Understanding Making Tax Digital for Landlords: Key Changes and Impacts

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to transform how landlords and unincorporated traders manage their tax affairs starting from 6 April 2026. Initially, it will affect those with annual business and/or property income of £50,000 or more, expanding to include those with income of £30,000 or more from April 2027. The government is still reviewing the implications for those with income below £30,000.

Following a review and the 2023 Autumn Statement, the government has announced several simplifications to MTD, making it more user-friendly for business owners and landlords.

What is MTD?

Under MTD for ITSA, landlords and unincorporated traders within its scope are required to keep digital records and provide digital updates to HMRC quarterly. Notably, the need for an End of Period Statement has been removed. Quarterly updates will now encompass year-to-date figures, allowing for more straightforward adjustments or error corrections. Those with income below the VAT threshold can opt for three-line accounts, simplifying the reporting process.

Another significant change allows taxpayers to be represented by more than one agent, facilitating the management of different aspects of their financial affairs.

Impact on Landlords

A landlord might fall under the MTD for ITSA even with a modest amount of property income, as the criteria consider the combined total of business and property income. For example, a landlord with £2,000 in property income will be within the MTD scope from April 2026 if their business income from other sources is £48,000 or more. This means even landlords with relatively small property income may need to start complying with MTD requirements from as early as April 2026.

Jointly Owned Properties

The Autumn Statement brought good news for landlords of jointly owned properties. Landlords now have the option to omit quarterly updates on expenses related to these properties. The process of record-keeping for jointly owned properties has also been streamlined, although details of expenses incurred still need to be submitted to HMRC to finalize the tax position for the year.

MTD for ITSA represents a significant shift in the way landlords and unincorporated traders will handle their tax reporting. The simplifications announced are intended to ease this transition, but understanding and adapting to these changes is crucial for effective compliance. As always, seeking professional advice and staying informed about these changes is advisable for a smooth transition into the digital tax era.

 

 
 
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