Making Tax Digital: What Landlords and the Self-Employed Need to Know for the Coming Changes
- David
- 4 days ago
- 3 min read
HMRC’s Making Tax Digital (MTD) programme is moving steadily toward full implementation, and the next phase will significantly affect landlords and self-employed individuals. While the rules have been evolving for several years, 2026 marks the start of mandatory digital record-keeping and quarterly updates for many taxpayers. Now is the ideal time to understand what’s changing and how to prepare.
Who Will Be Affected?
The upcoming MTD rules apply to individuals with:
Gross self-employment income over £50,000, or
Gross rental income over £50,000, or
Combined self-employment income and gross rental income exceeding £50,000 together.
Those earning between £30,000 and £50,000 are scheduled to join later in the rollout, and Partnerships will follow in yet another phase.
What MTD Actually Requires
Many people assume MTD means replacing their tax return with quarterly mini-tax returns, but that’s not quite accurate. The key obligations are:
1. Digital record-keeping
Landlords and self-employed individuals will need to keep their accounting records in HMRC-approved digital software. This includes:
rental income and allowable expenses,
self-employment sales and costs,
mileage and other business-related entries.
Paper folders, spreadsheets, and manual logs won’t be sufficient for MTD-eligible taxpayers. At Your Personal Tax Expert we use Xero and Quickbooks to store and process this information for you.
2. Quarterly updates
Every three months, taxpayers must send a summary of income and expenses to HMRC through the approved software. These updates feed into HMRC’s real-time view of your tax position.
3. An annual End-of-Period Statement (EOPS)
This is where you finalise the year’s figures, make adjustments, and claim any allowances or reliefs.
4. A final declaration
This replaces the traditional Self Assessment tax return, confirming all your income sources for the year.
Why This Matters for Landlords
Landlords often have irregular income and a wide spread of allowable expenses — mortgage interest, repairs, insurance, management fees, utilities, and more. Under MTD, keeping these records up-to-date becomes essential rather than optional.
Key considerations:
Multiple properties mean multiple income streams to capture and categorise correctly.
Jointly owned properties can require more complex reporting.
Fully digital records may make HMRC enquiries more likely if the numbers are inconsistent across updates, so accuracy will matter from day one.
Why This Matters for the Self-Employed
For sole traders, MTD could improve visibility over tax liabilities — but only if records are kept consistently.
Key considerations:
Quarterly reports may reveal tax liabilities much earlier, helping with cash-flow planning.
Adopting new software often allows easier invoicing, better tracking of unpaid bills, and more streamlined receipts capture.
Those with mixed income (e.g., freelancing plus rental income) will need to ensure each stream is logged correctly.
Challenges Many Taxpayers Will Face
Adopting new software if they currently use spreadsheets or manual methods.
Adjusting to quarterly admin rather than once-a-year submissions.
Ensuring accuracy when updates occur more frequently.
Understanding HMRC software requirements and avoiding non-compliant solutions.
How to Prepare Now
Review your existing record-keeping system — will it integrate with MTD?
Begin using MTD-compatible software well ahead of the deadline.
Track expenses more consistently rather than in an annual catch-up.
Speak with a tax adviser to ensure your business and property income are categorised correctly.
Final Thoughts
While MTD represents a major shift in tax reporting, early preparation makes the transition far smoother. For many landlords and self-employed individuals, the changes can even bring benefits — clearer cash-flow insights, fewer surprise tax liabilities, and more structured financial records.
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