Read Property Moves’ jargon-free guide, “Making Tax Digital for Landlords” for everything you need to know about the new tax rules.
Tax. It’s not exciting.
Most likely, it doesn’t fill your soul with joy. But, as part of our unwritten social contract to maintain roads, schools and hospitals, it’s just what we do. There are changes afoot – fairly major ones, to be fair, and they’re approaching fast. Don’t just skim through this article, though.
By law, if the changes apply to you, and probably they will, you must act. To make things easier, we’ve broken everything down into easy-to-read sections with clear signposts to the actions you’ll need to take. Don’t worry, and don’t panic.
The new legislation will affect sole traders and landlords FIRST, so we’d strongly advise you to join the MTD revolution sooner rather than later. Caveat: We are not accountants, so you should seek professional advice if you wish to clarify any of the finer details about the upcoming rules.
See below for income thresholds, but let’s set the scene:
WHAT IS MAKING TAX DIGITAL? AND WHY IS IT HAPPENING?
MTD is about streamlining your tax return to make everything more straightforward and efficient. No more messing about with paper receipts and sending in your accounts in a big brown envelope.
You will need to maintain digital records of your business income and outgoings, and also submit your returns through MTD-compliant software. The traditional yearly Self-Assessment process still theoretically remains in that HMRC requires you to submit a final declaration of your accounts by 31st January each year.
However, you’ll also have to transmit your figures through your chosen software every 3 months. These quarterly updates are in effect mini tax deadlines, and you must get everything in on time. So, by law, going forward HMRC will receive your updated records four times a year, rather than once: three “smaller” ones, then a summary.
A LONG TIME COMING
The blueprint for Making Tax Digital (MTD) for Income Tax Self-Assessment has undergone several changes and, importantly, significant delays since the government first announced the plan in 2015. An overly ambitious early deadline came and went, then the launch was pushed back from 2024 to April 2026.
And now it’s actually happening on April 6th if you qualify.
DO THE NEW RULES APPLY TO YOU?
MTD applies to your whole income; for example if you rent out a property and have an additional self-employed profession, you will need to calculate figures for both businesses – not much change here.
This applies to rental income from the UK and overseas.
Here are the thresholds. As you can see, they’re phased:
Tax Year: 2024/2025. Income over £50,000. Start using MTD from 6th April 2026.
Tax Year: 2025/2026. Income over £30,000. Start using MTD from 6th April 2027.
Tax Year 2026/2027. Income over £30,000. Start using MTD – TO BE ANNOUNCED.
ANY EXEMPTIONS
Yes. If you’re
- A trustee or personal representative
- A Lloyd’s underwriter
- A non-resident company
- Someone without an NI number as of 31st January before the tax year
- Foster carer, non-resident individuals and those with Power of Attorney (now permanently or temporarily exempted from MTD)
Also, if it’s not reasonably practical for you to use digital tools due to age, disability, a remote location or religious beliefs. Again, refer to a financial specialist for more information on this nuanced aspect of MTD.
It’s worth noting that HMRC will allow a “soft landing”, meaning that if you need to start this process in April 2026 and submit figures late, you won’t get a late submission penalty.
It’s also useful to know that if you’re a business below the VAT threshold, MTD will allow “three-line accounts”. This means you can report your total income, total expenses and profits rather than categorising all your expenses.
WHAT TO DO NOW
Are you registered for Self-Assessment, and have you submitted a tax return in the last two years? If so, here’s the deal:
You, or your agent (bookkeeper or accountant) must register for MTD for Self-Assessment via HMRC’s online portal. You will need a Government Gateway ID and password, your National Insurance number and your Unique Taxpayer Reference. Plus, the name of your MTD compatible software.
You can also go directly to a supplier that offers compatible software.
What’s the best one? That will be your decision. It’s worth asking around and doing your own research, but popular options include Xero, Sage, QuickBooks, FreeAgent, Zoho Books, and Kashflow. Bear in mind that you can download them as an App on your phone, making things super-convenient and (hopefully) easy. Some software products are free, like Zoho Books, but they may not give you everything you need.
You can get software that either:
- Creates digital records, or
- Connects to your existing records, such as those you keep in spreadsheets.
It will need to:
Support ALL your income, eg self-employment, landlord status, foreign property etc
Enable you to submit your figures to HMRC to meet the deadlines
Work with your accounting period
DATES FOR YOUR DIARY
Once you’ve started using MTD, no doubt the following dates will be burned into your memory:
Q1: 5th April to 5th July – Due 7th August
Q2: 6th July to 5th October – Due 7th November
Q3: 6th October to 5th January – Due 7th February
Q4: 6th January to 5th April – Due 7th May
WHAT PROPERTY MOVES THINKS
Change can be unsettling. And the new legislation, as mentioned, will affect landlords and self-employed people first, so it IS a significant change. However, once you’ve become accustomed to Maxing Tax Digital we firmly believe it will make your life easier.
If you think about it, MTD could even transform your landlord portfolio business. Knowing your up-to-date figures will empower you to make better-informed decisions. With current information at your fingertips, you’ll be able to respond faster and spot any new opportunities.
The new structure may help reduce errors, saving time and stress. Life’s busy enough.
And of course, given that knowledge really IS power, you’ll be able to understand trends and patterns, and better understand your finances. In our opinion, knowing how much tax you owe will help you to plan more effectively and efficiently.
Change for the better? Honestly, yes. And preparation is everything. So don’t delay.