Making Tax Digital for Landlords Starts Soon – Are You Ready?

Making Tax Digital is a new way to file your accounts with HMRC. Landlords must start using it as soon as April this year (depending on your turnover). Here’s our pain-free guide to what you need to know and how to get ready.
 

What is Making Tax Digital?

Making Tax Digital (or MTD) is a new HMRC scheme. It means self-employed landlords must keep all their financial records and file their Income Tax returns digitally. Paper records won’t be allowed anymore. (So, no more shoe boxes in the back of the wardrobe.)
 

When you need to use it

If you’re a self-employed landlord and your qualifying income was £50,000 or more in the 2024/2025 tax year, you’ll need to start using MTD from 6 April 2026. This lowers to £30,000+ in April 2027. It is planned to drop it to £20,000+ in April 2028.

Suppose you have other self-employed businesses; the income from those counts towards the total. You’ll need to use MTD for them too. This scheme doesn’t cover limited companies. Neither are partnerships included – at least for now.
 

How to get started

You’ll need HMRC-recognised, MTD-compatible accounting software. The HMRC website has a list. If you already use accounting software, it may be compatible. Check with your provider. If you’re attached to spreadsheets and can’t give them up, you may be able to use bridging software to make them work with MTD.

Once you’re signed up with HMRC, you’ll have to file a quarterly update every three months. Then, a tax return each year, same as now. You won’t have to pay any tax due sooner under MTD. (But we wonder how long that one will last.)
 

Pros and cons

Switching to MTD will involve some initial disruption. It could be a steep learning curve for some. However, MTD could save you time on paperwork. With MTD, you’ll be able to spread your record-keeping across the year, rather than waiting until the end of the tax year and doing it all in one hard-to-digest chunk.

You’ll also receive a quarterly snapshot of your business's performance. And how much tax you’re going to have to stump up at the end of the year.
 

What to do now

Monitor your turnover to determine when you’ll need to start using MTD. HMRC are planning to send letters to those they think need to start using MTD – but don’t bank on it.

If you have an accountant, take their advice. (This article is a general guide and not financial advice.) If you use a letting agent, liaise with them to ensure a smoother transition.

If we can help with any aspect of letting or managing your rental property, please don’t hesitate to call us.
 

Making Tax Digital Questions and answers:

1. What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a new HMRC scheme that requires self-employed landlords to keep financial records and submit Income Tax returns digitally instead of using paper records.

2. When do landlords need to start using MTD?
Landlords with a qualifying income of £50,000 or more must start from 6 April 2026. This threshold drops to £30,000 in April 2027 and £20,000 in April 2028.

3. Does MTD apply to all types of property businesses?
No, MTD currently applies to self-employed landlords. It does not yet include limited companies or partnerships.

4. What do landlords need to get started with MTD?
They need HMRC-approved, MTD-compatible accounting software. If they use spreadsheets, they may need bridging software to connect them to HMRC systems.

5. What are the advantages and disadvantages of MTD?
MTD may involve a learning curve and initial disruption, but it can save time by spreading record-keeping throughout the year and providing quarterly updates on business performance and tax estimates.

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