Making tax digital for landlords and sole traders

What You Need to Know (and How to Prepare)

If you’re a sole trader or landlord running a small property business, you’ve probably heard about Making Tax Digital (MTD)—but many are still unclear on what it actually means in practice.

MTD for Income Tax is a significant change being introduced by HMRC that will affect landlords, sole traders and self-employed individuals with rental or business income. In short, it moves tax reporting away from a once-a-year system to a more regular, digital process.

 

What is MTD for Income Tax?

Under MTD, affected taxpayers will need to keep digital records of their income and expenses using HMRC-compatible software, and submit updates to HMRC throughout the year rather than just completing an annual tax return.

For many landlords and sole traders —especially those used to spreadsheets or paper records—this represents quite a shift.

When does it start?

The rollout is being phased in over several years:

• From 6 April 2026 – if your total income from property and/or self-employment exceeds £50,000 (based on your 2024/25 tax return)
• From 6 April 2027 – threshold reduces to £30,000
• From 6 April 2028 – threshold reduces further to £20,000

So even if you’re not affected immediately, there’s a good chance you will be in the near future.

What will you need to do?

Once you hit the criteria for MTD, you’ll need to:

• Register for MTD with HMRC
• Keep digital records of all rental income and allowable expenses
• Submit quarterly updates to HMRC
• Make any necessary year-end adjustments
• Submit a final digital tax return to confirm your overall position

Quarterly reporting is the biggest change here, and it’s something many landlords and sole traders aren’t currently used to.

How can you prepare now?

Getting ahead early can make the transition much smoother. You can prepare for this by putting the following steps in place:

• Get your records up to date: Make sure income and expenses are recorded consistently and accurately
• Consider moving to cloud software: HMRC-compliant bookkeeping tools will become essential under MTD
• Understand the new reporting cycle: Missing quarterly deadlines could result in penalties
• Get the right advice: Property taxation has its own complexities, and MTD adds another layer

How we’re helping sole traders and landlords with MTD

At Kirk Newsholme, we’re already working with landlords, sole traders and property investors to get ready for MTD—whether that’s putting systems in place now or managing the process ready for when it’s required.

We support clients with:

• Bookkeeping and quarterly submissions
• Reviewing and sense-checking figures
• Year-end tax compliance
• Ongoing tax planning for property portfolios

Some may want a fully managed service, while others prefer to stay hands-on with a bit of guidance—we’re happy to work either way.

If you’re unsure how MTD will affect you, or want to get ahead of the changes, feel free to reach out to Krystal Young (Senior Personal Tax Manager) at krystal.young@kirknewsholme.co.uk or 0113 531 7321