Making Tax Digital is changing how landlords report income to HMRC.
If you are a self employed landlord, these changes will affect you over the next few years, depending on your level of income. Here is a straightforward guide to what it means and how to prepare.
What is Making Tax Digital?
Making Tax Digital, often shortened to MTD, is an HMRC initiative that requires landlords to keep digital financial records and submit Income Tax information online using compatible software.
Paper records will no longer be acceptable under the scheme. The days of keeping receipts in a folder or shoe box are coming to an end.
When will it apply to you?
MTD for Income Tax begins in stages:
- From 6 April 2026 if your qualifying income is £50,000 or more in the 2024 to 2025 tax year
- From April 2027 if your qualifying income is £30,000 or more
- From April 2028 if your qualifying income is £20,000 or more, subject to final confirmation
Qualifying income includes rental income and any other self employed income combined.
At present, limited companies are not included. Partnerships are also excluded for now.
What will you need to do?
To comply with MTD you will need to:
- Use HMRC recognised, MTD compatible accounting software
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC
- File a final declaration at the end of the tax year
If you already use accounting software, it may already be compatible. It is worth checking with your provider.
If you prefer spreadsheets, bridging software may allow you to continue using them while remaining compliant.
Importantly, MTD does not currently change when tax is paid. Payment deadlines remain the same.
Pros and cons
There will inevitably be a learning curve, particularly for landlords who have always managed records manually.
However, there are potential advantages.
Spreading record keeping across the year may reduce the pressure of completing everything at the end of the tax year. Quarterly submissions also provide a clearer picture of how your rental business is performing and what your likely tax position will be.
For some landlords, that visibility may improve cash flow planning.
What should you do now?
Start by monitoring your rental income and understanding which threshold you fall into.
Do not assume HMRC will notify you in plenty of time. It is wise to plan ahead.
Speak to your accountant about how MTD will affect you and what software would be suitable. This article is a general guide and not financial advice.
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Article by Andrew Overman | Partner | Location Location East
