HMRC’s Making Tax Digital is a ‘step too far’ for many landlords

The government’s announcement that 900,000 sole traders and landlords must adopt the Making Tax Digital (MTD) initiative is a ‘step too far’ for many.

That’s the belief of ARLA Propertymark president Angharad Trueman who says that small landlords, especially those who are older and less tech-savvy, will struggle.

This step also comes on top of the increasing nervousness in the private rented sector about the impact of the Renters’ Rights Bill.

On LinkedIn, Ms Trueman said: “The creation of a £20,000 threshold means many, many more landlords will fall into this bracket, and it’s a risk that this may be the final straw for many.”

MTD shifts tax management

The MTD initiative will shift tax management into a fully digital framework from next year.

That’s when self-employed individuals and landlords earning above £50,000 annually must comply with MTD for Income Tax Self-Assessment (ITSA).

The threshold drops to £30,000 by April 2027.

However, Chancellor Rachel Reeves, in her Spring Statement last week, confirmed the threshold will drop further to £20,000 by 2028.

A policy document released on the day points to the government’s aim to eventually include those with lower incomes in this digital transition.

Landlords to make quarterly submissions

MTD seeks to simplify tax administration by requiring digital record-keeping and quarterly submissions to HM Revenue and Customs (HMRC) via approved software.

Launched in 2015, the programme aims to enhance accuracy and efficiency, replacing traditional annual Self-Assessment returns with real-time data.

Taxpayers will receive estimated calculations to aid financial planning, finalising their obligations digitally at year-end.

Propertymark is also urging letting agents to act swiftly to ensure both they and their clients are equipped with HMRC-compliant tools.

Join in the voluntary phase

HMRC is also encouraging participation in a voluntary testing phase to help taxpayers familiarise themselves with the system ahead of its mandatory rollout in April 2026.

This trial will also help HMRC refine the platform, ensuring seamless operation when it becomes compulsory.

However, critics say the Making Tax Digital comes alongside other regulatory pressures which are facing PRS landlords.

They include the Renters’ Rights Bill, EPC efficiency goals and higher stamp duty rates for buy to let purchases.