Farmers have secured a crucial one-year reprieve from new digital tax rules after the NFU warned the system had not been properly tested for farming businesses and risked adding cost and complexity to an already pressured sector.
Sole traders who farm and may need to average their profits will now have until April 2027 before being required to comply with Making Tax Digital for Income Tax, following successful lobbying by the NFU. The scheme had previously been due to become mandatory for all sole traders from April 2026.
NFU president Tom Bradshaw said the delay was a “big win” for farmers and would “save many farmers significant time and money, giving businesses vital breathing space” at a time when margins remain tight and administrative burdens are increasing.
Under current government plans, self-employed individuals and landlords earning more than £50,000 will still be required to keep digital records and submit quarterly updates to HMRC from April 2026, with those earning between £30,000 and £50,000 joining the system from April 2027.
However, farmers who reasonably expect to use profit averaging — a long-established mechanism allowing farm incomes to be averaged over two or five years to reflect volatility — will now be entitled to defer entry into the system until April 2027.
The deferment will apply even where farmers also operate other sole trades or property businesses that would otherwise have triggered mandatory entry in April 2026, providing additional clarity for diversified businesses common across the farming sector. HMRC is expected to issue further guidance in the new year setting out when the deferment will apply automatically and when farmers will need to apply.
The NFU has argued that Making Tax Digital for Income Tax was effectively untested for farming businesses, after HMRC was unable to include farmers who wished to use profit averaging in public beta testing for 2025–26. The union said this made it impossible to properly assess how the system would work in practice for agriculture.
As a result, the NFU said it could not encourage farmers to volunteer for trials that would prevent them from making legitimate averaging claims, warning this would place participants at a financial disadvantage. The union said HMRC has now acknowledged that limitation by agreeing to the deferment.
While welcoming the delay, Mr Bradshaw said digital reform could still bring benefits if implemented correctly. “However, it’s important to recognise that this initiative has the potential to streamline tax administration in the long-term as a well-tested and workable system,” he said.
“We’ll continue pressing HMRC to ensure the system is properly tested and workable before farmers are mandated.”
The NFU said it would continue to raise concerns with HMRC over the impact of quarterly reporting requirements, particularly for diversified farm businesses, and warned that further changes may be necessary before Making Tax Digital is genuinely fit for agriculture.
