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Everything to know about Making Tax Digital for landlords

  • 4 min read
  • Last updated 19 Apr 2023

So, Making Tax Digital for landlords – what is there to know?

Here’s the rundown.

How it started…

In April 2022, the first part of Making Tax Digital (MTD) came into effect in the UK. 

Now, we know what you’re thinking: ‘Is this a new tax I don’t know about?’ Relax! MTD isn’t a new form of tax you have to pay. Rather, it’s just a term that’s being used to describe HMRC’s plan to get small businesses, landlords and self-employed workers to complete their tax records entirely online. 

If you’re a landlord, you might be wondering how Making Tax Digital affects you and whether or not you have a deadline to make the switch. In the blog below, we’ll explain everything you need to know about Making Tax Digital for landlords.

Let’s dive in!

Remind me again, what is Making Tax Digital? 🤔

If you’ve forgotten what MTD is, or have never heard the term before, let us refresh your memory. Essentially, Making Tax Digital is a plan by the government and HMRC to fully ‘digitalise’ UK Tax. 

Many businesses, self-employed workers and landlords use HMRC’s online services or manually complete their tax affairs on paper. Making Tax Digital will soon require them to keep their tax records and make submissions to HMRC digitally through MTD-compatible software. 

When will MTD for ITSA come into effect?

The next stage of the MTD roll-out will cover Income Tax Self Assessment and will come into effect in April 2024, meaning it isn’t compulsory yet. Although it’s being rolled out a year later than planned thanks to the Covid-19 pandemic, from that date, Making Tax Digital will still be applied to anyone who is registered to pay Income Tax and National Insurance through Self Assessment. 

I’m a landlord, will MTD affect me?

Most likely, yes! 

The biggest deciding factor will be whether or not you earn more than £30,000 a year in taxable income from either property or business and property.

Property types include:

  • Residential property
  • Furnished Holiday Lettings (FHL)
  • Commercial property
  • Non-UK overseas property

If you meet these requirements, and you’re earning over £50,000 then you’ll be required from April 2026. If you’re earning between £30,000 and £50,000 you’ll be required to use MTD-compatible software to keep records and make submissions to HMRC by April 2027. So, unless the government extends the deadline again, you have to comply with the new changes!

However, if you earn under the £30,000 a year threshold, you can continue to use the current Self Assessment system as normal, while we wait for HMRC to make further announcements on the process.

​​Some landlords have already joined a pilot MTD scheme for Income Tax Self Assessment, which is being used to test and develop the new process. If you sign up, this lets you send Income Tax updates to HMRC instead of filing a Self Assessment tax return. 

This will help you to get used to MTD before the April 2026 deadline. 

What if I’m a landlord that’s registered as a limited company?

MTD isn’t applicable to landlords who are registered as a limited company. Instead, you can continue sending limited company accounts and Corporation Tax to HMRC and Companies House.

Why is the government Making Tax Digital for landlords?

The main aim is to switch all UK tax services from paper to digital, but it’s also because:

  • It’s believed that MTD will help landlords avoid making common mistakes with tax. Not to mention this can help you to save time when it comes to managing your tax affairs. And of course, we all know how costly mistakes on your tax returns can be!
  • It’ll save HMRC money. It’s estimated that the current process (including all those tax errors) costs them approx £10 billion every year!
Evolution of tax preparation

What software is compliant with MTD?

Once MTD for Income Tax is introduced, as a landlord, you, your accountant, or your tax service (like TaxScouts!) will need to use MTD compatible software to update and report digital records of your rental income and expenses to HMRC.

It’s important if you or your accountant already use a type of software, that you check if it’s MTD compliant or not. You can do this here on HMRC’s website. The key points that make it compatible with MTD are:

  • You can maintain business records as required by the regulations
  • You can finalise your taxable business income and submit your declaration at the end of the tax year
  • It allows you to communicate with HMRC digitally through their API (application programming interface) platform.
  • You can prepare and send quarterly updates and statements to HMRC from your tax records

I’m a landlord and I need Making Tax Digital help!

If you’re a landlord who makes over £30,000 a year in taxable income and are confused by the upcoming MTD changes, then don’t worry. Get in touch with us for some simple, one-off tax advice from one of our accredited accountants. You can learn more here.

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