I took the liberty of rewriting it to haskell syntax
(\y -> x (\x-> x y))
(\y -> x (\x-> x y)) t
x (\x -> x t)
since the y is already bound to the input \y all y will be substituted by t.
Edit: As noted in the comment below if t where to contain a free x it would be important to rename the bound x in this scope to a "fresh" name. That is a name that has currently no meaning. If we say
let t = \t -> x t
Then the proper substitution would look like
x (\z -> z (\t -> x t))
Where as stated by pigworker
some z
is chosen for freshness as a fresh identifier to replace our bound x to prevent hiding the free x in t.