Since the switch to Making Tax Digital (MTD) was first announced back in March 2015, there has been much debate about how the change will affect the property market in the UK.
Although the scheme went live for higher-earning landlords on 6th April this year, there is still a lot of uncertainty about the financial and practical implications of this generational tax change.
That’s why our letting agents in Ilford have joined forces with our estate agents in Newbury Park to share their expertise on Making Tax Digital in the UK.
What are the key requirements for MTD?
- You will be required to keep digital records of your income and expenses. You must submit quarterly reports to HMRC, via approved software.
- These should be submitted by the 7th of August, November, February and May every year.
- A final declaration, which will be similar to the standard self-assessment tax return, must be submitted by 31 January each year.
- This will confirm that the submissions you have made throughout the year are accurate and allow you to claim any allowances or reliefs due.
You will not be subject to the new rules if your rental properties are held under limited company status. As a limited company, your business will pay corporation tax as usual.
What is defined as income?
If you are self-employed, Making Tax Digital requires that you declare your total gross income from property in the UK or overseas (before expenses). Any other income from self-employment should also be included.
You will only be asked to create digital records of your self-employment and property income and expenses. Other income sources don’t need to be recorded on the system, but they must be reported on the annual final declaration you make, using your MTD software.
Employment income (PAYE) and pensions won’t be counted towards the threshold.
Who will be affected by the changes?
This year the switch to MTD will only affect self-employed UK landlords, property investors and real estate sole traders with income above £50,000 (estimated at around 125,000 individuals).
On 6 April 2027 self-employed individuals with incomes of between £30,000 and £50,000 (earned during the 2025/26 tax year) will enter the scheme. HMRC estimates that this will bring a further 118,000 landlords and 3,000 sole traders into MTD.
On 6 April 2028 those with incomes of between £20,000 and £30,000 (earned during the 2026/27 tax year) will also join.
At this time there are no plans for landlords with qualifying rental income below £20,000 to engage with MTD.
Where can I find free Making Tax Digital software?
The software you use to manage your finances must be recognised by HMRC. FreeAgent, Quickfile, Clear Books, My Tax Digital and Sage all offer no-cost, HMRC-compatible options suitable for straightforward landlord and sole trader self-assessment. However, if your financial set up is more complex, a paid package could better suit your needs.
Once you have uploaded digital records of your income and expenses, the software system will use that information to create your quarterly reports. These 3-monthly submissions aren’t classed as tax returns, they are simply updates, designed to spread the admin burden across the year. This avoids leaving everything to the self-assessment deadline which rolls around each January.
Are there penalties for non-compliance?
From April 2026, HMRC is introducing a points system to encourage compliance with deadlines. Each missed due date will incur one penalty point, but there will be no penalty charges until four deadlines have been missed, with four points earned. After this the landlord will be subject to a fine of £200.
This incremental points system means that landlords won’t be penalised for accidentally missing the odd deadline.
How can I prepare for MTD?
Your journey towards MTD enrolment should begin with a letter from HMRC confirming that you must join. This letter will explain what steps you need to take; it will also include a QR code with a link to GOV.UK guidance.
Even if you already submit self-assessments, you must sign up for Making Tax Digital with HMRC and complete the registration process. If you want to test the system before it becomes mandatory for your income threshold, it’s possible to join on a voluntary basis.
Where can I get more support?
As long-established East London letting agents and property managers, we understand the pressures landlords feel as they navigate new rules and regulations.
Fortunately, our highly qualified staff are on hand to ensure that landlords can protect their property investment by staying legally compliant.
If you are letting a property in Redbridge, Havering, Newbury Park, Newham, Tower Hamlets, Greenwich, Waltham Forest or Hackney and would like some support, why not get in touch?
Call us at 020 3972 7341 or email info@oaklandestates.co.uk
Alternatively, if you are planning a buy-to-let investment in these areas, we would be happy to offer help and advice.
Don’t forget to follow our socials for the latest property market advice and listings:
https://www.facebook.com/Oakland-Estates-1426149597689066/?fref=ts
