Landlords – look out for ‘Making Tax Digital’ letters

Landlords – look out for ‘Making Tax Digital’ letters

HMRC is planning to start sending letters to taxpayers who may be affected by the introduction of Making Tax Digital (MTD) for income tax advising them they will have to report quarterly to HMRC.

The first letters will hit the post in April 2025, with landlords, sole traders and self-employed with income over £50,000 being the first to receive them. 

The imminent rollout of this new income tax element of MTD for Income Tax self-assessment will see self-employed, sole traders and landlords earning more than £50,000 in annual income in the 2024-25 self-assessment tax return subject to quarterly reporting to HMRC.

The rules which kick in from 6 April 2026, will be the first time individuals have been told personally by HMRC that they will have to comply with the new MTD reporting requirements.

HMRC confirmed: ‘From April 2025, we’ll write to customers whose 2023 to 2024 self-assessment tax return shows their income from these sources was close to, or over, £50,000. This letter will let them know that they may need to use Making Tax Digital for Income Tax.’

HMRC also confirmed that from April 2025, there will be two sign up options to enrol in MTD:

Option 1 is to sign up for the 2025-26 tax year to familiarise with the changes.

Early adopters will also have the benefit of access to a specialist HMRC customer support team to help them through any teething problems.

HMRC said: ‘Accountancy firms and clients that sign up now will have exclusive access to HMRC’s Making Tax Digital customer support team – they’ll support you with Making Tax Digital for Income Tax and help you with some of your clients’ other income tax queries.’

Option 2 is to sign up for the 2026-27 tax year.

It is important to note the taxpayer clients who sign up during the testing period, will not be able to claim carry back of losses, or change their accounting period and accounting method.

There are a number of clients that cannot participate in the trial period, including anyone on a HMRC payment plan, earning income from a trust or a furnished holiday let, as well as users of ‘averaging’ due to variable profits throughout the year, which would include farmers, artists and writers, for example.

As with all HMRC digital services, there are a couple of exemptions for taxpayers once the rules become mandatory in 2026. These are very limited and anyone applying has to provide an adequate explanation of why they should be exempt. The main exemption factors are age, disability and location meaning it is not practical to use software to keep digital records. In addition, practising members of certain religious societies or orders which ban the use of electronic communications can also secure an exemption.

Now that HMRC is mailing the tax payers who are captured by phase one of Making Tax Digital for Income Tax, it will be important for you to advise your accountant if you receive a letter.