Landlords cannot afford to ignore their Making Tax Digital (MTD) obligations, says business advisory firm Blick Rothenberg.
MTD comes into effect on April 6 and Heather Powell, a partner at the firm, says: “Penalty points will be awarded if filings are late, at two points (i.e. two late filings) landlords will face a £200 fine. This is on top of another two penalties if the tax due is paid late.
“For 2026 the first starts 30 days after payment was due based on a set percentage (3%) of the balance outstanding, and a second (10% per annum) starting after 45 days which accrues daily, based on the sum outstanding.
“Interest will also be charged on late payments by HMRC. Late filing can quickly become extremely costly.”
Under MTD, landlords who have a gross rental income greater than £50,000 will be required to make quarterly reports to HMRC of their rental income and expenses from April 6 2026, followed by a final return pulling all of the information together.
The first return, reporting rental income and expenses for the three months April 6 2026 to July 5 2026, has to be filed by August 7 2026, with filing from ‘compliant software’ or bridging software that picks up the financial information from an excel spreadsheet.”
Powell adds: “If they have rental income greater than £50,000 landlords need to start writing up their accounting records from 5 April 2026, and make the first filing by August 7 2026.
“If a landlord’s rental income is over £30,000 per year their filings do not need to start until 5 April 2027. Landlords with rental income over £20,000 – which equates to rent £1,666.66 per month – need to start filing from April 5 2028.”
She believes that landlords who run their buy to let portfolios through a separate bank account, and write up the records in accounting software which allows the user to upload copies of the rent demands and purchase invoices, are in a good position to comply with these new rules.
But they need to factor in the administration and deadlines for making their filings into their diaries.
She adds: “If a landlord collects rent into their personal bank accounts and collates various reports and invoices for analysis at the end of each financial year, they now only have a couple of months to get their accounting records in order.
“The key tasks are opening a bank account and appointing an accountant to write up their accounting records or purchasing accounting software that HMRC has designated as ‘compliant’ for filing the quarterly returns.”
Powell says there has been much discussion on why HMRC are introducing this new filing regime, as tax payment dates will not change.
MTD will increase the overheads of landlords significantly and to date the only reply from HMRC has been that this will “increase the accuracy of filings”.”
She concludes: “Accountants and tax advisors are already speculating that this filing regime will be followed by a quarterly tax payment regime, mirroring the VAT regime.
“It is easy to see why The Treasury would be happy to see income tax payable by landlords paid at an earlier date than current legislation requires.”
This article is taken from Landlord Today