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HMRC’s Tax Digital Plan to Impose Extra Costs on Landlords

In a recent disclosure, HM Revenue and Customs (HMRC) acknowledged the financial and time burdens the new Making Tax Digital (MTD) initiative is poised to place on landlords. Under this scheme, landlords will be mandated to keep their tax records in a digital format and use designated software to submit their tax information to HMRC.

This regulation targets both self-employed individuals and landlords, with implementation dates set for 6 April 2026 for those earning above £50,000 annually, and April 2027 for incomes exceeding £30,000 from business or property. The MTD initiative requires detailed submissions of trading or property income, permitted expenses, and claims for allowances or reliefs for each tax year, alongside quarterly cumulative reports.

The cost implications outlined by HMRC suggest significant financial impact, especially on smaller landlords. For those with annual incomes between £30,000 and £50,000, an initial transition cost of around £350 and an additional yearly expense of £110 are expected. For landlords earning above £50,000, the estimated transition cost drops slightly to £285, with a yearly additional cost of £115.

Starting April 2026 or 2027, based on their income brackets, landlords will need to digitize their records, provide quarterly digital updates, and submit their Income Tax Self Assessment (ITSA) returns using MTD-compatible software.

Sam Reynolds, CEO of Zero Deposit, criticized the initiative for the added financial strain and bureaucratic complexities it introduces for landlords. He pointed out the substantial upfront cost of £350 and an ongoing annual cost of £110 for landlords within the £30,000 to £50,000 income bracket, highlighting the broader economic pressures from high interest rates and inflation affecting the buy-to-let market. Reynolds expressed concerns over the initiative’s timing and its potential to deter investment in the rental sector, emphasising the need for incentives to attract more landlords and increase rental property availability to address the current housing shortage and high rent prices.