Making Tax Digital for Landlords: What you need to know

Updated: 6 days ago

Making Tax Digital is the government's initiative to implement a fully digital tax system in the UK with the aim to making tax administration more efficient and easier for tax payers through the use of compatible accounting software.

MTD has been slowly rolled out over the last few years and is split into three initiatives:

  • Making Tax digital for VAT

  • Making Tax digital for Income Tax

  • Making Tax digital for Corporation Tax

The introduction of MTD for Income Tax for self assessment will come into effect from 6th April 2024 and will change the way you have to report your income and make tax submissions to HMRC.

Which landlords will be affected by MTD?

MTD for Income Tax rules will apply to all landlords whose combined property and/or business income is greater than £10,000 a year. MTD will replace the current process of completing an annual Self Assessment tax return. Landlords whose combined income is between £1,000 and £10,000 will continue to file annual tax returns through the Self Assessment process.

If you fall under MTD rules, HMRC will require you to use accounting software to:

  • keep digital records

  • send quarterly updates to HMRC

  • finalise your property and/or business income by submitting an end of period statement and final declaration to HMRC

Keeping digital records

From April 6 2023, landlords affected by MTD for Income Tax will need to use compatible software to keep a digital record of their property income and expenses. If you're a landlord and also a self employed business owner, MTD will require you to keep separate records of business income and expenses.

Sending quarterly updates

Under the new rules, affected landlords will need to send a summary to HMRC every three months using compatible software. The deadlines for submitting these quarterly updates will be the same for everyone who has to follow MTD for Income Tax rules:

  • 5th August

  • 5th November

  • 5th February

  • 5th May

Finalising your income

At the end of the tax year, you will need to finalise your property and/or business income by submitting:

  • an end of period statement for each source of property or business income

  • a final declaration which replaces the annual Self Assessment tax return

The process of submitting an EOPS and final declaration allows you to confirm the quarterly updates throughout the year are correct and gives you an opportunity to add details about any relevant personal income or tax reliefs you received during the tax year as well as other necessary adjustments.

For each tax year, you'll be required to submit your required EOPS and final declaration statements by 31st January of the following tax year, as well as pay any tax you own in relation to each tax year on this date.

If you're a landlord and think you might get affected by the introduction of MTD for Income Tax, get in touch with PKPI.UK and our tax experts can help you get ahead of the curve and beat the last minute hassle.