This article by Stuart Miller, Director of Public Policy & Tech Research, Xero

Making Tax Digital for Income Tax (MTD for IT) is being introduced in just a matter of weeks, marking the most significant reform to personal taxation since self-assessment was launched over 30 years ago.

At its heart, MTD for IT replaces the traditional single annual tax return with a more regular, fully digital reporting process.

Taxpayers will be required to maintain digital records using HMRC-approved software, submit quarterly updates, and file a final declaration after the end of the tax year.

Initially, MTD for IT will apply to individuals earning more than £50,000 from property income, or from a combination of rental and self-employment income.

By April 2028, the threshold will be lowered to include those with turnover exceeding £20,000.

What does MTD for IT mean for landlords?

For many years, the government has been working towards a more digitalised tax system.

The introduction of MTD for IT is a big leap forward in that journey. 

For landlords or property professionals that have previously only filed year-end accounts or used paper or spreadsheets for records, then MTD for IT might feel like a step into the unknown and will require you to choose a HMRC recognised digital bookkeeping system so you can comply. 

However, be selective.

Every landlord or property investor’s situation is different.

While some of you might only have one property, others may manage a dozen. Some of you might even share ownership or other sources of income.

All these variations affect how MTD for IT applies and what you need from a digital platform.

Streamline the switch

The trick is to pick a tool that is easy to use so you can confidently handle your tax in the new digital way, while also making your day-to-day property management feel easier. 

Ideally, tools should pull everything together so you can capture your expenses and manage your taxes in one place. 

Look for features that can also save you time and reduce errors in your financial admin. For example, some platforms can connect directly to your bank and instantly categorise expenses like insurance, repairs and agent fees. 

Automatically recording income and expenses against the right property to give you more control, visibility and accuracy over your numbers.

All this information should then flow straight into your quarterly updates and give you a real-time view of how your business is doing and a good idea of what your tax bill will look like at the end of the year. 

Bringing finances into focus

While the move to digital tax is a compliance requirement, it should mean fewer end of year tax surprises and put financial information directly at your fingertips.

Up-to-date digital records will make it easier to understand what’s coming in and going out.

With everything captured in one place, you will be able to get a clearer view of cashflow so you can spot early warning signs or issues – from unpaid rent to unexpected maintenance costs, and changing profit margins.

If you’re new to digital tools or if you manage a complex portfolio, the shift to MTD for IT might feel overwhelming.

This is where the advice of an accountant or bookkeeper can be invaluable.

They can help set you up with digital records, guide you on quarterly submissions, and work with you on the final declaration at the end of the year to ensure everything is accurate.

Crucially, they can remove the stress and confusion by translating the new requirements into a clear, actionable plan for you to follow.

It’s time to act

With a little over a month to go until MTD for IT becomes a mandatory requirement for those earning more than £50,000, the time to act is now.

It is part of a wider, irreversible shift towards digital, real-time services taking place across the UK economy. 

Although the new requirements may seem significant, taking the time to understand what’s involved, choosing the right software, and organising your records will make all the difference. 

Getting to grips with the process from the start will reduce unnecessary stress and prevent a last-minute scramble when the first declaration window comes around.