Landlords struggle with Making Tax Digital compliance and agent support debate

Landlords struggle with Making Tax Digital compliance and agent support debate

Research reveals many landlords are unaware or confused about their Making Tax Digital obligations, with over half of high-earning landlords unsure if they must comply. Letting agents face calls to assist landlords struggling with the new digital tax rules.

More than six months after Making Tax Digital (MTD) for Income Tax became mandatory for landlords with high rental incomes, a significant proportion remain unaware or confused about their responsibilities. This is according to research conducted in August by a property management platform, which surveyed landlords on their knowledge of MTD start dates and their gross income from property and self-employment.

The findings show that only 35% of landlords correctly identified the date they must start using MTD. Among landlords with income of £50,000 or more—the group required to keep digital records and submit quarterly updates since April 2026—fewer than half (48%) acknowledged they were already subject to MTD. Almost as many (44%) believed their start date was later or that they fell below the threshold, while 8% did not know.

The awareness gap widens for landlords with lower incomes who must join MTD in future waves. Only 28% of landlords with income between £30,000 and £49,999 knew they must join in April 2027, with many mistakenly believing they were already in or unaware of the requirement. For those earning between £20,000 and £29,999, due to join in April 2028, just 11% correctly identified their start year and 36% did not know.

Landlord expectations and current record-keeping practices

Landlords in scope for MTD anticipate a considerable time commitment. Three-quarters expect the process to add at least four hours of work every quarter, and a third estimate it will take more than a full day. Only 6% expect it to take less than an hour. Among those already submitting quarterly updates, 83% reported submitting on time, while 12% were late.

The methods landlords use to maintain digital records vary. About 28% rely entirely on their accountant, 26% use general accounting software such as Xero or QuickBooks, 25% use dedicated landlord software, and 14% manage spreadsheets with bridging software to comply with MTD requirements. Landlords who use letting agents tend to depend more on accountants (42%), whereas self-managing landlords are more likely to handle records themselves.

Propertymark, a professional body for letting agents, has recently urged agents to offer assistance to landlords facing difficulties with MTD compliance if needed. This call reflects the growing recognition that many landlords require support to meet the new digital tax obligations effectively.

Context of Making Tax Digital and landlord compliance challenges

Making Tax Digital was introduced by HM Revenue & Customs (HMRC) to modernise tax administration and improve accuracy by requiring digital record-keeping and quarterly reporting. For landlords, this means keeping detailed digital records of rental income and expenses and submitting updates using compatible software.

The phased rollout targets landlords based on income thresholds, with the highest earners required to comply first. However, the research suggests that communication and education around these thresholds and start dates have not fully reached the landlord community. Many landlords remain uncertain about when they must join MTD or what it entails.

This uncertainty is compounded by the diversity of landlord profiles, ranging from professional landlords with multiple properties and formal accounting arrangements to smaller-scale or accidental landlords who may lack experience with digital tax systems.

Practical implications for landlords and letting agents

For landlords, the research highlights the need to verify their income against HMRC thresholds and confirm their MTD start dates. Failure to comply can lead to penalties and complications with tax filings. Landlords should assess their current record-keeping systems and consider whether they need to adopt dedicated MTD-compliant software or seek professional assistance.

Letting agents managing properties on behalf of landlords may find themselves increasingly involved in supporting MTD compliance. Agents could offer guidance on digital record-keeping, recommend suitable software, or liaise with accountants to ensure landlords meet their obligations. This additional service could strengthen client relationships but also requires agents to understand MTD requirements and the challenges landlords face.

Self-managing landlords should be particularly vigilant, as the research shows they are more likely to handle records themselves and may need to invest time in learning new systems or securing software that integrates with HMRC’s digital tax platform.

Ongoing uncertainties and areas to watch

While the research provides insight into landlord awareness and behaviours, some uncertainties remain. It is unclear how many landlords will face penalties for late or inaccurate submissions as MTD compliance matures. The extent to which letting agents will formally incorporate MTD support into their service offerings is also not yet established.

Further government guidance and industry education efforts may be necessary to close knowledge gaps, especially for landlords in lower income bands who must join MTD in the coming years. Additionally, software providers and accountants will play a critical role in simplifying compliance and reducing the burden on landlords and agents.

Considerations for landlords and agents now

Landlords should review their rental income and self-employment earnings to confirm their MTD start date and compliance status. They should check whether their current accounting methods meet HMRC’s digital record-keeping standards and explore software options if needed. Consulting with an accountant or tax adviser familiar with MTD can help avoid pitfalls.

Letting agents should evaluate how they can support landlords through this transition, whether by providing information, recommending software, or integrating MTD compliance checks into their management services. Agents should also keep abreast of regulatory developments and guidance from professional bodies like Propertymark.

Supporting landlords with Making Tax Digital through TLA membership

The Landlord Association (TLA) offers members access to practical compliance resources and guidance that can assist landlords and letting agents in understanding and meeting Making Tax Digital obligations. TLA’s developing property management platform, ORBIT, currently in BETA testing, aims to help members organise rental properties and portfolios, manage digital records, and keep evidence of compliance activity in one place.

ORBIT’s features under testing include tools to record key actions and produce documentation relevant to tax and tenancy compliance, which could be particularly useful for landlords adjusting to MTD requirements. Membership also provides access to up-to-date information on regulatory changes and support materials tailored to the private rented sector.

Agents and landlords interested in exploring TLA membership or learning more about ORBIT’s BETA access can find further details on the TLA website. This support can help landlords reduce the time and complexity involved in meeting their digital tax obligations and help agents enhance their service offerings.

Looking ahead, the ongoing rollout of Making Tax Digital will require landlords and agents to remain alert to changes and prepare for future compliance waves. Early engagement with digital record-keeping and professional advice will be crucial to avoid penalties and administrative burdens.

Sources: Letting Agent Today