Leading Tax Expert Slams Looming Making Tax Digital Changes for Landlords
Why Landlords Face Chaos Under HMRC’s Digital Shake-Up
The UK’s property sector is once again bracing for upheaval. As HM Revenue and Customs (HMRC) pushes forward with the phased rollout of Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), landlords across the country face a storm of new compliance demands, digital record-keeping requirements, and quarterly reporting burdens.
While the government claims MTD will simplify tax reporting, many in the accounting profession—and landlords themselves—are far from convinced.
This growing discontent reached a crescendo recently when one of the country’s most respected tax experts publicly criticized the initiative.
Citing concerns about cost, complexity, and the disproportionate burden on landlords with modest portfolios, the expert warned that the government’s plan is “out of touch with economic reality” and risks creating unnecessary confusion for thousands of property owners.
The Aim Behind Making Tax Digital
Making Tax Digital is part of HMRC’s strategy to modernize the UK tax system by requiring digital record-keeping and more frequent tax submissions. From April 2026, individuals with property or business income over £50,000 will be required to use MTD-compatible software to:
- Maintain digital records of income and expenses
- Submit quarterly updates to HMRC
- File an End of Period Statement (EOPS) and Final Declaration annually
By April 2027, the threshold drops to £30,000, capturing even more landlords in the MTD net.
HMRC maintains that these changes will reduce tax errors, streamline record-keeping, and make tax administration more efficient. But tax professionals, landlord associations, and even some MPs are increasingly vocal in their opposition.
Leading Expert Warns of Widespread Confusion and Cost
In a recent industry panel discussion, a leading chartered tax adviser and member of the Institute of Chartered Accountants in England and Wales (ICAEW) sounded the alarm.
“The looming changes under Making Tax Digital for landlords are a digital disaster in the making,” he said. “Landlords with one or two rental properties are not digitally equipped to cope with quarterly submissions. They’ll face rising costs, technical hurdles, and risk penalties for late or incorrect returns.”
The expert, with decades of experience advising landlords and SMEs, argued that the policy disproportionately penalizes smaller landlords who do not run formal businesses and lack dedicated accounting support.
Costs, Software, and Complexity
One of the most frequent criticisms is the financial burden MTD imposes. Landlords will need to:
- Subscribe to approved MTD-compatible accounting software
- Learn to use digital tools or hire an accountant
- Pay higher professional fees due to increased reporting frequency
Many landlords currently keep paper records or use basic spreadsheets—systems that will become obsolete under MTD. Switching to digital software like Xero, QuickBooks, or FreeAgent involves both a learning curve and ongoing subscription costs. While large landlords or agencies may absorb this, smaller landlords—who often rely on their rental income for retirement—may struggle.
Multiple Properties, Multiple Headaches
The reporting burden grows exponentially with each additional property. MTD requires landlords to submit separate data for different types of income (e.g., furnished holiday lets vs residential lets). This creates further administrative complexity, especially for:
- Landlords with multiple properties across different regions
- Joint ownership arrangements
- Overseas landlords
In these cases, simply compiling data for quarterly submissions can become a full-time job.
Concerns Over Digital Exclusion
The tax expert also flagged the issue of digital exclusion. Many landlords are older individuals who may not be tech-savvy or comfortable managing complex software. Despite HMRC’s limited “digital exemption” process, the burden of proof lies with the taxpayer, and the process to apply for an exemption is slow and bureaucratic.
“We’re pushing people into a system they’re not ready for,” the expert warned. “It’s like expecting every pensioner to file digital accounts with no assistance.”
A System Built on Flawed Assumptions?
Critics argue that HMRC’s assumptions about error reduction are not fully backed by evidence. While digital tools may reduce some arithmetic errors, they do not prevent incorrect categorization of expenses, misreported income, or misunderstanding of tax rules.
Furthermore, the assumption that all taxpayers can afford MTD software or advice is out of step with today’s cost-of-living crisis.
Industry Bodies and Landlord Groups Join the Chorus
Landlord associations, including national and regional organizations, have echoed the concerns. Many have received panicked inquiries from members struggling to understand the new rules. Some are urging the government to reconsider the implementation timeline, or at least raise the £30,000 threshold to avoid dragging in small-scale landlords.
