The way landlords report their income to HMRC is set to change significantly. The government’s Making Tax Digital (MTD) initiative is part of a broader move to modernise the tax system, making it more efficient, accurate, and accessible.
For landlords, this means moving away from annual paper-based submissions and instead keeping digital records and reporting income quarterly through approved software.
If you earn rental income, it’s important to understand what this shift means for you — and how you can prepare now to avoid any stress down the line.
What is Making Tax Digital (MTD)?
Making Tax Digital is a government initiative designed to simplify the tax process by digitising record-keeping and submissions.
Instead of the traditional annual Self Assessment tax return, MTD requires eligible individuals to:
- Keep digital records of income and expenses.
- Submit quarterly updates to HMRC.
- Provide a final declaration at the end of the tax year.
This approach aims to reduce errors, improve efficiency, and provide real-time insights into tax liabilities.
Who Needs to Comply and When?
The rollout of Making Tax Digital for Income Tax is phased based on income levels:
It’s important to note that if you have both rental and self-employment income, these are combined to determine your total income for Making Tax Digital eligibility.
What Are the Requirements?
To comply with Making Tax Digital, landlords must:
- Maintain Digital Records: Use compatible software to record all income and expenses related to your rental properties.
- Submit Quarterly Updates: Provide HMRC with updates every three months summarising your income and expenses.
- Final Declaration: At the end of the tax year, submit a final declaration confirming your total income and tax due.
Quarterly submission deadlines are:
Choosing the Right Software
Selecting Making Tax Digital compatible software is crucial. The software should allow you to:
- Record income and expenses digitally.
- Submit quarterly updates and final declarations directly to HMRC.
- Store records securely for at least five years.
Popular options include Xero, QuickBooks, and Sage, among others. Ensure that the software you choose is listed on HMRC’s approved software list.
Penalties for Non-Compliance
Starting April 2025, HMRC will impose stricter penalties for late submissions and payments:
- 15 days late: 3% of the tax owed.
- 30 days late: An additional 3%.
- Over 31 days late: 10% per annum on the outstanding amount.
It’s essential to stay on top of your reporting and payment deadlines to avoid these penalties.
Benefits of Early Adoption
While MTD becomes mandatory based on income thresholds, landlords can choose to adopt it earlier. Benefits include:
- Improved Financial Management: Regular updates provide a clearer picture of your financial position.
- Reduced Errors: Digital records minimise the risk of mistakes.
- Time Savings: Automated processes can save time compared to manual record-keeping.
How Blue Spire Can Help
At Blue Spire, we know that tax changes can feel overwhelming — especially when new systems and software are involved. That’s why we’re here to make the transition to Making Tax Digital as straightforward as possible, offering practical support every step of the way.
Whether you’re tech-savvy or totally new to digital record-keeping, we’ll help you get set up with the right tools and the confidence to use them.
Here’s how we can support you:
- Choosing the Right Software – We’ll help you pick MTD-compatible software that suits your rental business, ensuring it’s compliant and easy to use. Whether it’s Xero, QuickBooks, or something else, we’ll make sure it fits your needs.
- Getting You Up and Running – From installation to integration, we’ll set everything up and tailor it to your property portfolio, so you’re not left guessing.
- Training That Makes Sense – We’ll walk you through how to use the software day-to-day, cutting out the jargon and showing you how to manage your income and expenses confidently.
- Ongoing Support When You Need It – Questions? Glitches? Changes in your circumstances? We’re on hand with advice and solutions — by phone, email, or face-to-face at our Chichester office.
Our goal is to take the hassle out of tax and give you peace of mind, so you can focus on managing your properties rather than wrestling with spreadsheets.
What You Can Do Next
Getting ahead of the changes will save you time and stress later. Here are a few simple steps to help you prepare:
- Understand Your Income Position
Work out whether your total income from property and self-employment exceeds the MTD thresholds (£50,000 from April 2026, and £30,000 from April 2027). This will determine when you’ll need to comply. - Find the Right Software
Choose a digital accounting platform that’s recognised by HMRC and fits the way you manage your rental business. If you’re not sure where to start, we’re happy to help you weigh up your options. - Learn the Ropes
Take time to get familiar with how quarterly reporting works and how to record your income and expenses digitally. With the right training, it quickly becomes second nature. - Reach Out for Expert Support
Navigating tax changes is much easier with someone in your corner. Our team is always here to make sure everything’s done correctly — and with as little disruption to your day-to-day as possible.
Switching to Making Tax Digital isn’t just about ticking boxes for HMRC — it’s a chance to modernise your systems, get a better handle on your finances, and run your property business with greater clarity and control.
| For personalised assistance and to learn more about how we can support you through this transition to Making Tax Digital, contact Blue Spire today. |
