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Business Services  •  Personal tax

HMRC admits MTD will be costly for landlords

By RJP LLP on 29 April 2024

Landlords continue to face more challenges when dealing with HMRC, as policies have become stricter and less tax advantaged. Now HMRC has admitted that when Making Tax Digital (MTD) fully comes into operation, landlords will experience higher costs and time commitments when dealing with record keeping.

MTD is part of a broad range of regulations designed to modernise and digitalise the tax system. This element of MTD is part of the Making Tax Digital for Income Tax regulations. It will require all landlords who own property personally to maintain tax records electronically and submit quarterly reports through HMRC-approved software. For some landlords, it could be a big change from filling out a paper-based tax return once a year.

Dates for MTD for Income Tax compliance

The first tranche of landlords needing to comply with MTD will begin from 6 April 2026 - for those earning more than £50,000 annually from property income. Other landlords with an annual income from property in excess of £30,000 must comply with MTD from 6 April 2027. Note, these requirements may change after the 2024 General Election.

A key feature of MTD for Income Tax is that landlords will be treated more like business owners. They will need to submit a detailed report for each tax year - rather like a set of accounts. The report will summarise the business’s trading or property income, allowable expenditure and any claims for allowances or reliefs. In addition to this, quarterly updates will need to be filed on fixed dates, much like VAT returns currently. This means that HMRC will be able to track an individual’s property income and calculate their estimated tax liability in advance.

In the same way as most policy introductions involving landlord tax, these changes will not be free. HMRC has estimated that landlords will face additional costs to be able to comply. These ranges from £150 to £500 in total, depending on how much they are making from property rental.

What will landlords need to do?

To comply with MTD for Income Tax, starting from April 2026 or 2027 depending on income levels, landlords must do the following:

• Maintain digital accounting records for their rental property;
• Submit digital quarterly updates;
• Once a year, submit an Income Tax Self Assessment (ITSA) return using MTD-compatible software.

If you have rental property and want to think about how best to structure your investment to be tax efficient, or perhaps you are thinking about selling, we can help. Get in touch via partners@rjp.co.uk.

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