From April 2026, sole traders and landlords with a qualifying income over £50,000 will now have to comply with the Making Tax Digital (MTD) for Income Tax Requirements. Below, we detail the most recent updates, what this means and the tax filing changes that need to be made.
Are You A Landlord? The Recent Changes Will Impact You
The new updates state that mandated taxpayers must now use third-party MTD-compliant software to keep their digital records. They must also file quarterly summaries of their income and expenses with HMRC. But how can you determine qualifying income? And what happens when a lease property is jointly owned? Learn more in our guide.
- Who Are Mandated Taxpayers?
- How Will The Updates Impact Landlords?
- How Does HMRC Determine Who Is Mandated?
Who Are Mandated Taxpayers?
A mandated taxpayer is an individual or entity legally required to file tax returns and pay taxes based on income, assets or other taxable activities. Both sole traders and landlords are considered mandated taxpayers as they earn income through self-employment or property rental; this makes them legally obliged to report their earnings, file tax returns and pay any applicable taxes.
How Will The Updates Impact Landlords?
The recent updates to MTD will mainly impact landlords. For any rented properties that two or more individuals jointly own, each owner must maintain their own digital records and submit seperate quarterly returns to HMRC.
Luckily, HMRC has recognised that this will likely cause an administrative burden, so have implemented more relaxed quarterly reporting requirements. Those who take advantage of this easement will be allowed to report their share of gross income in their quarterly returns only. They will, however, still be required to submit the full details of their share of income and expenses on their annual return at the end of the year.
Landlords who own some properties on their own and others jointly will still need to report expenses relating to the solely owned property on their quarterly returns.
How Does HMRC Determine Who Is Mandated?
To determine which taxpayers will be mandated to join MTD for Income Tax in 2026, HMRC will look at the tax return for the current tax year (2024-25), specifically qualifying income. Qualifying income relates to the total gross income from trading and property, as reported on the most recent self-assessment tax return.
For jointly-owned property, each individual’s share of the income from the property will count towards their qualifying income, not the total rent income from the property.
In most cases, gross income relates to income before deductions; however, some landlords benefit from existing concessions. Concessions mean that if a property is jointly owned and the taxpayer receives notice of their share of property income with expenses deducted, they can report the net amount on their self-assessment return instead.
As HMRC has confirmed that only the qualifying income reported on the self-assessment return is checked, any joint property owners who benefit from the concession may have a lower qualifying income for MTS purposes.
Making Tax Digital Support
At Digital Tax Matters, we can help you comply with the MTD regulations. We offer assistance in selecting and implementing digital accounting systems, provide training and ongoing support, conduct compliance checks, and ensure accurate quarterly reporting. Many of our clients choose to outsource their digital bookkeeping to us.
You’ll need to take three steps to prepare for the changes which come into force on the 1st of April 2026:
- Ensure you have set up and have access to your own gateway:
If you haven’t already, then you will be required to create a personal gateway as soon as possible; not only is this necessary for MTD, but it is also a useful tool to keep on top of your personal tax affairs. Your gateway will link to our agent services account and create a digital handshake, which will allow us to file the quarterly returns on your behalf. You can this link to create your personal gateway. - Use software to allow a seamless exchange of information with us:
We have conducted research across a number of software providers, and we advise the best and most efficient software to help you Comply is ‘Xero Simple’‘. This software is packed with features to assist you in complying with the upcoming changes, including a live bank feed and digital receipt-capturing app. The cost for this software is £7 per month. - Set up a separate business account for business use only (includes rental income and sole traders):
If you are currently using your personal account for business transactions, we advise you to set up a separate account for business use only. This will ensure the transactions being pulled through with the live feed capture business transactions only. This will help keep your accountancy fees as low as possible and allow us to report the quarterly figures as efficiently as possible.
Please contact us and discuss this in further detail with your account manager. You can get in touch with us as a new client or for general enquiries via 01234 357595 or [email protected].