Making Tax Digital: what does it mean for landlords?

Making Tax Digital (MTD) has brought about a generational change in the way self-employed landlords and real estate sole traders are assessed for tax purposes. 

Under new rules, landlords must use HMRC-approved software to create and submit digital records, providing regular updates as well as a year-end declaration. 

Why have HMRC self-assessment methods changed?

MTD has been designed to modernise tax assessment through the introduction of digital tax reporting in the UK. Its primary objective is to encourage landlords to cut down on errors and increase efficiency when submitting information. HMRC also aims to ensure that more of the tax owed is actually paid, thus closing the ‘tax gap’. 

It is hoped that the introduction of quarterly reporting will reduce the usual last-minute panic to complete paperwork for annual UK  income tax returns. It encourages landlords to track their income and expenses in real time and should therefore help them improve both financial planning and accuracy.

Landlords express concern

A poll of 305 landlords conducted in January found that almost 88 per cent had concerns about their readiness for MTD. Nearly half of those consulted said they lacked confidence in their understanding of how it would work. 

Since that time, the roll-out of MTD has begun by enrolling the first cohort of landlords (those earning over £50,000 a year). These high-earning MTD landlords of 2026 have now registered with the system. Others will be required to join over the next two years, subject to their income level. 

How will tenants be protected under the Renters’ Rights Act?

Unless the tenant fails to pay rent for three consecutive months or is guilty of serious anti-social behaviour, notice cannot be served on tenancies that have been in place for less than 12 months. An exception to this is when the mortgage provider wants to repossess the property.

This 12-month period is designed to protect tenants from the costs and inconvenience of an enforced move. However, a tenant can serve notice to quit during this time, giving two months’ notice to align with the date the rent is paid. Landlords cannot sell their property or move in themselves during the protected period, although they can sell to another landlord who is willing to take over the tenancy. 

What is the timeline for others to sign up? 

6 April 2027 is the next deadline, when self-employed landlords and sole traders in the property industry earning between £30,000 and £50,000 will join MTD. A year later, on 6 April 2028, individuals earning between £20,000 and £30,000 will enter the system. 

Landlords with income below £20,000 are exempt and there is no suggestion that this situation will change in future. 

The key requirements of MTD 

Self-employed landlords and real estate sole traders will be required to create digital records of their income and expenses, using HMRC-approved software.

Landlords must record their total gross income from UK and overseas property (before expenses) as well as any other income from self-employment. 

This information will be used to submit quarterly tax updates to HMRC, issued on the 7th of May, August, September and February each year. These updates are statements of current income and expenditure and should not be confused with tax returns.  

A ‘Final Declaration’ will be due on 31st January. This replaces the standard annual tax return, although the content will be broadly similar. At this time other sources of income should be reported, and any reliefs or allowances claimed.

 It’s worth noting that income from employment (PAYE) and pensions are not counted towards your income threshold. 

If your landlord operations are conducted under limited company status, you will not need to sign up for MTD. 

What happens if I miss a deadline? 

HMRC uses a points system, which avoids penalising landlords who miss the odd due date. 

One penalty point will be incurred for each missed deadline, but a fine will only be levied if the landlord accrues four penalty points. When four points have built up, a fine of £200 will be payable. 

Getting ready for MTD 

It’s important to start early: you can do this by reviewing your income from rental properties and self-employment, to assess how close you might be to the approaching enrolment dates. 

As your deadline draws nearer, you should receive a letter from HMRC telling you to register and inviting you to read the government guidance on MTD. 

However, there is no need to wait until the deadline to get your records in order. 

Which software package should I use? 

The good news is that as a Client of Daniel Cobb, we've got systems in place to support. Make sure you've logged into your personal account on STREET. From there you'll be able to easily download all your tax statements. https://street.co.uk/app. From there you will need to choose an HMRC-approved software package. There are many free-of-charge options for landlords that work well for straightforward assessment. However, if your business model is more complex, it could require a more sophisticated, paid package. 

As soon as you have set up your software, you should start inputting your tax details. This will avoid a rush to enter the information when the deadline comes around. It will also help to establish good admin habits as well as encouraging you to keep a closer eye on finances. 

Where can I get more support as a landlord? 

As new legislation rolls out under the Renters’ Rights Act and Making Tax Digital comes into force, some landlords may feel the need to reach out for extra support. 

Our experienced property managers can relieve the pressure by taking exceptional care of your rental assets.  They will also ensure that your properties stay legally compliant. 

If you would like to learn more about the services we offer, simply contact the experienced lettings teams at our offices in Westminster, London Bridge or Kennington to learn more.