MTD for income tax – Landlords and Self Employed Quick Guide

Are you aware of the Making Tax Digital (MTD) legislation and what it means for landlords and self-employed people? If not, read on because time is running out to get up to speed before you have to be using MTD-compliant accounting software.

In this short guide we’re going to cover everything you need to know ahead of next year’s deadline, including what MTD is, when it might apply to you and what software there is to choose from.

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is a government initiative intended to help close the ‘tax gap’ by requiring businesses and individuals to keep digital records, use MTD-compliant accounting software and submit quarterly updates.

The use of the word ‘digital’ in the name of this initiative relates to the transition from paper-based or spreadsheet accounting to a fully electronic system of reporting

MTD will bring the tax system closer to real-time reporting, simplify the process of record keeping and payment, and ease the burden of costly administrative errors on businesses and sole traders. MTD will also eliminate the time-consuming task of manually submitting data to HMRC.

When will it apply to you?

VAT-registered businesses have been required to comply with MTD since April 2022, but over the next three years it is being rolled out for most landlords and the self-employed.

From April 2026, sole traders and landlords earning over £50,000 of qualifying income will have to comply with MTD, and this will be extended to those earning over £30,000 in April 2027, and over £20,000 in April 2028.

MTD exemptions

The government wants all businesses to be MTD compliant in the near future, but HMRC might consider granting an exemption if there’s something preventing you from complying fully with the scheme. For example:

• You have a disability that prevents you from using the software or electronic devices required to submit digital tax records.
• You or your business are in the process of becoming insolvent.
• Your religious beliefs prevent you from using electronic devices or keeping digital records.

You’ll need to contact HMRC to apply for an MTD exemption if you believe you cannot comply with this legislation.

What software is MTD-compliant

Making Tax Digital-compliant software will help you to fulfil all of the tasks required of you by the legislation, including creating and storing digital records of your business income and expenses, sending quarterly updates to HMRC and submitting your annual tax return. You can choose to either use a single software product that can do everything, or use multiple software products.

You can view the full list of software currently available for the 2024/25 tax year here, but some of the most notable brands include:

• FreeAgent
• QuickBooks
• Sage Accounting
• Xero

Warr & Co can set you up with a free trial of any of the above software, contact us to request your trial now.

When evaluating MTD-compliant software make sure you check it offers everything you need for your specific circumstances, and speak to your accountant if you need further advice.

Contact Warr & Co to ensure compliance

Making Tax Digital is intended to simplify the tax system for the self-employed and landlords, but any change to how you’ve been submitting your tax returns increases the likelihood you’ll get something wrong—and incur the penalties that can come with it.

The best thing you can do to ensure compliance with the new legislation is to contact the team here at Warr & Co. We’ve got decades of experience in helping sole traders, landlords and small businesses to manage and optimise their tax position, and we can take the burden of having to get it right completely off your hands.

To find out more about how we can help reach out to us here, or book a free, no obligation consultation and we’ll explain exactly what you need to do and how we can provide support.