The Spring Statement 2025 has clarified some crucial aspects of the MTD rollout for landlords, including revised implementation dates, updated income thresholds, and new exemptions.
Making Tax Digital (MTD) represents the most substantial overhaul of the tax system in recent history, with particular implications for landlords across the United Kingdom.
According to the latest information from the Spring Statement 2025, landlords will face a phased introduction based on their annual gross income from property rentals.
Perhaps the most significant announcement from the Spring Statement was the confirmation of a third implementation phase for MTD for landlords.
Starting from April 2028, the MTD income threshold for landlords will further reduce to £20,000, bringing many more landlords into the digital tax system.
The gradual reduction in thresholds demonstrates the government’s commitment to eventually digitalising tax reporting for the vast majority of property owners.
The phased approach provides some breathing room, but the message from HMRC is clear: digital tax reporting for landlords is not a question of if, but when.
Understanding the MTD timeline is crucial for landlords to plan their transition effectively, including budgeting for software costs, training, and potential changes to their book-keeping practices.
Making tax digital for landlords thresholds
From April 2026, landlords with a gross income exceeding £50,000 will be the first group required to comply with MTD regulations.
- This initial phase targets higher-income property owners, giving them approximately one tax year from now to prepare their systems and processes for the transition. For these individuals, the quarterly digital reporting will become mandatory, replacing the traditional annual self-assessment tax return.
- The second phase commences in April 2027, when the threshold drops to £30,000. Landlords with gross rental income between £30,000 and £50,000 will then need to adopt MTD-compliant software and begin submitting quarterly updates to HMRC.
- The third threshold starts in April 2028 for landlords with income from £20,000.
Early adoption remains possible and is encouraged by HMRC through their ongoing pilot programme, which offers valuable experience with the system before it becomes mandatory.
Quarterly reporting requirements and digital record-keeping
The transition to making tax digital introduces fundamental changes to how landlords must maintain records and report their income to HMRC.
The Spring Statement confirmed that HMRC’s free online filing service for self-assessment will be withdrawn as part of the MTD transition.
This means landlords will be required to use third-party software for both their quarterly updates and final declaration.
While this change aims to provide a better user experience, it does represent an additional cost consideration for landlords who previously relied on HMRC’s free tools.
Making tax digital software for landlords
The Spring Statement’s announcement regarding the withdrawal of HMRC’s online filing service underscores the importance of selecting appropriate third-party software.
This change means that even for the annual finalisation statement (effectively replacing the traditional tax return), landlords will need to use commercial software rather than HMRC’s free tools.
The selection of appropriate software stands as a pivotal decision for landlords preparing for making tax digital compliance.
HMRC maintains an official list of MTD-compatible software products, which continues to expand as more developers adapt their offerings to meet the technical requirements.
MTD exemptions for landlords
Exemption categories for making tax digital were introduced in the spring statement, providing clarity for landlords in special circumstances who may be concerned about their ability to comply with the new digital requirements.
The Spring Statement expanded exemptions to include several additional categories relevant to the property secto which includes:
- Landlords who have granted Power of Attorney to others to manage their affairs will now be exempt, recognising the practical difficulties this arrangement might present for digital compliance.
- Non-UK resident foreign landlords (who are entertainers and sportspeople) with no other qualifying income sources for MTD purposes will also receive exemption, simplifying compliance for overseas property owners.
- Religious ministers, members of Lloyd’s Underwriters, and recipients of specific allowances (including the Married Couples’ Allowance and Blind Persons’ Allowance) have been granted temporary exemption from quarterly reporting requirements for the duration of the current Parliament.
MTD penalties and compliance framework
A new penalty regime that will accompany the implementation of making tax digital for landlords.
Understanding this framework is essential for landlords seeking to avoid unnecessary financial penalties while transitioning to the new system.
The new penalty system adopts a points-based approach for late submission of quarterly updates and annual declarations.
Under this model, landlords will accumulate penalty points for each missed deadline, with financial penalties applied once a specific threshold of points is reached.
This represents a departure from the immediate financial penalties under the current self-assessment system, providing some flexibility during the adjustment period.
A more lenient approach to penalties will be applied during the initial implementation period. This “soft landing” approach aims to support landlords as they adapt to the new requirements, focusing on helping them achieve compliance rather than immediate punishment for minor infractions.
Landlords participating in the voluntary pilot programme before mandatory implementation will benefit from additional support and a more forgiving approach to initial compliance issues.
This represents another advantage of early adoption, allowing property owners to become familiar with the system during a period when HMRC is prioritising education over enforcement.
