Making Tax Digital For Landlords

Understanding Making Tax Digital for Landlords

Making Tax Digital (MTD) is a major HMRC initiative designed to modernise the UK tax system by requiring digital record-keeping and online submissions. For landlords, this represents a significant change in how rental income and expenses are reported.

What is Making Tax Digital?

MTD aims to reduce errors and improve efficiency by moving away from paper-based tax returns. Key features include:

• Digital record-keeping for income and expenses.
• Quarterly updates to HMRC via approved software.
• End of Period Statement (EOPS) and Final Declaration replacing the traditional Self-Assessment return.

When Does MTD Apply to Landlords?

MTD for Income Tax Self Assessment (ITSA) will apply to landlords based on their gross income (before expenses) from property and/or self-employment:

• 6 April 2026: Mandatory for landlords with gross income over £50,000 (from 2024–25 tax year).
• 6 April 2027: Threshold reduces to £30,000 (based on 2025–26 tax year).
• 6 April 2028: Expected extension to those earning over £20,000.

Quarterly Reporting Deadlines

Once enrolled, landlords must submit quarterly updates through MTD-compatible software:

• 7 August – First quarter (April–June)
• 7 November – Second quarter (July–September)
• 7 February – Third quarter (October–December)
• 7 May – Fourth quarter (January–March)

Additionally:

• End of Period Statement (EOPS): Summarises annual figures.
• Final Declaration: Due by 31 January following the tax year.

What Counts as Income?

Thresholds are based on total gross income, including:

• UK and overseas rental income.
• Furnished Holiday Lets (FHLs).
• Self-employment income.

Important: Rent-a-Room relief and the £1,000 property allowance do not reduce the gross income figure for MTD eligibility.

How to Prepare for MTD

1. Check your income against the thresholds.
2. Choose HMRC-approved software for digital record-keeping.
3. Digitise your records now to avoid last-minute stress.
4. Register for MTD (you are not automatically enrolled).
5. Seek professional advice if unsure about compliance.

Benefits for Landlords

• Real-time visibility of tax position.
• Reduced errors through automation.
• Easier communication with HMRC.

Challenges to Expect

• Initial software costs.
• Learning curve for new systems.
• Ongoing maintenance of digital records.

Conclusion

Making Tax Digital is not just a compliance requirement—it’s an opportunity to streamline your property business. By preparing early, landlords can avoid penalties and benefit from better financial oversight.