HMRC is contacting nearly 900,000 landlords and self-employed individuals as part of its compliance push for Making Tax Digital (MTD) for Income Tax, which will take effect from 6 April 2026. This initiative represents a significant shift in how rental income is managed, requiring affected landlords to comply with new quarterly reporting protocols. The letters being dispatched over the coming weeks are a precursor to the changes that will affect those earning above a specified income threshold.

The new rules

Starting from the 2026–27 tax year, landlords with a combined income exceeding £50,000 from property or self-employment will be required to submit income and expense updates to HMRC every quarter using compatible digital software. The first quarterly submission is due by 7 August 2026. This marks a departure from the traditional annual self-assessment system, as landlords will face additional reporting obligations rather than a simpler alternative.

The HMRC correspondence outlines the differences between the current self-assessment process and the forthcoming MTD requirements, detailing which software will be necessary for compliance. Furthermore, landlords are reminded that they must continue to file their annual self-assessment returns, adding an extra layer of complexity to their tax obligations.

Phased implementation for more landlords

The initial threshold of £50,000 will not remain static. From April 2027, the threshold will decrease to £30,000, followed by a further reduction to £20,000 by April 2028. This phased implementation suggests that a significant number of landlords, regardless of the size of their portfolios, will eventually fall within the MTD framework. For many landlords currently below the £50,000 threshold, the message is clear: compliance with MTD is inevitable, with the emphasis now on preparation.

Practical steps for landlords

Landlords receiving HMRC's letters are advised to take several proactive measures. Firstly, they should confirm that their qualifying income exceeds the threshold for MTD compliance. Next, researching and selecting suitable MTD-compatible accounting software is crucial, as this will be necessary for meeting the new reporting requirements. Additionally, landlords should ensure that they have established digital records well before the April 2026 deadline.

Consulting with an accountant can provide further clarity on compliance requirements, especially for those who may feel uncertain about the changes. The letters will be issued in two waves: the first from 2 to 13 February and the second from 16 to 27 March. Landlords who believe they have received notifications in error should thoroughly check their income calculations before approaching HMRC for clarification.

Stakeholder perspectives

The introduction of MTD has faced delays in its rollout, but the recent correspondence from HMRC provides a tangible reminder of the impending changes. As the deadline approaches, landlords who have been hesitant about upgrading their record-keeping practices or selecting appropriate software may find themselves with limited time to act. The urgency to adapt to the new system is underscored by the fact that landlords must still file their 2025–26 tax return by 31 January 2027 under the existing self-assessment rules.

Landlords across the UK must now consider how best to navigate these changes and ensure that they are well-prepared for the transition to MTD. With the landscape of rental income reporting set to evolve significantly, the time for action is now. By taking the necessary steps to comply with MTD, landlords can mitigate potential challenges and position themselves effectively within the new framework.

As HMRC continues its outreach, the implications of MTD for Income Tax are becoming increasingly clear. Landlords are encouraged to engage with these changes proactively, as the transition will affect nearly every aspect of their tax reporting and compliance obligations in the coming years.