Property and Homes

Making Tax Digital has Landlords worried – Be compliant in 3 easy steps

The rules for Making Tax Digital (MTD) for Income Tax will be coming into force from 6 April 2024 and it will affect landlords. Read on for how this government initiative will impact you and what you will need to do to prepare for the changes coming into effect in April 2024.


What is Making Tax Digital?

It is a government initiative to make tax administration more efficient and easier for taxpayers through the implementation of a fully digital tax system. The government says it is introducing Making Tax Digital to make it easier for people and businesses to manage their tax affairs and to help prevent avoidable mistakes that are believed to cost many billions of pounds a year in lost tax revenue.

Which landlords will be affected by Making Tax Digital for Income Tax?

This initiative will affect landlords with property income above £10,000. You must still file a Self-Assessment tax return (SA100) for the tax year before you comply with MTD for Income Tax Self-Assessment requirements. But once you do, you won’t have to complete a Self-Assessment tax return (SA100) each year.

Landlords with property income of between £1,000 and £10,000 a year will need to continue filing annual tax returns through the Self-Assessment process.

If you already use software to maintain your financial records, HMRC recommends asking your provider whether their software is or will be Making Tax Digital for income tax compatible.


How do you become Making Tax Digital compliant?

1. Maintain digital records – you must keep digital records of all your transactions. These records must be held digitally (e.g. invoice and expenses data) and kept for the required period after the tax year ends (currently five years). You will need to use MTD-compatible software to maintain and report digital records of your rental income and expenses.

2. Register for MTD – register for the digital tax service through your existing Government Gateway account. The GOV.UK website helpfully lists software that is compatible with Making Tax Digital for Income Tax. Making Tax Digital for Income Tax-compatible software can:

  • maintain business records as required by the regulations
  • prepare and send quarterly updates and end-of-period statements using the information maintained in your records
  • finalize your business income and submit your declaration after the end of the tax year
  • communicate with HMRC digitally through HMRC’s (application programming interface – API) platform.

3. File four tax returns a year instead of one – under the new rules, affected landlords will need to send a summary of their business income and expenses to HMRC every three months using compatible software.

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