Lower income thresholds will bring significantly more landlords into HMRC’s Making Tax Digital for Income Tax regime over the next two years, with industry body Propertymark advising letting agents to begin discussions with affected clients.
Making Tax Digital became mandatory from 6 April this year for landlords and sole traders with qualifying income above £50,000. The threshold will fall to £30,000 from April 2027 before reducing again to £20,000 from April 2028, bringing the majority of landlords within scope of the digital reporting requirements.
Digital reporting requirements
Affected taxpayers must maintain digital records and submit quarterly updates to HMRC using compatible software, replacing the traditional annual self-assessment reporting system. The changes represent a shift in administrative burden for landlords who have previously relied on annual tax returns.
Propertymark has stated that the threshold expansion will require letting agents to determine whether they will support landlords with reporting requirements or direct them to accountants, bookkeepers and software providers. The organisation emphasises that early discussions will be necessary, as some landlords may expect their agent to help manage the process while others may make alternative arrangements.
The changes come as regulatory compliance requirements continue to increase across the property sector. Agents who decide to offer support will need suitable systems for capturing property income and expenses digitally, while also ensuring they have the appropriate HMRC authorisations in place, according to Propertymark guidance.
Penalty framework
Although HMRC will contact taxpayers it believes are affected, landlords remain responsible for checking whether the rules apply to them and ensuring compliance with the new requirements. While HMRC is not issuing late-submission penalties for missed quarterly updates during the first year of Making Tax Digital, taxpayers who repeatedly miss deadlines from 2027/28 could face £200 penalties under a points-based regime.
The tax authority has confirmed that it will maintain this approach during the initial implementation period, though enforcement will tighten from the 2027/28 tax year onwards. Similar to other administrative changes affecting property owners, the transition period aims to allow taxpayers time to adjust to new systems.
Propertymark has published guidance for members covering key deadlines, HMRC requirements and software options, alongside a webinar produced in collaboration with HMRC. The organisation notes that agents will need to assess their capacity to provide support as the thresholds decrease and more landlords fall within the digital reporting requirements.
