HMRC reminds landlords to prepare for Making Tax Digital deadline

HMRC reminds landlords to prepare for Making Tax Digital deadline

HM Revenue and Customs has issued a reminder to landlords with turnover over £30,000 to prepare for the mandatory Making Tax Digital for Income Tax (MTD) requirements coming into force in April 2027.

HMRC has alerted landlords earning more than £30,000 in turnover that they must comply with Making Tax Digital for Income Tax from 6 April 2027. This involves maintaining digital records and submitting quarterly updates to HMRC using compatible software. The reminder comes six months before the deadline, urging landlords to check their turnover and sign up early to ensure compliance.

Details of the Making Tax Digital expansion for landlords

From April 2027, approximately 1,077,000 additional sole traders and landlords will be required to use MTD for Income Tax. This expands the existing requirement to a wider group, including landlords whose turnover exceeds £30,000. Turnover includes gross income from self-employment and property rental before deducting any expenses or allowances.

Under MTD, landlords must keep digital records of their income and expenses and submit quarterly updates to HMRC via approved software. These quarterly updates are summaries and not additional tax returns. The final tax return will still be required but will be completed using data submitted throughout the year.

HMRC emphasises that early registration allows landlords to verify their MTD setup and select appropriate software ahead of the deadline, helping to avoid last-minute issues. The department also highlights that digital record keeping can save time by reducing the effort needed to gather information at tax return time.

Context of Making Tax Digital in the rental sector

The Making Tax Digital initiative aims to modernise the tax system by requiring digital record keeping and reporting. For landlords, this means moving away from traditional paper or spreadsheet records towards software solutions that can communicate directly with HMRC.

This change reflects the government’s broader push for digital compliance and transparency in tax affairs. Landlords with smaller portfolios who previously were exempt from MTD will now fall within the scope as thresholds lower over time. From April 2028, the threshold will reduce to £20,000, further widening the requirement.

For landlords, this represents a significant shift in how financial information must be managed. It aligns with other regulatory trends demanding greater digital organisation and record retention in the private rented sector.

Practical implications for landlords and letting agents

Landlords with rental income above £30,000 will need to invest in compatible accounting software if they have not done so already. This software must be capable of maintaining digital records and submitting quarterly updates to HMRC.

For smaller landlords approaching the threshold, it is advisable to review current income levels and consider early registration. Early adoption provides time to familiarise themselves with the software and reporting process, reducing the risk of errors or missed deadlines.

Letting agents managing portfolios on behalf of landlords should also prepare to support clients with MTD compliance. This may involve advising on software options, record keeping practices, and ensuring that all rental income and expenses are accurately recorded digitally.

Remaining uncertainties and considerations

While HMRC has set out the broad requirements, some details remain to be clarified, such as which software products will be approved and the exact processes for quarterly updates. Landlords should monitor official guidance closely as the implementation date approaches.

There may also be practical challenges for landlords with complex portfolios or mixed income streams, especially those combining self-employment and property income. Understanding how to aggregate turnover and report accurately will be crucial.

Additionally, landlords should be aware that failure to comply with MTD requirements could lead to penalties or complications in tax affairs. However, HMRC has indicated a willingness to support taxpayers transitioning to the new system.

Steps landlords should take now

• Check whether your rental income and other self-employed income exceed the £30,000 turnover threshold for April 2027.
• Research and select MTD-compatible software suitable for your property portfolio and accounting needs.
• Consider registering for Making Tax Digital early to test the system and avoid last-minute complications.
• Keep digital records of all rental income and allowable expenses consistently throughout the year.
• Stay informed of HMRC updates and guidance on MTD requirements and processes.

How TLA membership supports landlords with Making Tax Digital

Membership of The Landlord Association offers landlords access to practical compliance resources and guidance relevant to Making Tax Digital. Our developing ORBIT platform, currently in BETA testing, is designed to help landlords organise property records, manage rental documentation, and keep track of compliance actions in one place.

ORBIT aims to assist landlords in maintaining digital records efficiently, which will be essential for MTD compliance. Members can explore how ORBIT’s features may support their transition to digital tax reporting and access up-to-date information on regulatory changes affecting the private rented sector.

Explore TLA membership and learn more about ORBIT BETA access to prepare your portfolio for the upcoming MTD requirements.

Landlords should begin preparations now to ensure a smooth transition to Making Tax Digital, reducing administrative burdens and avoiding penalties as the April 2027 deadline approaches.

Sources: Landlord Today