Making Tax Digital Explained: What Landlords Need to Know - Ep. 17

Making Tax Digital Explained: What Landlords Need to Know - Ep. 17.

Welcome to another episode of The All Things Property Podcast, where Simon Bacon and Ian Sadler dive into the real-world challenges and changes facing landlords and property investors today. In this episode, they shed light on Making Tax Digital (MTD), what it actually means for landlords and self-employed property owners, why it’s not just another government hassle, and how to prepare before the new rules roll out.

With Ted, the Preferential Properties Leonberger, quietly supervising, Simon Bacon and Ian Sadler break down the essentials: who Making Tax Digital affects, the new requirements for digital record keeping, and the importance of getting your systems in order now rather than scrambling later.

This is not just a technical update or another box-ticking exercise, it’s about making your lettings business more efficient, compliant, and stress-free. Whether you’re a hands-on landlord or already working with accountants and agents, this episode is packed with actionable advice to help you stay ahead of the April 2026 deadline. Grab a notebook, tune in, and make sure you’re prepared for the next step in property tax compliance!

Chapters

00:00 "Making Tax Digital Explained"

05:05 Landlord Obligations and Recordkeeping

09:00 "Prepare for Tax Changes"

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www.prefprop.com

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Transcript

SPEAKER_00 0:00

You don't want to be in a position where you get a knock on the door from a tax inspector saying we'd like to look at your records playing death.

SPEAKER_01 0:05

And not to have you could you could say that maybe this is just a way of the government having another go at landlord, but it is this button. Welcome to the All Things Property Podcast with me, Simon Bacon of Preferential Properties. Every week, Ian Sadler and I will delve into all things property. We'll guide you through with friendly, no nonsense advice. Hello and welcome to the All Things Property Podcast with me, Simon Bacon from Preferential Properties. And me, Ian Sadler from Inspire Property. We also have with us today is Ted, the Preferential Properties Leon Burger. Now, what you may have noticed from previous episodes is he doesn't move very much. I can assure you he is generally a live dog, aren't you, Teddy? SC, slight movement. So I'll leave him there. Obviously, one of his pet likes is having his ears rubbed. So I just wanted to make sure that you do know it's not just uh an ornament, it is a live a live dog. Obviously, he's he's not really that interested in what we have to say. Hopefully, you will be. But his behaviour is probably coinciding with the what we're going to talk about today. Pretty dry, but worth talking about. And what we're going to talk today is about making tax digital or MTD and a very brief overview. Neither Ian nor uh Ian, neither Ian nor I are tax experts, so we can't go into the real detail of this. We will do, or our hope is that we'll shortly have another podcast with a tax professional who will be able to put some more flesh on the bones of what we're going to talk about. But if you think this is just another HMRC headache, stay with me. It's actually manageable, but it's something that every landlord needs to understand well before April 26, and we are fast approaching that. So, in a nutshell, making tax digital isn't a new tax, it doesn't change how much tax you pay. What it does do is change how you report your income to HMRC, and that includes both self-employment income and rental income. Getting it wrong could cost time, money, and stress. So let's just give you in this podcast a very brief overview, and hopefully it will give you something to think about. If you already have a tax expert or an accountant, it may well be worth giving them a call just to say, Oh, I've heard about MTD. Can you tell me a little bit more about it? So, what making tax digital is basically all about is HMRC saying we want all income reported digitally every few months rather than waiting till the end of the year. It applies if you're a sole trader, a landlord, or both, and your combined income is over certain thresholds. Are you with me so far, Ian? Oh, all ears. Yeah. Okay. Ted? No, he's just no, clearly he's not with me. From April 2026, effectively, what it's saying is combined gross income from self-employment and property. If it was over £50,000 in the previous tax year, MTD applies. But from April 2027, that threshold is going to drop to 30,000. So for people with a property portfolio, maybe of three or four properties, which I know some of your people have got, Ian. They've all got good accountants. Excellent. But there is a threshold there, and it's what we're trying to do today is just raise the raise the flag and say, look, you know, give it some thought, find out whether it's going to apply to you or not. You could you could say that maybe this is just a way of, I don't know, the government having another go at landlord, but it isn't, it's but more than that, isn't it?

SPEAKER_00 4:34

So that they're they're fixing a broken system that was really inefficient and so much tax revenue went through the through the floorboards that they're now actually getting hold of.

