Making tax digital for landlords
Making Tax Digital is no longer a distant concern for UK landlords—it’s an active requirement that affects how you report your rental income to HMRC. Whether you’re managing a single buy-to-let property or a portfolio of several, understanding what MTD means for your tax affairs is essential. At Severn Accounting, we work with Worcester-based property investors regularly, and we’ve seen first-hand how getting ahead with digital tax compliance saves time, stress, and money come self-assessment season.
What is Making Tax Digital and why does it affect landlords?
Making Tax Digital is HMRC’s initiative to modernise tax administration and make it easier for businesses and individuals to get their tax right. For landlords, MTD requirements apply if your rental income exceeds £10,000 per tax year, or if you’ve chosen to opt in voluntarily below that threshold.
From a practical standpoint, MTD means you must maintain your rental records in digital form and use compatible software to submit quarterly updates to HMRC. Rather than gathering receipts in a shoebox and filing everything once a year, you’re now expected to keep your books updated throughout the tax year and file regular submissions. This might sound cumbersome, but it actually reduces errors and keeps HMRC informed as you go.
Quarterly submissions: what you need to know
The cornerstone of MTD compliance is submitting quarterly summaries to HMRC using compatible software. These submissions capture your rental income and allowable expenses for each three-month period. You’ll need to report:
- Rental income received
- Allowable expenses (mortgage interest, repairs, maintenance, letting agent fees, insurance, council tax if applicable)
- Capital allowances claimed
One crucial point: you cannot simply estimate these figures. Your software must pull data from digital records. This means moving away from manual spreadsheets and relying on tools that maintain an audit trail. HMRC-approved software includes everything from basic bookkeeping packages to specialist landlord accounting tools.
The four quarters typically follow the tax year (6 April to 5 April), though you can align them to calendar months if you prefer. Each submission is due by the deadline specified by HMRC—usually 90 days after the quarter ends.
Record-keeping in the digital age
Good news: if you’re already using modern accounting software or even well-organised spreadsheets, you’re probably halfway there. However, MTD has specific standards for what counts as adequate digital records.
Your records must evidence:
- Every transaction relating to rental income
- Every allowable deduction
- Supporting documentation (invoices, receipts, bank statements)
Importantly, HMRC expects records to be kept in ‘digital’ format, but this doesn’t mean you must bin your paper invoices immediately. Digital records can include scanned documents, so long as you retain the originals for six years. Many landlords use cloud-based storage or document management systems to centralise everything—a sensible approach given that HMRC can request evidence at any time.
The end-of-year position statement
Once you’ve submitted your four quarterly updates, you’ll complete a final end-of-year position statement. This isn’t a brand-new calculation; rather, it’s a reconciliation that confirms your software figures match your actual tax position. You’ll declare any adjustments needed and provide a balancing figure that feeds into your self-assessment tax return.
This step is critical because it’s your final opportunity to correct any errors before filing your SA return. Many landlords find this the least onerous part of MTD, especially if they’ve kept their quarterly submissions accurate and up-to-date.
Getting started with MTD
If you’re new to MTD, the best first step is choosing compatible software. HMRC’s list of approved products is extensive and caters to all budgets. Some are free, whilst others charge monthly subscription fees—often worth the cost for the time saved and accuracy gained.
Once you’ve selected your software, you’ll need to link it to your HMRC online account and authorise it to submit on your behalf. If you’re uncertain about the technical side, your accountant can guide you through it. At Severn Accounting, we help clients set up their digital systems and ensure their quarterly submissions are filed correctly and on time.
MTD might feel like another compliance burden, but it’s genuinely designed to simplify tax reporting when implemented properly. By keeping digital records throughout the year and submitting quarterly, you’ll avoid the chaos of year-end scrambles and present a clearer picture of your rental business to HMRC.
For tailored advice, contact Severn Accounting — we’re here to help.