What the new Making Tax Digital rules mean for landlords and the self-employed

The self-assessment tax deadline is fast approaching, but landlords and the self-employed will soon have new HMRC requirements to follow – known as Making Tax Digital.

The changes are the “biggest shake-up of tax returns for 30 years”, said Saga.

MTD will "shake up" how landlords and self-employed people report their untaxed income to HMRC, said MoneyWeek, with a shift to a digital system.

What is Making Tax Digital?

Making Tax Digital is a “new way for sole traders and landlords to report their income and expenses” to the taxman, said HMRC, if their annual income is above £50,000.

The self-employed and landlords with an income between £30,000 and £50,000 will need to comply from April 2027.

Submissions must be made quarterly using HMRC-approved software.

VAT-registered businesses have already had to follow the rules, said The Independent, so they “will have a head start”, but it will be a “major change for other sole traders and landlords”.

How Making Tax Digital works

Making Tax Digital will initially affect almost 800,000 landlords and self-employed people, said HMRC, who will need to create digital records of their income and expenses, provide quarterly updates, and pay their tax return by 31 January the following year.

You can file the information yourself or use an accountant. However, it must be done “using either a compatible software package or other software, such as spreadsheets that connect to HMRC’s systems”, said DMO Accountants. You won’t be able to “simply input data manually” from a spreadsheet into a software package. A list of compatible software providers is available on the government website.

The payment deadline dates for income tax will remain the same as under the current self-assessment system: 31 January and 31 July each year.

The pros and cons of Making Tax Digital

The changes should provide a more secure and easier way to manage your taxes, said Unbiased, and could “help you understand your company’s finances better, including tax and cash flow”.

But there may be “additional costs” said the financial website, such as for an accountancy package, while “new processes take time to adopt”.

There is also still a “worrying lack of knowledge” about the changes, said The Independent, reporting a survey by accounting software firm FreeAgent which found that almost two in every five respondents said they had never even heard of it.

However, there will be fines for those who fail to comply, starting at £200 for late filing once businesses have breached a certain penalty points threshold. Fines could reach £3,000 if a business does not provide any records.

But in a sign that HMRC accepts there are “likely to be teething problems”, said the Financial Times, the taxman has waived penalties for late submissions of quarterly reports during the 2026/27 tax year.