SA104 averaging-relief partners get automatic MTD exemption until April 2027

Individuals in a partnership who claimed averaging relief on the SA104 supplementary page in their 2024 to 2025 Self Assessment return are automatically exempt from Making Tax Digital for Income Tax for the 2026 to 2027 tax year.GOV They do not need to contact HMRC or submit an exemption applicationGOV: HMRC grants automatic exemptions from the information it already holdsGOV. Anyone exempt must still report income and gains in a Self Assessment tax return as normal.

This puts partners on the same footing as individuals who claimed averaging relief on the SA103 supplementary page, who were already covered automatically. Previously a partner with a 2024 to 2025 SA104 averaging claim was directed to apply for an exemption; that separate application route for historic SA104 averaging claims has been removed, and the automatic exemption now names the SA104 page alongside the SA103 pageGOV.

Averaging relief itself is unchanged. It is available to farmers, market gardeners and people who personally create literary or artistic works, and it works by recomputing tax over consecutive years as if volatile profits had been their average, which helps where marginal rates differ between years. Farmers and market gardeners can average over two or five consecutive years; creators of literary or artistic works average over two consecutive years. The claim is made in the return for the later year of the period.

The automatic exemption is temporary: exemptions of this kind last until April 2027GOV at the earliestGOV. From the 2027 to 2028 tax year onwards, a person whose qualifying income was above £30,000 in the 2025 to 2026 tax year will need to use Making Tax Digital for Income TaxGOV. Qualifying income is total self-employment and property income before expenses, measured from the previous tax year's return; a partner's share of partnership profit as an individual partner does not count towards it.

Partners who did not include an averaging claim in their 2024 to 2025 return but reasonably expect to claim averaging relief on the SA104 page in their 2025 to 2026 or 2026 to 2027 return must still apply for an exemptionGOV, as must those newly expecting qualifying care relief or the SA107 or SA109 pagesGOV. The same forward-looking application rule covers first-time SA103 averaging claimsGOV. An application should not be made without a genuine reason to expect the claim or page in those returns.

Legal basis: averaging relief in sections 221 to 225 of the Income Tax (Trading and Other Income) Act 2005, applied through HMRC's automatic-exemption rules for Making Tax Digital for Income Tax.