Making Tax Digital (MTD)

Making Tax Digital (MTD) is a UK government programme that requires many taxpayers and landlords to keep digital records and send updates to HMRC using approved software, instead of relying on paper forms or manually completed spreadsheets. It is mainly aimed at making tax “right first time”, reducing errors and giving HMRC more frequent information.

For renters, MTD matters mostly indirectly, because it changes how landlords (especially smaller, “accidental” landlords) manage their tax affairs. A landlord with several properties, or with a mix of employment and letting income, may increasingly use apps like August to track rent, allowable expenses and mortgage interest in real time, rather than sorting everything out once a year.

MTD is already in place for all VAT-registered businesses, who must keep digital records and file VAT returns via compatible software. For Income Tax, MTD will apply in stages to individual landlords and self-employed people with property and/or business income above certain thresholds, requiring quarterly digital updates and an end-of-year statement instead of a single annual Self Assessment return.

MTD sits alongside a wider policy trend towards professionalising the private rented sector (PRS). MTD supports that trend by nudging landlords towards better record-keeping, clearer separation of personal and business finances and more accurate tax reporting.

MTD does not give landlords any new powers over tenants and it does not change core housing rights. However, as compliance expectations increase through both tax and housing law some landlords may review their portfolios, improve documentation or, in some cases, exit the market altogether, which can affect availability of rented homes in particular areas.