Is your farm ready for MTD? Why acting now matters

Executive summary

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a new way for His Majesty's Revenue and Customs (HMRC) to collect tax information. Instead of one annual tax return at the end of the year, farmers will send quarterly updates using HMRC-compatible software.

While the general rollout begins in April 2026 for those with income over £50,000, farmers who use profit averaging (averaging profits over 2 or 5 years) are now entitled to a deferral until April 2027. However, this deferral is not a reason for complacency. Transitioning from manual spreadsheets or paper records to a digital first system takes time. By adopting a modern solution early, UK farmers can use this extended window to streamline their recordkeeping and transition to digital reporting with total confidence.

To support a smoother transition, TELUS Agriculture & Consumer Goods is helping UK farmers prepare for MTD by offering trusted digital tools and expert guidance through TELUS Farm Accounting. Our solution is HMRC-recognised, and helps simplify recordkeeping, helping farmers meet the new MTD for ITSA requirements.

What is MTD for income tax and why does it matter? 

MTD for income tax is a UK government initiative that transforms farmers' income reporting for HMRC. You’ll need to move away from annual, paper based systems or manual spreadsheets and adopt a digital system that supports quarterly reporting. This shift helps reduce errors and helps you with compliance to the new MTD rules.

Here’s what’s changing under MTD and the move to digital tax records for agriculture:

• You’ll need to switch to digital recordkeeping 

  • This means using HMRC-recognised software to keep track of your income and expenses throughout the year.

• You’ll provide quarterly tax updates

  • You’ll submit a summary of your income and expenses each quarter

• You’re required to submit an End of Period Statement (EOPS) and Final Declaration 

  • At the end of the tax year, you’ll use the software to submit a final summary to calculate your tax liability. 

So what happens if you don’t comply with the MTD for income tax start date? HMRC has created a points based penalty system.

For missed submissions:

• You’ll receive one penalty point each time you miss a quarterly update

• You’ll be fined £200 once you reach the penalty threshold:

  • 4 points for quarterly submissions

  • 2 points for annual submissions

For late payment of tax:

• Penalties apply if your Income Tax balance isn’t paid on time. You’ll be charged:

  • 3% of the tax owed after 15 days

  • 6% after 30 days

• Daily interest at 10% per year will also be added until the balance is paid

Why MTD for ITSA is hitting farmers hard

MTD for income tax compliance won’t be easy for everyone and the first major deadline is fast approaching. A 2025 poll from Gravita revealed 65% of those polled were undecided or not confident at all about complying, and only 4% reported being very confident. What’s more? Roughly 40% of the individuals surveyed still use spreadsheets for their accounting.

In the UK farm community, MTD compliance is a growing concern. A 2019 study showed that nearly 44% of UK farmers were still "in the dark" or unprepared for MTD, having not yet adopted the software they would need to comply with the new initiative. Tech adoption has increased significantly amongst UK farmers since, with a rise in awareness for MTD and its requirements driving the shift away from paper recordkeeping, spreadsheets and accounting tools that don’t connect with the internet. That being said, there still remains a slow adoption to the technical requirements that need to be made.

So what’s holding farmers back? A Barclays Bank survey showed 300 UK farmers in 2024 and more than half of them expressed that they were interested in adopting new technologies but felt skeptical about them. Their major concerns revolved around unclear value or tools that don't fit daily farm life and limited long term support. It’s worth noting that farmers typically have limited money and time available to adopt new technologies. There’s also a learning curve to going digital that can be quite intimidating and they have to work within tight margins when it comes to investing in new tools. All that being said, farmers have ample reasons to lag behind on compliance when it comes to supplying digital tax records for agriculture.

Key deadlines: When do UK farmers need to comply?

You may be wondering “What is the MTD for income tax start date”? If you’re a sole trader, landlord, or a farmer with mixed income, you’ll need to comply with MTD once your income goes over the relevant threshold. If you have both trading and property income, these are added together when working out whether MTD for income tax applies to you. Your total income determines when you must start complying.

