Landlords and Sole Traders to comply with MTD rules by 2027

If you’re a landlord or sole trader and you submit a self-assessment tax return, you need to be aware of the changes coming to how you pay your taxes.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to be extended for landlords and the self-employed with qualifying income, with the changes coming in two phases:

• From April 2026, for those earning over £50,000pa
• From April 2027, for those earning over £30,000pa

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is designed to reduce the tax gap by requiring businesses and individuals to keep digital records, use MTD-supported software and submit quarterly updates in order to bring the tax system closer to real-time.

The government hopes that MTD will make it easier for individuals and businesses to get their tax right, as well as improving productivity by encouraging businesses to digitise key processes. It’s also hoped MTD will reduce the amount of tax lost to avoidable errors.

What’s changing?

VAT-registered businesses have been required to comply with MTD for VAT since 2019, requiring them to keep digital records of all business transactions and submit quarterly statements, but HMRC announced in February this year that MTD would be extended to sole traders and landlords.

HMRC expects the first phase to bring 780,000 people into MTD, with a further 970,000 joining during the second phase.

What will the transition cost those affected?

The transition to MTD is expected to hit landlords and sole traders by as much as £350, while there is also an anticipated additional ongoing yearly cost.

• For those earning between £30,000 and £50,000 per year, the move is expected to cost £350, with an average yearly additional cost of £110.
• For those earning above £50,000, the transition cost is estimated at £285, with an additional average yearly cost of £115.

Aside from yearly earnings, the other factors that could impact these costs include the size and complexity of the business, the individual’s digital capability and the cost of the software solution the business invests in.

How we can help with the transition

Every year, hundreds of thousands of taxpayers are hit with penalties from HMRC for simple mistakes with their self-assessment tax returns, and significant changes like the MTD scheme only make this more likely.

However, by employing the services of a specialist accountant, you can save yourself a lot of time, potentially save yourself from over or under-paying tax, and stay on top of new legislation and processes.

To find out more about how we can help sole traders, landlords and other small businesses, why not contact our team of experts today? Click here to book your free, no obligation self assessment consultation.