Making Tax Digital for Landlords and the Self-Employed: What You Need to Know
The UK tax system is undergoing a significant transformation, and if you’re a landlord or self-employed individual, it’s time to get familiar with Making Tax Digital (MTD). This government initiative is designed to modernise the way taxes are reported, aiming to reduce errors, improve efficiency, and bring the tax system closer to real-time reporting. While the changes may feel daunting, understanding what’s required and preparing early can make the transition much smoother.
What is Making Tax Digital (MTD)?
At its core, Making Tax Digital is about moving away from paper-based or spreadsheet accounting to a fully digital system. Under MTD, landlords and self-employed individuals will need to:
Keep digital records of their income and expenses.
Use MTD-compliant software to submit quarterly updates to HMRC.
File a final declaration at the end of the tax year, replacing the traditional self-assessment tax return .
The goal is to simplify tax reporting, reduce administrative errors, and ensure taxpayers “get tax right.” However, it also means more frequent reporting and a shift in how you manage your financial records.
Who Does MTD Apply To?
The roll out of MTD is being phased in over several years, with income thresholds determining when you’ll need to comply:
From April 2026, MTD will apply to landlords and sole traders with a qualifying income over £50,000.
From April 2027, the threshold lowers to £30,000.
By April 2028, it will apply to those earning over £20,000 .
Qualifying income includes the combined total of income from self-employment and property. For example, if you earn £15,000 from rental properties and £20,000 from a self-employed business, your total income for MTD purposes is £35,000, meaning you’ll need to comply from April 2027 .
It’s worth noting that limited companies are not yet included in MTD for Income Tax, though HMRC may introduce similar requirements for companies in the future .
What Will Change?
The biggest shift under MTD is the move from an annual self-assessment tax return to quarterly updates. Here’s what you’ll need to do:
Quarterly Updates: Submit income and expense summaries every three months using MTD-compliant software. These updates provide HMRC with a snapshot of your financial position throughout the year.
End-of-Year Declaration: At the end of the tax year, you’ll file a final declaration confirming your total income, allowable expenses, and tax owed. This replaces the traditional self-assessment return .
The deadlines for quarterly updates will align with tax quarters, but you can opt for calendar quarters if that’s easier for your business .
Preparing for MTD: Practical Steps
Get Familiar with the Rules: Understand when MTD will apply to you based on your income and ensure you’re clear on the new reporting requirements.
Organise Your Records: MTD requires more frequent and accurate record-keeping. Consider using a dedicated business bank account to separate personal and business transactions—it makes bookkeeping much easier .
Seek Professional Advice: If you’re unsure about the changes or how to comply, speak to an accountant. They can guide you through the transition and ensure you’re meeting your obligations.
Exemptions and Challenges
While the government aims for universal compliance, some individuals may qualify for an MTD exemption. For example, if you have a disability that prevents you from using digital tools, or if your business is insolvent, you may be able to apply for an exemption through HMRC .
That said, transitioning to MTD will inevitably bring challenges. The need for more frequent reporting and the cost of software are common concerns. However, with proper preparation and support, these hurdles can be managed.
Final Thoughts
Making Tax Digital represents a significant shift in how landlords and the self-employed manage their taxes. While the changes may feel overwhelming at first, they also present an opportunity to streamline your financial processes and reduce the risk of errors. By preparing early, choosing the right tools, and seeking professional advice where needed, you can navigate the transition with confidence.
If you’re feeling unsure about where to start, don’t hesitate to reach out to an accountant. At the end of the day, the goal is to make tax compliance easier—not harder—for everyone involved.
