If you are a self-employed partner, your share of partnership profit does not count towards MTD for Income Tax qualifying income. Partnerships themselves, including general partnerships, LPs and LLPs, have no confirmed MTD start date and continue to file the SA800. MTD only applies to you personally if you have separate sole-trade or UK property income over the threshold, tested on gross income before expenses. Employment, dividend, savings and pension income do not count either. HMRC’s guidance on partnerships has changed before, so check it regularly.
- A partner’s share of partnership profit is excluded from MTD qualifying income, no matter how large it is.
- Partnerships (general partnerships, LPs and LLPs) have no confirmed MTD start date and still file the SA800 as normal.
- A partner can still be brought into MTD through separate sole-trade or UK property income earned outside the partnership.
- Qualifying income is gross income before expenses, so £25,000 of rent counts as £25,000 even if the profit is lower.
- Employment, dividend, savings and pension income do not count towards MTD, but they still go on your Self Assessment return.
If you’re a self-employed partner in a business, you’ve probably heard that Making Tax Digital is coming for sole traders and landlords, and wondered where that leaves you. It’s a reasonable thing to wonder, because HMRC’s guidance on partnerships has genuinely lagged behind the rest of the MTD rollout, and a lot of what’s written about it online gets the details wrong.
At present, your partnership profit share isn’t part of the MTD calculation at all. Whether MTD applies to you personally depends entirely on qualifying income you hold outside the partnership. This guide explains generally what counts, what doesn’t, and when partnerships themselves are likely to be brought in.
Does MTD for Income Tax Apply to Partnerships?
Not yet, and there’s no confirmed date for when it will. MTD for Income Tax was originally meant to include partnerships. Still, that plan was shelved after consultation feedback flagged how complicated partnership structures, profit-sharing arrangements, and the interaction between the partnership return and each partner’s own return would make things. General partnerships, limited partnerships and LLPs have all been excluded from the current MTD for Income Tax rollout.
What This Means in Practice
- The partnership itself does not file anything under MTD; it continues filing its SA800 partnership return as normal.
- MTD may still apply if they have qualifying self-employment or property income outside the partnership.
- Under the current rules, this applies across all partnership types: general partnerships, LPs, and LLPs.
- Partnerships continue to file an SA800 partnership return, and partners continue to report their share of profits through their own Self Assessment tax returns.
What Counts as Qualifying Income for MTD If You’re a Partner?
This is the point that trips almost everyone up, including much of the guidance published online: your share of partnership profit does not count toward your MTD qualifying income. HMRC’s own manual is explicit that an individual partner does not need to use MTD for Income Tax in respect of their share of profit from a partnership.
So if you earn £28,000 from your partnership share and nothing else, your qualifying income for MTD purposes is £0, rather than £28,000. That’s true no matter how large the partnership’s total profit is. What does count, if you have it, is:
- Income from a separate sole-trade self-employment you run outside the partnership
- Any UK property income and, where applicable, foreign property income reportable by UK residents.
If you have either of those alongside your partnership work, it’s that qualifying income
, and only that income, that gets tested against the MTD threshold.
What Doesn’t Count
- Your share of partnership profit
- Employment income (PAYE)
- Dividends, including from your own limited company
- Savings and investment income
- Pension income
You still need to declare all of these on your Self Assessment return as usual. They don’t feed into whether you’re mandated into MTD.
When Might a Partner Actually Be Brought Into MTD?
Under the current rules, a partner is only brought into MTD through qualifying income earned outside the partnership. If you’re a partner who also runs a personal sole trade, or lets out a property in your own name, that income is tested exactly the way it would be for anyone else: gross income (before expenses) from self-employment and property is added together, and if the combined total crosses the relevant threshold, you’re brought into MTD for that income.
Two worked examples show how this plays out:
- Partnership only: You earn £40,000 as your share of partnership profit and have no other income. Your MTD qualifying income is £0. You are not required to use MTD.
- Partnership plus a side property: You earn £30,000 from your partnership share, plus £25,000 in gross rental income from a property you own personally. Your MTD qualifying income is £25,000. The partnership share is excluded from the sum.
It’s also worth flagging that HMRC uses qualifying gross income, not taxable profit, to decide whether the MTD threshold is met. In other words, the test looks at what you bring in before any costs come out.
Take a rental property that brings in £25,000 a year. After repairs, agent fees, and insurance, the actual profit might be only £10,000. HMRC still tests the full £25,000 against the MTD threshold, not the smaller profit figure.
Why This Catches Partners Out
It’s an easy mistake to make: partnership profit feels like self-employment income, since partners are self-employed for tax purposes and report their share on the same Self Assessment return as any other self-employed income. But under the current MTD for Income Tax rules, HMRC does not include partnership profit shares when calculating an individual’s qualifying income for MTD purposes. Two partners in the same firm could have wildly different profit shares, and it wouldn’t matter for MTD either way; what matters is what each of them separately earns from a sole trade or from property.
What Happens When Partnerships Do Eventually Join MTD?
The position remains uncertain.
HMRC has indicated a future timeline will be set out for partnerships, but hasn’t published one, and has flagged that the design questions, like how a partnership’s figures would be allocated to individual partners quarterly, and who would be responsible for what, still need to be worked through in consultation.
What You Can Do Now
- Keep good digital records of your partnership income and expenses anyway; it makes life easier whenever the rules do land.
- If you have separate self-employment or property income, review that against the current MTD thresholds now, since that part of the rules already applies.
- Don’t assume your partnership’s overall turnover or profit determines whether you fall within MTD. Under the current rules, the focus is on your own qualifying income.
- Check HMRC’s published guidance periodically rather than relying on older articles, since this area has been revised more than once.
How Swiftacc Can Help You Get MTD-Ready
Working out exactly where you stand as a partner, especially once you add a second income source, isn’t always straightforward. At Swiftacc, we help partners and partnerships understand their actual MTD position, review any separate self-employment or property income against the thresholds, and set up digital record-keeping well before it’s mandatory. If you’re not sure whether MTD applies to you yet, we’ll review your specific situation and give you advice based on current legislation and HMRC guidance.
Final Thoughts
A key point to understand, which differs from what some guidance suggests, is that under the current rules, partnership profit is not counted towards the MTD income threshold, and HMRC has not yet confirmed when or how partnerships will be brought into MTD. If MTD applies to you as a partner, it is usually because of other income, such as a personal sole trade or property income, rather than the partnership itself. Understanding this distinction now can help you avoid preparing for an obligation that may not apply to you, while still keeping track of the income that does count towards the threshold.
If you’d like help working out exactly where you stand, get in touch with the Swiftacc team today, and we’ll talk you through it.
Frequently Asked Questions
No. Your partnership profit share is not currently included from the MTD qualifying income calculation entirely. MTD only applies to you if you have separate sole-trade self-employment or property income above the relevant threshold.
Partnerships themselves aren’t currently within MTD, so this doesn’t arise from partnership income. If individual partners have their own separate qualifying income, they could be brought in at different times, but that has nothing to do with their partnership share.
Under the current rules, no. HMRC’s guidance is explicit that a partner’s share of profit from a partnership does not count towards qualifying income, regardless of size. You still need to report it on your Self Assessment return as usual.
Only if you have separate qualifying income (sole-trade self-employment or property) above the threshold will you need MTD-compatible software for that income. Your partnership share doesn’t create any software requirement on its own.
