Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) was previously set for implementation in 2024. However, HMRC moved the deadline to give people more time to prepare and adapt to new ways of working against a backdrop of challenging economic circumstances.
The MTD deadline extension means that self-employed people and landlords now don’t need to follow MTD rules until at least 2026. But, when the changes are implemented, they are likely to affect a large number of self-employed individuals and landlords, so it’s worth getting ahead of the game and considering now how when you will be affected.
Here we answer some of your key questions about making tax digital for landlords, and for those self-employed.
What are the key dates for MTD implementation?
From 6 April 2026 – Self-employed individuals and landlords with income above £50,000 must transition to digital record-keeping.
From 6 April 2027 – Those with income between £30,000 and £50,000 must follow suit.
The government has also announced the extension of MTD ITSA to those with turnover of more than £20,000 by the end of this parliament although there is currently no specific implementation date.
What are the current rules and what will be required from April 2026?
Landlords are currently only required to declare their income and expenses at the end of the year via a self-assessment tax return and are not required to keep a digital record of their property income and expenses.
From April 2026, sole traders and landlords with a total annual income above £50,000 will need to use MTD for Income Tax compatible software to keep digital records and file returns.
They will also need to send quarterly updates of all business income and expenditure to HMRC, as well as a Final Declaration with details of all other taxable income by 31 January every year.
The time limit for retaining digital records under MTD is the same as the Self-Assessment record-keeping requirement: five years after 31 January following the tax year to which the records relate.
What about landlords who own multiple properties?
Under MTD, landlords with multiple properties will report all their UK property income together. There will be no requirement to prepare individual quarterly reports for each UK property.
How will income from overseas property be treated?
Property income from overseas properties must also be reported under MTD, and will be reported separately to UK properties.
What if I own a property jointly?
For landlords with jointly owned properties, when considering when MTD will apply from, only the individual’s share of income counts towards their qualifying income.
Each person who has received income from a jointly owned property will need to report their share of income to HMRC quarterly.
What are the quarterly reporting obligations of landlords under MTD?
In addition to digital record keeping, landlords bound by the MTD regime must submit quarterly updates. As a result of the quarterly digital records updating obligation, the record-keeping needs to be completed before the quarterly deadline or prior to submitting the update. Landlords can choose to follow either the standard update period which is aligned with the tax year, or the calendar update period.
After submitting the final quarterly update, the MTD compatible software will display the income and expenses for the entire year, allowing for any necessary adjustments. Once any adjustments are completed, the software will update the final business income and the next step is to finalise the income tax position.
What is the ‘final declaration’?
The final declaration process will be introduced in April 2026 as part of the MTD ITSA initiative and will replace the annual self-assessment tax return for many taxpayers.
To finalise the income tax position for a tax year, taxpayers must send details of any other income sources to HMRC and submit a final declaration confirming that the information provided is correct and complete. This declaration can be made through MTD software or via HMRC online services account.
The final declaration process also allows the taxpayer to calculate their final Income Tax liability and it must be made by 31st January following the end of the relevant tax year.
What next?
It’s anticipated that the majority of UK landlords are likely to be affected by MTD from April 2027, if not before. Landlords fulfilling certain criteria can opt to register for MTD now and start keeping their records digitally
The first, most important step to complying with MTD is to find compatible record-keeping software which is capable of maintaining business records in accordance with MTD regulations, preparing and submitting quarterly updates to HMRC, and finalising business income calculations and declarations at the end of the year.
Landlords can keep digital records of their property income and expenses themselves or choose to appoint an agent to do it for them.
Our thoughts
MTD for landlords marks a significant shift in the way property income is reported to HMRC and, like it or not, many landlords are going to have to embrace digital record-keeping and quarterly reporting to comply with the new rules.
If you think you are going to be affected, now is the time to prepare, by selecting compatible software and getting to understand what your record-keeping and reporting requirements will be.
By preparing now, landlords will be able to navigate the transition smoothly and ensure compliance which in turn will help avoid potential penalties.
We can offer help and advice so please get in touch with our expert indirect tax team who will be able to support you during this period. Get in touch via our website, or contact our tax partner Paul Hammond at paul.hammond@cowgills.co.uk.
