8 Steps Landlords Need to Take To Become MTD Ready

For many landlords, the UK tax system is changing. Making Tax Digital (MTD) for income tax marks a digital shift for landlords and self-employed individuals to report their earnings. No more paper records or spreadsheets; HM Revenue and Customs (HMRC) is turning to cloud-based systems for easier reporting.

Make sure you’re ready for the changes with these 8 steps to preparing for MTD.

1. Work Out Your Income

Making Tax Digital for landlords applies if you’re earning £50,000 or more a year. This takes into account income from either:

• Rental properties alone
• Combined income from rental properties and self-employed earnings 

For example, if you earn £35,000 a year in rental income, you won’t need to worry about MTD just yet. If you additionally earn £30,000 a year from self-employed ventures, your total income would be £65,000, making you eligible for MTD.

If you earn £50,000+ from rental income alone, you’ll need to comply with MTD.

As a landlord, it’s a smart idea to predict your income ahead of time so that you know whether you’ll qualify for MTD. You can do this by checking your current earnings, for instance, and what you’ve reported for previous tax years. 

You can also predict income from future property investments by using property data to predict rental yields in the UK. This provides insights into average rental income based on location, providing a more accurate estimate of potential earnings for a property and whether you may qualify for MTD in the next tax year.

Do note that the MTD thresholds are subject to change, and the government plans to expand the rules to landlords earning over £30,000 from April 2027. Eventually, there are also plans to bring the threshold down to £20,000. 

What About Your Expenses?

MTD thresholds apply to your gross income. This is your total earnings before your expenses - like maintenance costs and repairs - are removed, so expenses don’t factor into your eligibility. That being said, it’s still a legal requirement to record your expenses and report them to HMRC, making cash flow tracking essential.

3. Understand What’s Changing

MTD for landlords will involve a switch in how you report your earnings to HMRC. The key changes to be aware of once you reach the threshold include:

• Keeping digital records of your income and expenses
• Using MTD software to submit quarterly updates of your finances to HMRC
• Completing a single tax return once a year

The government aims to make tax reporting easier and more streamlined, with the goal of reducing errors on tax returns. It also means you don’t need to wait until the end of the tax year to review your accounts, with regular reporting ensuring you stay up-to-date with your real-time financial health. 

Check out our guide to MTD Requirements to learn more about what to expect.

4. Choose MTD Compliant Software

Under the new MTD rules, you’ll need to use compatible software when maintaining records and submitting your reports to HMRC. This allows VAT returns to be filed directly with HMRC, and HMRC can communicate with the software to provide progress updates (like when a return has been received).

Landlord Studio is MTD compliant and designed specifically for finances from rental properties. With an intuitive platform and a full fleet of reporting tools under one (digital) roof, we’ve got everything you need to make your transition to MTD a breeze.

Before registering for MTD, make sure you’ve created an account with your chosen software and connected it to your bank accounts or current record-keeping system.

Create your free Landlord Studio account and see how it can help you become MTD-ready today.

5. Register for MTD for Landlords

Once you’ve chosen your software, you’ll need to sign up for MTD as a landlord. You can do this by:

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1. Signing into your HMRC account (or creating an account if you don’t already have one).
2. Choosing MTD software that’s compatible with HMRC’s system, like LandlordStudio.
3. Navigate to the MTD sign-up page on the HMRC website. 
4. Adding and confirming your details, including the MTD software you’ll be using.

After registering, you’ll receive a confirmation email from HMRC within 72 hours.

6. Track Your Rental Income

Before April 6th, we recommend that you start tracking your rental income using the MTD system. This gives you time to adjust to a new routine and work out any kinks, ensuring that when the new tax year rolls around, you’re ready to go.

As the new quarterly submissions need up-to-date figures, you’ll need to ensure every rent payment is recorded as soon as it is received. This includes regular rent, late fees, and any additional charges that form part of your rental agreement. 

Make sure all of your financial records are stored within your chosen MTD-compatible software, too, so that they can be easily accessed and submitted when deadlines approach.

Luckily, this is an easy task when you’re using our cloud-based software. By connecting your profile to your bank accounts, we can record transactions on your behalf, reducing administrative burden and cutting down on mistakes. All that’s left is to check that your tenants are paying rent accurately and on time for a streamlined financial system. 

7. Add Key Dates to Your Diary

Knowing deadlines is crucial if you want to avoid penalties and late fees. Under MTD, key dates you should know include:

We recommend adding these dates to your diary so that you don’t miss a single submission.

8. Should You Sign Up for MTD Early?

The government is allowing landlords to sign up early for MTD, even if you’re not reaching the threshold yet. This gives you time to familiarise yourself with the digital reporting process, test your chosen software, and ensure your record-keeping practices meet HMRC requirements.

It also means that once you hit the threshold, you’re already compliant with MTD rules. There’s no need for a quick switch, making the transition a lot less stressful.

Final Thoughts

Getting ready for MTD for landlords doesn’t have to be a last-minute rush. By setting up LandlordStudio now and registering early, you’ll be ready to go when the new tax year begins. 

Looking for more advice? Check out our Landlord’s Guide to MTD and make the transition stress-free.

Create your free Landlord Studio account and see how it can help you become MTD-ready today.