As the phased rollout continues, all agents need to understand what is required and take appropriate steps to prepare. In a policy paper published on 26 March 2025, the UK Government confirms it is continuing to explore how to bring digitalisation to sole traders and landlords who have income below the £20,000 threshold.
Read the HMRC Policy Paper: Modernising the tax system through MTD →
What is Making Tax Digital?
MTD aims to streamline tax processes by moving them to a fully digital system. The scheme is intended to make it easier for businesses and individuals to maintain accurate records and submit tax returns more efficiently. Under MTD, taxpayers must use compatible software to keep digital records and submit tax returns to HM Revenue and Customs (HMRC).
The scheme was first announced in 2015 and will require quarterly, rather than annual, reporting of self-assessment tax returns through MTD-compatible software. An estimated calculation will be produced based on the information provided to help budget for tax. At the end of the year, any non-business information can be added and then finalise tax affairs using MTD-compatible software. This will replace the need for a Self-Assessment tax return.
What agents need to do
Property agents must prepare for MTD by ensuring they and their clients use compatible software that meets HMRC’s requirements.
HMRC is urging agents to sign up for the voluntary testing phase for MTD for Income Tax to try the new process before it becomes mandatory. It will also help HMRC expand end-to-end testing, to ensure the systems work as they should before April 2026.
Find out when you need to use MTD for Income Tax →
Concern over the increasing burden on landlords
ARLA Propertymark President Angharad Trueman believes for small landlords, especially those who are older and less tech-savvy, the MTD requirements will be a step too far, coming on top of nervousness about the impact of the Renters’ Rights Bill. She stated that many may decide they’ve had enough and make the decision to exit the market.
Alongside these new requirements, the ongoing legislation in the private rented sector, with more changes to come affecting renting and energy efficiency targets, together with the impact of Section 24 tax changes, and higher property taxes when purchasing a buy-to-let property, all add to disincentivise landlords to continue to invest in housing.
Using survey data from members and other private and public sector organisations, Propertymark’s position paper, Impact of tax changes on the private rented sector, highlights the detrimental impact that UK Government decisions since 2015 have had on landlords’ tax and financial situations.
