Good news for landlords earning under £30,000 a year - they will not have to use the HMRC’s Making Tax Digital scheme.
The announcement came in paperwork released following this week’s Autumn Statement.
Landlords with an income over £50,000 will still have to join MTD from April 2026, followed by those earning over £30,000, from April 2027.
A statement on the HMRC website says it will “keep under review the decision on further mandation of businesses and landlords with income below £30,000”,
Making Tax Digital is HMRC’s plan to digitise the tax system for VAT, Income Tax Self Assessment and Corporation Tax for businesses and individuals. MTD aims to make tax returns simpler and more efficient.
But it has had a checkered history - a year ago landlords and others were given an extension to the deadline for using the software. Now landlords earning under £30,000 a year are completely exempt.
HMRC adds: “The government remains committed to delivering MTD for Income Tax Self Assessment and believes this is central to building a trusted, modern tax administration system and supporting small business productivity.
"The digitalisation of records and tax administration will help businesses to keep on top of their tax affairs, saving them time and reducing errors while, in turn, reducing the tax gap from error and carelessness.”
Higher earning landlords who do have to join the system from 2026 onwards must submit quarterly summary data to HMRC, rather than one larger end of year self assessment. This will have to be submitted via special software.
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The biggest problem with MTD is knowing which software program to use. There are numerous things out there all promising the earth but how do you know which to try? Especially when whatever computer skills you have have just been picked up randomly and you're not an accountant.
Even though several do free or very cheap trials it can take many, many hours to set them up sufficiently to see if they actually work in a way that works for you. The ongoing costs range from free (for one I can't make work) to quite a lot for one that does loads of different things fairly smoothly.
I been trying 4 different ones recently and most of them are still being developed. Not that they necessarily warn you of that. It's incredibly frustrating when you try doing something, it doesn't work no matter what you do, you contact their customer support and they tell you they already know it doesn't work and should be ironed out next month.
You need to decide if you just want one that only deals with the accounting aspects or if you want one that also deals with the property paperwork side of things. Some of them churn out tenancy agreements and produce tenant packs with all the house information and safety certificates.
Is your accountant going to get onboard with whichever one you choose or will he just say Xero, Xero, Xero and then not give any assistance with which of the numerous optional add ons you would need to make it useful?
TaxCalc. Been using it for years & it is pretty straightforward.
This MTD thing sounds like yet another ‘ headache’ for LLs. Just adds to the ‘is this worth the hassle question’, we increasingly ask ourselves.
Landlords earning under £30,000! Is that figure just for property income or does that include your pension income plus your property income?
No idea but I'm guessing it will be the spuriously higher figure created by S24 tax ie your total income before mortgage payments are deducted.
Does it include other PAYE income?
Not sure how it’s supposed to save time when you have to report 4 times a year and possibly 5 rather than just once. The present system seems to work fine and is straightforward enough.
Agree entirely.
Spot on.
I think the idea is you input the data into your software system on a daily, weekly, monthly bases and then every 3 months you press a button to send the data off to the taxman. So, instead of a big process once a year of gathering all the information you just do it on a more frequent interval.
If you are clever you can set up processes that link various accounts to your software system so you don't need to manually enter all the information. I believe big companies have to submit data on a daily bases.
John's right. It relies on doing things more regularly. In some respects that's good because you're not trying to do vast amounts on one day and are less likely to forget transactions or lose receipts.
The bank feeds can be very time saving. The best bank accounts have the ability to enter notes into the transaction after its been made so it's very simple to reconcile and allocate on the software. It's unfortunate a lot of credit cards won't feed into the software.
Setting up the program and learning how to use it is the really time consuming part.
Surely it will become a quarterly task for your accountant? I expect they have an interest in this scheme because they have a sudden massive workload every year under the current system.
Increased accounting fees another reason for me to be increasing rents, the end user always pays these increased costs
If your tax affairs aren't too complicated the good software can deal with it and you won't need an accountant. I use Taxcalc which can cope fine with my situation, income from property and PAYE. It can also deal with part ownership, pensions, dividends, companies etc. Prices start at £35 per year for individual tax return.
What's TaxCalc like with invoicing tenants and having expense headings that make sense for rental properties? Do they do a landlord specific version? I looked at their website and it didn't seem to mention landlords.
TaxCalc is a general tax accounting software. It is not designed to help you run your business like invoicing. It expects you to input the overall income and expenses then it calculates your tax liability and submits your self assessment for you. So basically it does the accountants job. So you would need additional software designed to help you run the business, keeping track of all your income and outgoings. You would then enter the totals into TaxCalc for the self assessment.
The trouble is, if you don't use an accountant, you are not sufficiently trained to know what you can and can't claim for.
My accountant saves me a lot of tax and in that respect, he is worth every penny.
i went through MTD for VAT with my limited company, complete waste of time
originally i had to log into my VAT account and input my numbers into their online form and submit
what changed with MTD?
i had to go through a 3rd party and pay them to submit my return after id inputted my numbers on their excel spreadsheet that they would then convert to a format hmrc could deal with
its madness, it really is
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