HMRC has revealed more details about its looming Making Tax Digital (MTD) system including that some 118,000 private landlords will soon have to begin reporting quarterly rather than annual rent receipts and expenses.

Letting agents will be heavily involved in this new system, as many will have to help their landlord clients gather than rental income and expenses information required by the new system, which initially will apply to those earning over £50,000 from their rental properties.

These landlords will have to from next month use compatible software to keep digital records, send four simple quarterly updates of their income and expenses and submit their tax return.

Most landlords will receive a letter from HMRC confirming they need to join, which also explains what they need to do and includes a QR code linking to GOV.UK guidance.

Generational change

Craig Ogilvie (main image), HMRC’s Director of Making Tax Digital, says: “MTD for Income Tax is a generational change and support is there for everyone who needs it.

“The quarterly updates aren’t tax returns – they’re simple summaries your software auto-populates, spreading the admin throughout the year, rather than leaving it all towards the January Self Assessment deadline.”

These changes don’t only cover landlords but anyone reporting ‘sole trader’ income to HMRC, which as well as landlords includes self-employed people working within the property industry (3,000) plus a further 400,000 people across other sectors.

Next year the MTD system will include landlords with income under £30,000 and in 2028, those earning under £20,000 from rental properties.

HMRC has also revealed that during the first 12 months of the MTD system, landlords will not be penalised for late submission of quarterly rental receipt/expense data.

Nathan Emerson, CEO of Propertymark, says:  “Making Tax Digital represents one of the most significant changes to the tax system in a generation.

“Agents have a key role to play in supporting their clients through this transition, with guidance on timelines regarding selecting the right software, to embedding new reporting processes. With just days to go, there is now an urgent need for landlords and agents to ensure they are ready.”