Making Tax Digital (MTD) is a plan being implement over a number of years by the UK Government to move to a fully digital tax system. Making Tax Digital supports HMRC’s plans to digitize the UK tax system.
Making Tax Digital affects UK landlords as the plans cover VAT, income tax self assessment tax returns and corporation tax.
This blog covers, all that landlords need to know about Making Tax Digital (MTD), the parts of the plan that are already implemented and the changes and requirements for Making Tax Digital for Income Tax Self Assessment (ITSA) for landlords. We cover areas including MTD requirements, how it will impact you, preparation you can do now and the changes coming into effect.
What is Making Tax Digital?
Making Tax Digital (MTD) is the government’s plan to implement a digitized tax system in the UK. It aims to make tax administration more efficient and easier for taxpayers through the implementation of a fully digital tax system.
What does Making Tax Digital involve?
Making Tax Digital requires individuals and companies to:
- keep digital records
- use software that works with Making Tax Digital
- submit updates every quarter, bringing the tax system closer to real-time
Under the Making Tax Digital initiative, businesses can no longer use manual record keeping and all records need to be maintained in functional compatible software which can connect to HMRC’s interface.
A phased rollout of MTD is already in progress, however, HMRC continues to shift and change implementation dates for the various phases of the MTD plan.
Making Tax Digital phases and timetable
The timetable for the various MTD phases currently is:
- From April 2022, all VAT registered businesses (including those voluntarily registered below the VAT registration threshold) were required to retain digital records and submit their VAT returns to HMRC using compatible software, unless an exemption such as digital exclusion applies.
MTD for income tax self assessment
This measure was due to begin in 2024, however, it was postponed again in December 2022. New dates are as follows:
- From April 2026, self-employed businesses and landlords with business turnover above £50,000 are to report under MTD for Income Tax.
- From April 2027, self-employed businesses and landlords with business turnover above £30,000 are to report under MTD for Income Tax.
- HMRC will review smaller self-employed business to decide if they will be required to join.
- General & other partnerships will join MTD, but no timetable has been set
- From April 2024 companies can start using an MTD for Corporation Tax (CT) pilot scheme.
- From April 2026 companies join MTD for Corporation Tax
Which landlords are affected by MTD for Income Tax?
MTD for Income Tax rules will apply to all landlords whose combined property and business income is £50,000 or more a year. You must comply with MTD for income tax requirements from 6 April 2026. Those landlords with business turnover above £30,000 are to report under MTD for Income Tax from April 2027.
You will be required to report your earnings and expenses via MTD for ITSA for all your properties together, you don’t need a digital account for each property. The £50,000 & £30,000 MTD ITSA thresholds apply per taxpayer, not per property.
Under these rules, HMRC will require you to use software to:
- keep digital records of your property and business income and expenses
- send quarterly updates of your property and business income and expenses to HMRC
- finalise your property and business income by submitting an end of period statement (EOPS) and final declaration to HMRC
If you hold properties jointly i.e. you own property for rent with a spouse, partner or family member, each person who has received income from those jointly held properties must report their income separately.
If you live in the UK but own property overseas from which you earn more than the £30k and £50k thresholds a year in rental income, MTD for ITSA requirements apply. You may be able to claim double tax relief if the rental income is also taxed in the country in which your property is located.
If you’re a landlord who doesn’t live in the UK or you’re a UK non-domicile (i.e. you live abroad and pay tax in another country), MTD for ITSA rules will only apply to rental earnings from UK properties that are about the £30k and £50k thresholds.
If a property is owned by a business partnership you’re a member of, the partnership is responsible for Making Tax Digital compliance, which must be fulfilled by a nominated partner.
Keeping digital records
If you dont already (for MTD for VAT), from 6th April 2026, landlords will need to use MTD compatible software to maintain and report digital records of your property income and expenses in order to comply with MTD for income tax self assessment.
If you already use software to maintain your financial records, ask your software provider whether their software is MTD compatible. If not, you’ll need to look at alternative software options.
Nomisma, the online accounting software provided by dns accountants is fully MTD compatible software. You can find details of all MTD compatible software here.
Making Tax Digital for Income Tax-compatible software is required to:
- maintain business records as required for MTD
- prepare and send quarterly updates and end-of-period statements
- finalise your business income and submit your declaration after the end of the tax year
- communicate with HMRC digitally through HMRC’s platform.
You will no longer be able to just maintain financial records in paper form.
After 6th April 2026, landlords affected by MTD for Income Tax will need to use compatible software to keep a digital record of all their property income and expenses. If you’re a landlord and you’re also a self-employed business owner, Making Tax Digital legislation will require you to keep digital records of your business income and expenses separately.
Under the new rules, affected landlords will need to send a summary of their business income and expenses to HMRC every quarter using compatible software.
You will need to (or your bookkeeper will need to) keep you accounting records regularly updated. You will need to enter into your accounting software any transactions on the transaction date (i.e. when you pay money out or receive taxable business income) or as soon after the transaction date as possible. All your transactions will need to be up to date before your quarterly update is submitted for that period.
The software will then summarise your figures, which you must send online via your HMRC digital account (you will get up to a month after every quarter end).
The deadlines for submitting quarterly updates will be the same for everyone who has to follow MTD for Income Tax rules. These deadlines will be:
- 5th August
- 5th November
- 5th February
- 5th May
Your software will show you how much tax you owe based on the information you’ve entered, enabling you to better budget for paying your tax bill.
The number of submissions to HMRC
The minimum number of submissions for someone affected by MTD for ITSA will be five per tax year. This is made up of the quarterly submissions plus the one final year end submission.
However, MTD for income tax self assessment regulations state that individual landlords must submit separate quarterly updates for each property business category i.e. separate submissions for lettings, overseas lets and furnished holiday lettings.
On top of this, if you are a self-employed individual, registered for VAT who is also a landlord with residential properties and furnished holiday lets, you will need to submit the following:
- Quarterly MTD updates for their residential properties (4 submissions)
- Quarterly MTD updates for their furnished holiday lets (4 submissions)
- Quarterly MTD updates for their self-employed trade (4 submissions)
- An ‘End of period statement’ for each of those 3 businesses (3 submissions)
- Four VAT returns (4 submissions)
- A finalisation statement (1 submission)
Finalising your income
At the end of the tax year, you’ll need to finalise your rental income and submit a final declaration, confirming that the updates you’ve provided are accurate. It also gives you an opportunity to add details about any relevant personal income or tax reliefs you received during the tax year, and to make other necessary adjustments.
Youll be required to submit:
- an end of period statement (EOPS) for each source of property or business income
- a final declaration (which will replace the annual self assessment tax return)
Soon after, you’ll receive your tax bill. You must submit your final declaration and pay the tax you owe by 31 January the following tax year. Late-submission/payment fines will apply.
For each tax year, you’ll be required to submit your required end of period statements and your final declaration by 31st January of the following tax year. You’ll also be required to pay the tax you owe in relation to each tax year on this date.
Although April 2026 may feel like a long time away, it is worth preparing for the changes that are coming for MTD for income tax self assessment as soon as possible. If you already are affected by MTD for VAT then you will already have software in place, but it is worth checking now if this software is MTD for income tax compatible as well.
If you are a landlord or are thinking of becoming a landlord and need help and advice on MTD for income tax self assessment or any other areas around online accounting software, tax planning or HMRC and companies house requirements, then call our specialist landlord team on 03300 886 686, or email on firstname.lastname@example.org.
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