There is a tax initiative coming that landlords should be aware of. What do you need to know? Manjit Kataora, Foxtons Director - Legal & Compliance, summarises the 'Making Tax Digital' initiative below:
Key takeaways
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- 1 Digital tax ahead. The government is implementing 'Making Tax Digital,' requiring landlords to submit tax information digitally.
- 2 Income thresholds matter. Your qualifying income determines when you'll need to comply, with higher earners needing to prepare first.
- 3 Software is available. You'll need to use specialist accounting software to meet the new digital reporting requirements.
- 4 Preparing early is beneficial. Start looking into MTD software and processes now to avoid last-minute stress and ensure a smooth transition.
The Government has recently reminded landlords with qualifying income over £50,000 to start preparing to digitalise their annual return process.
The making tax digital (MTD) initiative was first announced by the UK government in 2015. The stated aim of MTD was to simplify the annual income self-assessment return process for landlords. The term ‘simplify’ refers to the digitisation of the process (achieved through the use of specialist landlord software accounting packages) and not to the frequency of returns because whereas the current return process only requires an annual return, MTD requires quarterly returns plus an end of year return, increasing the level of reporting actually required.
MTD first required that landlords with a qualifying income of over £10,000 – by far the vast majority of landlords - would need to comply with MTD by 2024. Pressure by landlord groups led to a postponement of the implementation timescale as well as a re-assessment of the income thresholds at which MTD would apply. The term ‘qualifying income’ includes gross income from self-employment and property, i.e. before tax allowances or expenses are deduced.
For landlords with a qualifying income of over £50,000, MTD now goes live on 6 April 2026. Quarterly reporting means that landlords are reporting in near-real time, and the ability to keep electronic records, means - in theory at least – that landlords can spend less time collating end-of-year figures from piles of paper collected from as far back as 21 months beforehand (assuming the tax return is filed just before the 31 January deadline). Landlords in this category should now be looking at MTD software and it’s advisable they adopt the process beforehand to avoid any last-minute rush or glitches.
Those landlords whose qualifying income above £30,000 have until April 2027 to comply and, from April 2028, landlords with qualifying income over £20,000 will also have to adopt MTD.
A range of commercial software solutions already exist and they are set out helpfully in Government’s guidance accessible here. These include ‘bridging’ software packages that, as the name suggests, allows you to connect your existing spreadsheet records or accounting software to software that works with MTD.
It’s important to review these options based on your needs because while some packages will allow you to send quarterly updates and submit your annual tax return, others will not; the logic being that landlords who rely on accountants to send the annual return might still want their accountant to do this for them, but might be comfortable sending quarterly updates themselves. Expect more packages to come to market in the run up to April 2026.
MTD is now on its way. It’s unlikely to be postponed again. The implementation timetable is phased so as to allow plenty of time to get to grips with the new process allowing landlords to choose the option that best meets their needs.
Landlord Essentials is a series of articles where our experts delve into the big questions for London landlords. If you have a question on letting your property in London, or you want help making your property a success, get in touch with Foxtons lettings team.
Source: This piece was authored by Foxtons Director – Legal & Compliance, Manjit Kataora, who has been working with Foxtons on the intricacies of legislation affecting London landlords for more than 16 years. If you have a question on the article, ask a Foxtons expert.
