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The government has released an update on the Making Tax Digital (MTD) scheme, revealing the good news that many landlords are exempt.
The decision came to light following the Autumn Statement. The government is keen to emphasise that it is committed to modernising tax administration, but, also aims to ease the administrative burden on smaller property owners.
Exemptions based on income
Landlords with an income below £30,000 will be exempt from mandatory participation in the MTD scheme.
This exemption offers relief to a significant portion of property owners who may have faced additional administrative complexities with the digitisation of the tax system.
The government has expressed its intention to review the decision regularly, so this may be subject to change in the future.
Phased implementation for higher earners
For landlords earning between £30,000 and £50,000, there will be a phased implementation of MTD.
Those with rental income exceeding £50,000 will be required to join the MTD scheme from April 2026, followed by landlords earning over £30,000 from April 2027.
Challenges for higher earning landlords
The MTD scheme will create additional administrative work for some.
Larger property owners with incomes over £50,000 will need to adapt to filing income data and receipts on a quarterly basis, a departure from the traditional annual self-assessment process.
Nonetheless, the system itself is to be redesigned in places, with the following objectives:
- make it easier for individuals and businesses to get their tax right
- mean customers can integrate tax management with a range of business processes through software
- contribute to wider productivity gains for businesses by encouraging digitalisation
The government also promises the system will have:
- improved accuracy of digital records
- additional help built into many software products
- digital records being sent directly to HMRC
Government's commitment to modernisation
Despite the challenges, the government remains steadfast in its commitment to modernising the tax administration system. HMRC have said:
The government remains committed to delivering MTD for Income Tax Self-Assessment and believes this is central to building a trusted, modern tax administration system and supporting small business productivity.
The digitalisation of records and tax administration will help businesses to keep on top of their tax affairs, saving them time and reducing errors while, in turn, reducing the tax gap from error and carelessness.
Voluntary registration for low earners
While landlords earning under £30,000 are exempt from mandatory MTD participation, they retain the option to register voluntarily.
This allows smaller landlords to still benefit from the advantages offered by the digital tax system, if they want to.
This is good news for a lot of landlords already facing other challenges with their rental properties. They will now not get caught up in the extra admin work created by the Making Tax Digital scheme.
Read the government’s overview of the Making Tax Digital scheme.