What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative that aims to digitise the tax system to make it easier for businesses and individuals to calculate taxes, and keep and submit accurate financial records.
MTD is being introduced in phases. Making Tax Digital for VAT took effect in 2019; however, most landlords are exempt from this. The rollout that landlords are waiting for is the Making Tax Digital for Income Tax Self-Assessment.
MTD will require businesses and individuals to do the following:
- Keep digital records
- Use HMRC-compatible and approved software, at Hamptons we will be able to help you with this
- Submit updates every quarter
- Submit a final annual declaration
When is Making Tax Digital Due to Come Into Effect?
The MTD initiative was first announced in 2015, with MTD for Income Tax Self-Assessment expected to come into effect in 2023/2024, but in late 2022 the government announced that this date would be pushed back.
Making Tax Digital for Income Tax will now be introduced on April 6th 2026 for those with an annual business or property income of more than £50,000. For those with an annual business or property income of more than £30,000, Making Tax Digital won’t come into effect until April 2027.
The £50,000 and £30,000 thresholds apply to property income per taxpayer, not per property.
These dates represent when MTD for Income Tax Self-Assessment will be legislated, and anyone who fails to comply by then will be penalised. Nothing is stopping most landlords from digitising their taxes now, well before these deadlines.
Does Making Tax Digital Apply to All Landlords?
Currently, only landlords earning £30,000 or more annually will be legally obligated to comply with MTD. The phased introduction means landlords earning a property income of more than £50,000 have until April 2026 to comply, and those earning between £30,000 and £50,000 have until April 2027. MTD digital will likely be rolled out to everyone eventually, and consideration of the changes is in every landlord’s best interests.
Landlords with more than one property should enter all their property income under one account, not separately for each property. For landlords that own a property jointly with a spouse, partner, or family member, each person who earns income must report that separately.
Landlords may be able to apply for exemption from MTD if it is not practical to use software to keep digital records due to factors like your age, disability, or location. Or if your religious beliefs are incompatible with using electronic communications.
At Hamptons, we are keeping a close eye on the development and will keep you updated on how we can assist you to become compliant.
Policy paper: Making Tax Digital for Income Tax Self Assessment for sole traders and landlords
