Why should a ‘typical’ landlord care about MTD for Income Tax?

From April this year, landlords with a qualifying income in excess of £50,000 per year need to use Making Tax Digital (MTD) to report and file their tax returns for Income Tax.

In 2027 this threshold will reduce to £30,000, reducing again in 2028 to £20,000, which is a logical strategy. It incrementally onboards smaller cohorts of landlords year by year, the idea being not to overload the system or impose the responsibility of early adoption onto small, most likely part-time, landlords.

But what does this mean for the ‘typical’ landlord?  And by typical, I mean a landlord with an average income.

For the avoidance of doubt, the English Private Landlord Survey estimates that in the year to 2024 only 17% of landlords received a rental income of £50,000pa or more, and that the median rental income of landlords in England was £19,200pa.

In fact, even in London, where rents are highest, the median income was £24,500.

So, why should a ‘typical’ landlord care?

Put simply, many landlords don’t really need to MTD much consideration yet. It could be years before their income brings them into scope, if it ever does. Although, given recent governments’ attitudes towards fiscal drag, and at least the last few governments’ view of taxing landlords, I would assume that early in the next decade most landlords will need to be familiar with the system.

Of course, I recognise he chance that a future government might change the rules, or not adjust the thresholds is not a good enough reason to upend the way that you have been approaching your accounts for years though. Depending on your circumstances adopting tax software might be a great time saver and therefore offer a decent ROI, or it might be largely unnecessary. What is definitely going to be beneficial though, if not essential in the future, is adopting sensible record keeping practices that make life easier for today and future possibilities.

Looming tax deadline

With the 31 January deadline looming for self-assessment, many landlords (myself included) will have been thinking about our accounts and record keeping over recent days.

Some (also like me) will have rued the occasional missing invoice, spent unnecessary time chasing agents and managing companies, and (a source of much personal embarrassment) wondering why-oh-why my trusty spreadsheet’s columns do not correspond with the fields of SA105 – the infamous self-assessment UK property supplement.

Like most landlords I wont be mandated to use MTD this year but looking at what it may require in the future and considering it in the context of rental reforms also taking effect in the Spring, I am going to make some simple changes to how I operate.

A few simple changes

Phase one of the implementation of Renters’ Rights makes good record keeping more important than ever before. Recording details of your properties, tenancies, service of relevant documents, compliance activity, maintenance, and even regular investment will help prevent mistakes costing margin. NRLA Portfolio, which all members have access to as part of their subscription makes this straightforward and will help make sure the transition to a post AST world is as painless as possible.

What is also does is help to categorise and record income and expenditure relevant to each of your properties, which is the first step to MTD compliance and more orderly self-assessment.

MTD requires specific software to interface with HMRC, but if you’re not planning on enrolling this year you don’t necessarily need so invest yet – but a little early preparation is unlikely to hurt.

Using NRLA Portfolio, or similar management software will keep all of your compliance and management details together in one place and allow you to track income and expenditure all year round. Linking your finances to your portfolio management software with Openbanking also means that you can automatically label and categorise regular payments according to your chosen criteria – such as those used in SA105.

Ultimately it’s not essential that you use any kind of management software or system if you aren’t in scope of MTD – but it certainly couldn’t hurt given how much change and potential for error 2026 is likely to bring with it.