A new way of reporting tax:
Making Tax Digital (MTD) is the government’s plan to modernise the tax system by moving from annual paper-based returns to a fully digital process. For landlords, this means keeping financial records electronically and sending regular updates to HMRC instead of filing one self-assessment return each year. The aim is to make tax reporting more accurate, reduce errors, and provide a clearer picture of income and tax liabilities throughout the year.
Who will be affected and when?
The rules are being introduced gradually, based on how much income you receive from property and any self-employment combined.
- From April 2026: Landlords and sole traders with income above £50,000 must join MTD.
- From April 2027: The threshold lowers to £30,000.
- From April 2028: It reduces further to £20,000.
Important points to note:
- The figures above are based on gross income (before expenses), not profit.
- If you own property jointly, only your share of the income is counted.
- Limited companies are not affected by these changes – they continue to file corporation tax in the usual way.
What changes under MTD:
Once you are within scope, there are several key requirements:
1. Keep digital records: All rental income and expenses must be recorded in MTD-compatible software. Traditional paper records or unlinked spreadsheets will no longer be accepted.
2. Submit quarterly updates: Instead of reporting once a year, you will send four digital updates to HMRC each tax year. These updates will summarise your income and expenses for the quarter.
3. Provide a year-end declaration: At the end of the tax year, you must complete a final declaration. This will replace the current self-assessment return and will bring together all income sources, reliefs, and adjustments.
4. Meet new deadlines: Quarterly updates must be submitted within one month of the end of each reporting period. The final declaration must still be filed by 31 January following the end of the tax year.
5. Understand penalties: MTD introduces a points-based penalty system. Missing deadlines will earn penalty points, and repeated failures will result in financial penalties. Late payments may also attract interest charges.
Benefits and challenges:
Potential benefits:
- More accurate tax records
- Less chance of large errors or surprises at year-end
- A clearer picture of ongoing tax liability
Likely challenges:
- The need to purchase or learn new software
- More frequent record-keeping and submissions
- Greater organisation required to meet quarterly deadlines
How to prepare now:
- Check your income levels to see when you are likely to be affected.
- Start moving to digital record-keeping – get comfortable using accounting software now.
- Speak with your accountant or adviser to ensure they are MTD-ready and able to support you.
- Plan your workflow so that bookkeeping and reporting become part of your regular routine rather than a once-a-year task.
- Stay informed about updates and deadlines – HMRC will write to affected landlords ahead of time.
Why Choose tlc?
Making Tax Digital marks a significant change for landlords. Instead of sending one annual tax return, you’ll need to keep digital records, submit quarterly updates, and complete a year-end declaration. Preparing early – by adopting suitable software and getting advice – will make the transition smoother and help you stay compliant.
At tlc, we understand that navigating new tax regulations can feel overwhelming, especially when added to the daily responsibilities of managing property. That’s why so many landlords choose us as their trusted partner. Beyond securing quality tenants and achieving the best rental returns, we work closely with leading tax and financial specialists to ensure our clients stay fully compliant and ahead of industry changes. With our expertise, attention to detail, and proactive support, landlords can focus on growing their portfolios with confidence, knowing that tlc is safeguarding their interests every step of the way.
We are Kensington & Chelsea’s trusted letting specialists. With over 50 years’ experience and a 4.8/5 Google rating, our team delivers: Expert local valuations – ensuring your property achieves its full rental potential. Seamless lettings management – from tenant sourcing to compliance, handled with care. Personalised investor support – bespoke advice to maximise returns and safeguard your asset. Unlike larger, corporate agencies, we offer a boutique service rooted in the community. Our compliance-first, stress-free approach means you can invest with confidence, knowing every detail is taken care of.
