Making Tax Digital Kicked Into Touch Again for Landlords

Successive Tory governments have made a big noise about Making Tax Digital - the new answer to increasing efficiency and cutting costs for taxpayers and HM Revenue & Customs - only things haven’t gone as planned.

MTD was slated for April 2018 but slipped due to the COVID pandemic and other implementation delays.

The deadline was pushed back to this April and then April 2024 - but HMRC and The Treasury still haven’t got their act together over MTD and have announced yet another delay.

This constant will they, won’t they date changing leaves many landlords confused.

Now, MTD starts for landlords with more than £50,000 rental income are due to start MTD from April 2026, while those earning rents between £0,000 and £50,000 begin from April 2027.

Treasury calls for gradual change

But what about the millions of landlords earning less than £30,000 rent a year?

Ministers and HMRC are yet to announce when and how these landlords will join MTD if they ever will.

The Treasury announced an MTD review in December, promising updated government guidance would follow shortly.

Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually. However, it is important to ensure this works for everyone: taxpayers, tax agents, software developers, and HMRC.

“Smaller businesses, in particular, should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.”

Tip: Change accounting dates

The MTD switch does not come without issues.

Businesses that do not have a March 31 accounting date must estimate their profits and rely on HMRC to repay the overpaid tax.

For example, a business with a September 30 year-end will have six months of recorded profits but must estimate details for the other six months when the change-over occurs.

To avoid this blurring of profits, landlords should consider changing their property business year-ends to March 31.

Making Tax Digital for landlords FAQ

What does MTD stand for?

MTD, or Make Tax Digital is the government plan to digitise the tax system that was first introduced in 2015.

What does MTD mean for landlords?

Landlords must keep digital income and expenses records and send quarterly transaction reports to HMRC on compatible software.

HMRC will return a summary of the estimated tax due based on the figures.

The final MTD return for the year will act as a self-assessment tax return, doing away with the need for a separate return.

Why is MTD delayed?

The government has confirmed the reasons for the delay; other than COVID, the rising cost of living is ‘challenging’ for landlords.

However, rumours from HMRC suggest problems with IT systems and not enough landlords volunteering to test MTD are at the root of the problem.

Does the MTD delay impact all businesses?

No. For example, companies and VAT-registered businesses have MTD timetables unaffected by the property business delay.

Is MTD compulsory?

MTD is compulsory for landlords, although the final rules are expected to include exceptions if the taxpayer cannot keep digital records due to technical issues, age, disability or infirmity.

Choosing MTD-compatible software

HMRC publishes an online guide explaining how to choose MTD software for landlords and listing available suppliers.