Landlords have been advised by the Government to research available software before tax returns begin to go digital next April.
Those landlords who earn £50,000 in the 2024/2025 tax year will be the first to use Making Tax Digital for Income Tax from 6th April 2026 to create, store and correct digital records of their self-employment and property income and expenses and to send quarterly updates to HMRC.
They won’t need to create digital records for pensions, a partnership, savings or dividends but the software must be able to report this on their tax return.
The government explains that available software either creates digital records or connects to existing records, such as those held in spreadsheets.
Software that creates digital records can either link to a business bank account to import transactions automatically, scan receipts and invoices, or allow you to manually enter your income and expenses. Most of these products will also let you both send quarterly updates and submit your tax returns to HMRC.
And software that connects to your records (bridging software) kept in spreadsheets or other accounting tools allows you to send quarterly updates and submit your tax returns to HMRC and means you can keep using your current software.
You could use either one compatible software product that does everything or products that work together, such as one for creating digital records and another for submitting information to HMRC. It has a software finder tool and also lists potential providers.
It advises landlords: “You should also consider whether the software allows multiple agents if you have more than one and offers pricing that suits your budget. If you think your income sources will change you should check if your software will support that income source in the future, for example, if you’re a landlord but are thinking of starting a business.”
Landlords with an income of more than £30,000 will need to use MTD from April 2027 while it will impact those earning more than £20,000 from April 2028.
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