MTD for income tax will be introduced in stages, with start dates in 2026, 2027 and 2028, depending on your income level:

It’s important to note that these qualifying income thresholds do not correspond to your current year’s income. They are based on the income that you reported on your tax return two years prior to the mandatory compliance date. That means your 2024/25 tax return will be used to determine if you need to comply in April 2026 or later. If you own property jointly, your personal share of the gross income must be used to determine if you meet the threshold.

Beyond the spreadsheet: New MTD requirements for recordkeeping

If your farm business is impacted by MTD for income tax, here’s what you’ll need to do:

• Stop using paper records, spreadsheets and noncompliant accounting software

• Adopt MTD for income tax software that is HMRC recognised

• Keep and maintain thorough digital records of your finances year round

• Submit quarterly tax updates and a year end reconciled statement, instead of one annual return at year end, beginning after your compliance deadline

• Work closely with your accountants throughout the year to meet the government’s new reporting requirements

Why generic accounting software often fails the farming test

Even if you already have digital accounting software in your toolkit, as a farmer in the UK, it may benefit you significantly to make the switch and adopt farm specific accounting software. Generic accounting software is not ideal for businesses like farms which tend to have seasonal and complex income streams (trading, property, diversification etc.).

These basic models may require manual workarounds and data clean up to capture everything accurately for a farm business. Throw in the fact that you will now have to report quarterly instead of annually and you may find yourself facing significant pressure and time constraints to comply with MTD using standard software.

How to prepare early for MTD for income tax compliance 

You can, of course, choose to wait for the clock to run out to comply with MTD, but you also have the option to sign up voluntarily before it becomes mandatory for you. To do so, you’ll need to:

• Be registered for Self Assessment

• Have submitted a tax return in the last 2 years

• Choose compliant MTD for Income Tax software that is HMRC-approved to submit quarterly tax updates for the year

You can read this step-by-step guide from the government for more information.

Why TELUS Farm Accounting is the specialist choice for MTD

Unlike generic accounting software solutions, farm accounting software is a specialised financial management tool that’s designed to meet the complex needs of agricultural businesses. It helps you manage things like seasonal income, inventory of livestock and crops, complex VAT regulations and enterprise cost analysis. It also enables you to more accurately track your income and expenses and ultimately make better informed financial decisions.

When choosing farm accounting software, TELUS Farm Accounting (formerly Farmplan Business Cloud) stands out. It’s HMRC-approved farming software, cloud based, and built in the UK specifically for farming and rural businesses.

With TELUS Farm Accounting, you can:

• File VAT directly with HMRC, removing messy exports and insecure file uploads

• Keep all MTD records digitally in one place, without the complexity of bridging software

• Submit quarterly updates with confidence, using software designed for MTD 

• Share live, MTD ready data with your accountant through a real time, secure accountant portal

• Streamline quarterly reviews and signoffs, reducing last minute stress

• Manage your finances anywhere, anytime with cloud based access

• Get up and running quickly, even if you’re not tech savvy

• Access support from local experts who understand the agriculture context, whenever you need help

There’s nothing holding you back from using the right tool for the job. Make the switch to TELUS Farm Accounting now and be ready for MTD for income tax with confidence.

Key takeaways

• MTD for income tax is changing the way sole traders and landlords must do their accounting which will impact UK farmers hard.

• Compliance with MTD will soon be mandatory with staggered deadlines approaching in 2026, 2027 and 2028 that are determined by income threshold.

• Farmers who use profit averaging have secured automatic deferral until April 2027

• UK farmers and farm accountants must prepare their businesses to comply by adopting compatible digital accounting software if they still use paper records, spreadsheets or outdated accounting solutions.

• Generic software often lacks the agricultural nuances that TELUS Farm Accounting handles natively.