A new digital tax recording system is being rolled out by HM Revenue and Customs (HMRC), and landlords and sole traders can get ahead of the changes now.
The government’s Making Tax Digital for income tax will be a major change in how taxes are reported and managed for self-employed people and landlords alike, with Chancellor Rachel Reeves revealing that the new system will be phased in between 2026 and 2028.
Right now, anyone operating a buy-to-let/buy-to-let properties that brings in more than £50,000 a year (including any other self-employed income) is being urged to join a new testing scheme. This can help people to get ahead of the scheme’s first phase, which begins on 6th April 2026 for people generating this level of income or higher from a property or other self-employed business.
The following year (6th April 2027), qualifying individuals earning more than £30,000 as a landlord or sole trader will be required to use the new digital tax reporting system, with the threshold falling to £20,000 from April 2028. This will bring as many as 900,000 buy-to-let owners and sole traders into the remit of the new scheme.
Making Tax Digital for Income Tax
Making Tax Digital (MTD) for Income Tax is a system introduced by the government making it a legal requirement for qualifying individuals to keep digital tax records of income and expenses related to your business as a landlord or self-employed individual.
It requires the use of specific software to create, store and correct digital records of your business income and expenses; send quarterly updates to HMRC; and submit your tax return and pay tax due by 31st January the following year.
The goal, according to the government, is to make the process of filing a tax return easier and less time-consuming. By switching to quarterly reporting rather than annual, the idea is that the workload is spread “more evenly throughout the year”, helping businesses stay on top of their finances without a last-minute rush as the deadline approaches. It may also reduce calculation errors, and present a clearer picture of your tax bill to avoid any surprises.
Landlords can get ahead
With less than a year to go until it becomes compulsory for anyone earning £50,000 or more from letting out a property or other self-employed businesses, landlords are being urged to sign up for the government’s testing programme in order to get ahead of the changes.
This means finding and downloading compatible software for the MTD for Income Tax scheme, and beginning to use it so that when the 2026 deadline rolls around, users are already up and running.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said: “MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.
“By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”
However, according to comments from ARLA Propertymark president Angharad Truema, some smaller landlords – particularly those who are older and less tech-savvy – may be daunted by the new MTD requirements. This adds to the impetus for ensuring you have the knowledge and tools ahead of time in order to have a smooth transition.
Who can sign up
You can sign up voluntarily if (all of the following):
- your personal details are up to date with HMRC
- you’re a UK resident
- you have a National Insurance number
- you have submitted at least one Self Assessment tax return
- you’re up to date with your tax records — for example, you have no outstanding tax liabilities
- you use an accounting period that runs from either:
– 6 April to 5 April
– 1 April to 31 March — you must make sure your software can support this accounting period
Learn more about signing up here. Keep up to date with the latest property news with BuyAssociation here.