Accountancy firms are also pushing back. Many firms have stated they cannot provide quarterly filing support for every small landlord on their books. This will likely lead to higher fees and tighter deadlines.
Government Response: Stay the Course
Despite mounting pressure, HMRC continues to push forward, arguing that the long-term benefits will outweigh short-term disruption. A spokesperson reiterated that the phased introduction of MTD gives taxpayers time to adjust and that support tools will be made available.
However, critics say the pilot program for MTD has already shown signs of failure, with limited participation and unclear guidance for landlords.
What Landlords Should Be Doing Now
Despite the criticism, MTD for ITSA is coming. Landlords must begin preparing or risk being caught off guard.
Steps to take include:
Check if you fall under the threshold for April 2026 (£50,000 income from property and/or business).
Begin researching MTD-compatible software and get familiar with digital record-keeping.
Speak to a tax adviser or accountant early to plan for quarterly submissions.
If digitally excluded, consider applying for an exemption, but be prepared to justify your case thoroughly.
Keep updated with HMRC announcements, as there may be future changes to the rollout plan.
Conclusion
The push to digitise the UK’s tax system may be well-intentioned, but the execution—particularly for landlords—is under growing fire. The views of seasoned tax professionals, combined with the struggles of landlords facing technical and financial challenges, paint a picture of a system that may be rolling out too fast, with too little support.
Unless there is meaningful government engagement and flexibility in how MTD is applied to landlords, many may face penalties, rising costs, or may even be forced to exit the rental market entirely, at a time when affordable housing is already in short supply.
Frequently Asked Questions (FAQs)
1. What is Making Tax Digital (MTD) for landlords?
It’s a government initiative requiring landlords to keep digital records and file quarterly income and expense updates to HMRC via approved software.
2. When does MTD for landlords come into effect?
From April 2026 for those earning over £50,000 from property/business income, and from April 2027 for those earning over £30,000.
3. What kind of software will I need?
You’ll need to use MTD-compatible software such as Xero, QuickBooks, or similar. Spreadsheets alone will no longer be sufficient.
4. I only own one rental property. Does MTD apply to me?
If your total income from property (and any self-employment) is over £50,000 in 2026 or £30,000 in 2027, you will be required to comply.
5. What are the main criticisms of MTD for landlords?
Critics say it is overly complex, costly, unnecessary for small landlords, and doesn’t accommodate those who are digitally excluded.
6. Can I opt out if I’m not tech-savvy or don’t have internet?
Possibly, but you’ll need to apply for digital exclusion through HMRC, and this is only granted in very limited cases.
7. Will MTD reduce tax errors?
It may reduce basic maths errors, but won’t fix misunderstanding of tax rules, misreporting, or fraud.
8. What happens if I fail to comply?
Late submissions or errors may lead to penalties and interest charges under HMRC’s new points-based penalty system.
9. How will MTD affect my accountant’s fees?
Many accountants will need to do more work (four submissions a year instead of one), so fees are likely to increase.
10. Do I need to make separate submissions for each property?
No, not for each property. However, you must categorise your income correctly (e.g., residential vs holiday let) and keep clear digital records.
11. Will MTD apply to jointly owned properties?
Yes. Each owner must report their share of income digitally using MTD software, even if only one person manages the property.
12. Can I still file a paper tax return under MTD?
No, not unless you have a confirmed digital exclusion exemption. MTD is fully digital-only.
13. Are overseas landlords affected?
Yes. If you earn rental income from UK property and meet the income threshold, you must comply with MTD—even if you live abroad.
14. Is there any government support to help landlords transition?
HMRC says there will be guidance and webinars, but no financial assistance has been announced for software or training costs.
15. What’s the difference between MTD and Self-Assessment?
MTD replaces the current once-a-year tax return with four quarterly reports, plus an End of Period Statement and Final Declaration.
16. Could the MTD rollout be delayed again?
While it has already been delayed multiple times, there’s no current indication of further postponement. Landlords should prepare now.
The British Landlords Association is a national landlords’ association for UK landlords. It is one of the largest landlord associations in the UK. Join us now for £79.95!
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