Making Tax Digital (MTD) is edging closer but not everyone needs to worry yet

Making Tax Digital (MTD) is coming. After years of delays, consultation papers, and pilot schemes, HMRC is finally moving ahead with its digital reporting overhaul for landlords and the self-employed. But before you panic about quarterly submissions, it’s worth asking a simpler question:

Does MTD even apply to you yet?

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Many landlords are reading headlines about “mandatory digital filing from April 2026” without realising that thousands will still be exempt for several more years — and some indefinitely. Let’s unpack what’s really happening, who’s caught in the first wave, and who can relax (for now).

1. What MTD Actually Is — and What It Isn’t

HMRC’s Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is not a new tax. It’s a new method of reporting existing tax obligations. The aim is to move away from annual Self Assessment returns toward quarterly digital updates via approved software.

Under MTD, individuals with property or business income above certain thresholds must:

1. Keep digital records of income and expenses.

2. Submit quarterly summaries to HMRC through compatible software.

3. File a year-end “Final Declaration” replacing the current SA100 return.

That’s it. There’s no requirement to pay tax early; payments are still due by 31 January following the tax year.

Unfortunately, some software vendors and influencers have muddied the message by claiming MTD means real-time tax collection. It doesn’t. Think of it as a bookkeeping upgrade rather than a new tax.

2. Who’s Caught First — and When

MTD will apply in stages, depending on your gross income (not profit).

Start Date Income Threshold Who’s Affected
April 2026 £50,000 + combined self-employed or property income First wave of landlords and sole traders
April 2027 £30,000 – £50,000 Second wave
TBC (Under review) Below £30,000 HMRC reviewing cost–benefit

If you’re a joint landlord, HMRC looks at your individual share of gross income. For example, if two people jointly own a property generating £80,000 in rent, each reports £40,000 — meaning neither crosses the £50,000 threshold in 2026.

3. Who’s Safe (for Now)

Some groups fall outside MTD entirely:

Limited Companies — Already file under Corporation Tax; MTD ITSA applies only to individuals.

Trusts & Deceased Estates — Exempt unless the trustees themselves have separate qualifying income.

Partnerships — Excluded until a later phase (earliest 2027 +).

Low-Income Landlords (< £30,000) — Remain outside until HMRC reviews whether inclusion is proportionate.

So if you’re running a portfolio through a limited company, you can carry on as usual. If you’re managing an estate for a deceased landlord or acting as trustee, there’s no quarterly filing requirement.

4. Common Myths Busted

Myth 1: “MTD means paying tax every quarter.”
Wrong. You’ll send quarterly updates of income and expenses, but tax is still due once a year.

Myth 2: “Self Assessment is being abolished.”
Not yet. The annual “Final Declaration” under MTD mirrors today’s tax return.

Myth 3: “You can’t use an accountant.”
Quite the opposite — HMRC encourages agents to file via MTD software on clients’ behalf. Your accountant can manage submissions just as they do now.

Myth 4: “Excel is banned.”
Spreadsheets are allowed if they link digitally (e.g., via bridging software such as TaxCalc MTD Bridge).

5. Real-World Examples

Example 1 — Caught by MTD:
Sarah owns three buy-to-lets earning £62,000 gross a year. She manages them personally, so she’ll need MTD-compatible software (such as Xero, Hammock, or FreeAgent) from April 2026. She’ll submit four quarterly updates, then a year-end declaration.

Example 2 — Not Yet Caught:
Daniel earns £25,000 from one property in his own name and £15,000 as a part-time contractor. His combined gross income is £40,000, so he joins in April 2027, not 2026.

Example 3 — Exempt:
Priya runs her rentals through Priya Properties Ltd. As a company director, she already files a Corporation Tax Return (CT600) digitally, so MTD ITSA does not apply.

Example 4 — Trustee:
John manages a trust holding two rental properties worth £900,000. The income is declared on the trust’s tax return — MTD ITSA does not apply to trusts.

6. Why HMRC Is Doing This

HMRC estimates that over £9 billion in tax is lost annually through avoidable errors in manual record-keeping and late submissions. The agency believes digital integration will reduce those errors by automating totals, VAT links, and reconciliations.

It also hopes to modernise communication. Quarterly data gives HMRC (and taxpayers) a more accurate in-year picture of liabilities, reducing large surprises at year-end.

Critics argue that the costs for small landlords outweigh the benefits, especially when many only file one or two property schedules. HMRC counters that compatible software will make admin faster and easier once set up.