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After long delays, Making Tax Digital for Income Tax Self-Assessment is here. The government digitisation programme requires sole traders (not Limited Companies) who meet the income thresholds (more on this in a moment) to keep digital records of their transactions and submit quarterly updates to HMRC.
What is Making Tax Digital (MTD) for landlords?
The significant change means that, if you’re a sole trader landlord, you’ll need to submit digital updates to HMRC every quarter using an authorised MTD software. This is replacing the existing annual self-assessment returns process.
You will need to submit your updates within a month following the end of a quarter. For example, Q1 runs from 1st January to 31st March, so you’d need to submit your update by the end of April.
When does Making Tax Digital start for landlords?
The phased roll-out is based on gross income thresholds. This means your total income from rent and self-employment, before expenses and tax are deducted, counts.
- 6th April 2026: Landlords earning over £50,000 in the 2024/25 tax year.
- 6th April 2027: Landlords earning over £30,000 in the 2025/26 tax year.
- 6th April 2028: Landlords earning over £20,000 in the 2026/27 tax year.
HMRC will use your most recent tax return to determine when you qualify for the new scheme. They will then send you a letter stating that you need to start using approved software before April.
HMRC says that keeping digital reports throughout the year will save landlords time, compared to spending hours gathering all the necessary information at tax return time.
Furthermore, quarterly updates will more evenly spread the taxman's workload. This will allow the tax system to become closer to real-time reporting and help landlords manage their finances.
How can landlords prepare for Making Tax Digital (MTD)?
HMRC is now urging eligible customers to register for a testing programme to help them prepare. This can be found on the GOV.UK website here.
The Exchequer Secretary to the Treasury, James Murray, commented, “By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.
“This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth.”
HMRC’s director of Making Tax Digital, Craig Ogilvie, added: “MTD for Income Tax is the most significant change to the Self-Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.
“By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”
5 steps to help you prepare
- Look at your income for 2024/25 – Landlords earning £50,000 or over in 2024/25 will need to use MTD, so you will already know if you need to be ready for April 6 2026
- Find compatible software – Speak to your accountant to find the best MTD-compatible software, as not all will work for you. There are several options available, so it’s best to work with a professional to find the right software to suit your needs
- Digitise your records – Start transitioning from paper records to digital record-keeping now
- Speak to your letting agent – If you use a letting agent, ask them how they can support MTD and provide digital receipts for your records
- A separate bank account – It’s important to have a separate bank account for your rental business, as this will make integrating the account with the MTD software a lot easier, and you won’t need to exclude personal expenses
Speak to an expert
While we can’t provide you with tax advice, we are partnered with the Comprehensive Tax Planning experts to help you manage your property portfolio.
If you have any questions about your upcoming property finance plans, speak to our experts on 0345 345 6788.
