Tax man admits mandatory digital tax will cost landlords more

The government’s confirmation of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) brings both additional costs and changes in procedures for landlords. Starting from April 2026 or 2027, depending on income thresholds, landlords with qualifying income over £30,000 or £50,000 will need to adhere to the new regulations.

Under MTD for ITSA, landlords will be required to maintain electronic tax records and submit reports to HMRC using approved software. These reports will include details of their trading or property income, allowable expenditure, and claims for allowances or reliefs, with interim cumulative reports submitted quarterly on fixed dates.

HMRC estimates that landlords within the £30,000 to £50,000 income threshold may face an average transitional cost of £350 and an average annual additional cost of £110, while those above the £50,000 threshold may incur slightly lower costs. These costs include familiarization with MTD obligations, potential software subscription fees, and additional time spent on quarterly updates.

However, the government argues that the transition to digital tax records will ultimately benefit landlords by reducing errors and time spent on corrections, thereby enhancing productivity. Digitalization aligns with international trends and aims to reduce the tax gap caused by unintentional errors in tax filings.

While MTD for ITSA may present initial challenges and costs for landlords, the long-term benefits include reduced error rates, time savings, and tailored services from HMRC. With the implementation of MTD for VAT-registered businesses already underway since April 2019, the expansion to income tax self-assessment represents the next phase in the government’s digital tax strategy.

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