no MTD ITSA obligation under the current rules. If you also have personal trading or rental income, check whether it brings you above the threshold for your applicable date.
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Why Confusion Arose About the April 2026 Deadline
Early HMRC consultation documents and some published guidance discussed partnership MTD ITSA obligations without clearly distinguishing between partnership types or confirming deferral. Some commentators assumed partnerships would follow a similar timetable to sole traders and landlords. Guidance written during that period, which was not subsequently updated, circulated widely and gave the impression that partnerships with corporate members faced an April 2026 obligation.
HMRC subsequently confirmed the deferral, but the incorrect information continued to spread. Partnerships with corporate members are specifically in a holding position: no mandate, no announced date, and no current requirement to change their reporting processes.
What Your Partnership Should Do Now
The partnership itself has no MTD ITSA obligations to meet under the current rules. The practical steps worth taking are focused on individual partners and future readiness:
- Establish whether any individual partner has their own sole-trade or property income (separate from the partnership) that exceeds the relevant threshold. If so, that partner needs to prepare for the individual mandate from the applicable date.
- Keep your partnership's records in good order. When the partnership mandate eventually arrives, well-organised digital records will make the transition significantly easier. Good bookkeeping is worthwhile regardless of MTD timing.
- Monitor HMRC's MTD ITSA updates. The partnership mandate will arrive at some point, and more complex structures (those with corporate members) will likely need the most preparation time. Staying informed means you will not be caught out when an announcement is made.
- If individual partners will be in scope for the individual mandate based on their personal income, ensure they receive proper advice and have appropriate software in place before their applicable date.
Common Misconceptions Corrected
"Partnerships with corporate members must submit quarterly digital updates from April 2026." This is false. HMRC has deferred all partnerships from the current mandate. No partnership has a quarterly reporting obligation from April 2026.
"Having a corporate partner creates an earlier or different MTD ITSA obligation." No. Corporate partners are subject to corporation tax, not income tax. They are outside the scope of the income tax MTD ITSA programme, and their presence in the partnership does not create an earlier or different obligation for the partnership as a whole.
"Individual partners in a partnership with corporate members have no MTD obligation at all." This may or may not be true depending on each partner's own income. The partnership profit share is not the trigger. If a partner has separate sole-trade or property income above the threshold, they are caught by the individual mandate.
"HMRC will mandate these partnerships from April 2027 or 2028." Not confirmed. The April 2027 and 2028 dates are for individual sole traders and landlords at lower income thresholds. No date has been set for any partnership type. For partnerships with corporate members, the published position is deferred without a confirmed date.
Getting Advice
If you want clarity on which partners in your firm have a personal MTD ITSA obligation, or if you are planning changes to your partnership structure, speaking to an accountant who understands partnership taxation is worthwhile. The interaction between income tax and corporation tax rules in a partnership with corporate members can be complex, and getting individual partners' positions right matters as the individual mandate dates approach.
Visit our services page to see how we support partnerships, or contact us directly to discuss your situation. For a full list of MTD-related terms, see our glossary.