Landlords won’t be forced into Making Tax Digital – claims impact assessment

The government has confirmed landlords will not be forced into signing up for  the controversial Making Tax Digital (MTD) scheme as its impact assessment reveals it could cost the landlord hundreds of pounds to do so.

The government has released the impact assessment for Making Tax Digital, the scheme for Income Tax Self Assessment (ITSA).

From April next year, landlords earning more than £50,000 will be required to keep digital records and file taxes using MTD-compliant software, while those earning between £30,000 and £50,000 will join from April 2027.

Landlords could face extra costs

The impact assessment says 780,000 people with business or property income over £50,000 will join the MTD for ITSA service in from April 2026 with a further 970,000 joining from April 2027.

According to the assessment, landlords could face extra costs of hundreds of pounds to meet the requirements.

The impact assessment says landlords earning between £30,000 and £50,000 may incur an average transitional cost of £350 and an average annual additional cost of £110, while those earning above £50,000 may incur an average transitional cost of £285 and an average annual additional cost of £115.

The government claims landlords and businesses will only face a small transitional charge, and HM Revenue & Customs (HMRC) will provide support through free software.

The impact assessment says: “Through MTD, businesses and landlords will be required by law to keep digital records. This will involve a transitional cost for businesses not already doing this. They will need to purchase, or acquire a free version of, software and become accustomed to using it.

“HMRC has been working with the software industry to ensure that businesses needing to update their accounting systems will have access to affordable software products. The government has committed to there being free software products for the smallest businesses with straightforward affairs.”

Landlords can be exempted from Making Tax Digital

However, the impact assessment confirms landlords will not be forced to use MTD if they cannot go digital, and landlords can write to HMRC, or call them, to be exempted from the scheme.

The impact assessment says: “The government has been clear that if a business cannot go digital, it will not be required to do so.

“Where a business is not already exempt from engaging with HMRC digitally, they may request that HMRC consider an MTD exemption so they will not have to meet the MTD requirements.

“HMRC will continue to ensure that clear guidance is provided and information is easily accessible for digitally excluded taxpayers about the exemption process. Taxpayers may apply to be exempted from MTD requirements through non-digital means, for example in writing or by phone.”

The government confirm they will keep the decision on whether to mandate businesses and landlords with income below £30,000 to use MTD for ITSA under review.

The full impact assessment can be seen by clicking here