From April 2025, residential landlords, self-employed individuals and sole traders will be encouraged to adopt digital record-keeping and tax returns via the Government’s Making Tax Digital programme. From April 2026 it will be compulsory.
Making Tax Digital (MTD) is part of HMRC’s ongoing programme to modernise and simplify the tax system. It will already be familiar to VAT-registered businesses and sole traders who have been making MTD returns since 2022.
HMRC is now accelerating its MTD programme throughout 2025, 2026 and 2027, with landlords, self-employed individuals and sole traders firmly in its sights.
There are an estimated that there are 2.8 million private landlords in the UK together with a further 700,000 self-employed and sole traders and for many of them, the shift to HMRC’s MTD programme will be a considerable change in the way they report on their finances and pay tax.
Importantly, the move applies, initially, to landlords, sole traders and the self-employed with an annual gross income of £50,000 or more. That means, for example, a self-employed electrician earning £35,000 a year but with a rental property generating £20,000 would be caught by this change. Those that fall under this threshold do not need to worry for now.
For those over that threshold, it will mean that from 1 April 2026, it will be no longer possible to use HMRC’s website to file returns. Instead, you will need to keep digital records using MTD-compatible software, such as those provided by Xero, QuickBooks and Sage.
Landlords, sole traders and the self-employed will need to submit quarterly updates and a final declaration that includes all other taxable income by 31 January every year. Separate quarterly reports will be required for rental income.
Those with an annual gross income of £30,000 or more will be pulled into the MTD net from April 2027, lowering to £20,000 from April 2028.
However, landlords, sole traders and self-employed who want to get ahead of the game can embrace MTD from this April.
