Lettings expert offers Making Tax Digital advice for landlords

Landlords and sole traders earning more than £50,000 a year must report every quarter to HMRC under Making Tax Digital rules.

The changes replace a single annual submission with four updates to HMRC, covering income and expenditure across the year.

These updates are not tax returns, but progress summaries filed through compatible software, one lettings expert advises landlords.

Allison Thompson, the chief lettings officer at Leaders, said: “You’ll need to submit these updates via MTD compatible software, on which you will log income, expenses and receipts digitally as you go along.

“After every submission, the system will generate an estimate of your end-of-year tax bill, to help you plan ahead.”

Deadline for filing

The 31 January deadline for filing and payment remains in place and annual returns will draw directly from the quarterly data already submitted.

Eligibility is based on total income from self-employment and property.

Pension income, dividends and PAYE earnings are excluded when calculating whether the £50,000 threshold has been reached.

Those earning above the threshold must begin quarterly reporting from the 2026/27 tax year starting 6 April.

MTD software providers

Approved MTD software options include Xero, QuickBooks, FreeAgent and QuickFile, with bridging tools available for those using spreadsheets.

Monthly costs for paid systems typically range from £10 to £20.

HMRC requires users to be registered for Self Assessment and to have filed a return within the last two years before signing up.

Quarterly reporting introduces ongoing administrative requirements.

Records must be kept up to date throughout the year, with digital entries replacing end-of-year reconciliations.

Keep digital records

The first quarterly update deadline for the 2026/7 tax year is 7 August and those earning below £50,000 will not be required to join MTD until thresholds reduce.

From April 2027, the limit falls to £30,000 for combined self-employment and property income.

For landlords with PAYE income alongside lettings, only gross rental income (before expenses) is considered.

Quarterly reporting applies once that figure exceeds the threshold.

Self Assessment criteria

Where the combined income sits between £30,000 and £50,000, MTD will apply from April 2027.

Below £30,000, annual Self Assessment continues.

Ms Thompson said: “The new system will require you to stay up to date with recording income and expenditure and filing receipts digitally on a quarterly basis.”

Corrections to submitted figures can be made within the software and will be reflected in subsequent updates.

MTD penalties

No penalties will be issued by HMRC during the first year of operation.

From 2027 onwards, a points-based system will apply to missed deadlines, late final declarations and failures to keep digital records.

Further MTD changes are scheduled beyond 2027.

Those earning above £20,000 will be brought into the system from April 2028.