SPEAKER_01 4:45

That's actually it's not about landlord, no, no. It's about making it's about making tax more efficient and reporting of tax more efficient. Whilst it may be a bit more odious to start with, actually, if you use the right systems and again professionalise the way that you do everything in terms of letting agents for your rental income, accountants, for your business taxes, etc., it will make the process that much easier in the round rather than everything be disjointed and you know falling foul perhaps of uh some of the legislation.

SPEAKER_00 5:26

You don't want to be in a position where you're gonna knock on the door from a tax inspector saying we'd like to look at your records, please. Yeah. And not to have them, you'd be screwed. Yeah.

SPEAKER_01 5:35

What do landlords actually have to do? You're going to need to keep digital records. So you're going to need to record all rental income and expenses digitally. Um, you're going to need to submit quarterly updates. There's going to be an end-a-period statement confirming your total income for the year, allowing for allowances, um, adjustments for allowances or reliefs, and it will replace its final declaration that will replace your traditional self-attestment, a self-assessment term. So accountants will be able to help in, so good. Many of ours will be fine, but they cannot fix messy records. The easier it is to submit quarterly, the less stressful it will be. So the information that we as letting agents can provide, you know, again, talk to your letting agent, because it may well be that you need information on a more regular basis rather than just that annual rush to get your annual statements.

SPEAKER_00 6:37

So the statements we produce for our clients, they're similar pretty much. That would be sufficient for digital records.

SPEAKER_01 6:44

It should be, but it will need to be done quarterly because they're having to report quarterly, not annually. So I often get, I don't know about you, but I often get langors coming to me as they're about to do their self-assessment tactile. Do not saying, can you let me have my income and expenditure for the last 12 months? Well, we can do that click on a switch, can't we? That's something in that I think we probably, you know, we often get, or I certainly often get land laws who phone me up and say, just say about do their annual capture. The week before you can I have my income and expenditure, which we can divide, but the difference is it's not going to be annual now. It's going to be a quarterly basis. So keeping hold of um statements and records of income and expenditure, receipts, etc., there will be necessary.

SPEAKER_00 7:36

I think HMRC 10-15 years ago were a shambles when it came to rental income and rental property, whether it's the income itself or the sale proceeds for property, you could sell a property one, simply they did 15 years ago and didn't declare capital gains tax. They've had a slightly scared of improvement in their systems over the past 10 years, and now five years ago I had a client who hadn't declared certain parts of their income, including capital gains from sales, and the accountant negotiated amnesty with the HMRC because their their view was that it was far better to get a proportion of the amount the tax was owed to not get any at all. I'm not sure whether they're still doing it now. They probably would do, but they are still doing it. They are still doing it. Which I found amazing that HMRC hired people that they are with prepared to do that. But I'm not sure that policy will remain in place for much longer because that all their departments are connected now.

SPEAKER_01 8:39

I know. And that's LAN registry. Yeah, absolutely. Do you do you have to produce what I know we do, but I presume you do. Do you get contact from HMRC on an annual basis to do then your return?

SPEAKER_00 8:52

Yeah, the client account balances, all that sort of thing.

SPEAKER_01 8:55

It is, you know, I think the making tax digital is just another step towards, dare I say, Big Brother, whereby everything is is interlinked, and this, you know, that there is much more um because everything is becoming digital, the way of being able to track and monitor and check individual income and individual returns, everything else, this is what this is all about, isn't it? Absolutely.

SPEAKER_00 9:24

Making sure that yeah, everything is tied and it's enforcing a tax regime that they've let slip for too long.

SPEAKER_01 9:30

Yeah, no, absolutely. So I guess the upshot from this really, as I said, we will talk about this in more detail with a tax professional in a future episode. But what I would say to anybody watching this is this is now the opportunity for you, before it be comes into effect in April, to uh revisit and look at your record keeping, making sure that you've got robust systems in place and the the information is easily obtainable from letting agent from your accountant from your various sources, and that you keep good, accurate records. And again, hope you found it useful. If it is something that you want to have a further discussion on, again, please do give us a call and we'll be happy to point you in the right direction. Thanks for tuning in to this week's episode of the All Things Property Podcast. If you found this episode useful, don't forget to subscribe, like and share. These things really help us reach the people who need to hear this advice. See you next week.