Making Tax Digital (MTD) is one of the biggest changes to the UK tax system in recent years, and it will affect many holiday let and rental property owners over the coming years. While the changes aren’t immediate for everyone, understanding what’s coming — and when — will help you prepare calmly and avoid unnecessary stress or penalties later on. This guide explains what Making Tax Digital is, who it applies to, when it starts, and what you should be doing now.
Making Tax Digital (MTD) is HMRC’s move to a fully digital tax system. It requires some property owners and sole traders to keep digital records and submit quarterly income updates using approved software.
Your income is assessed on a gross basis, combining rental and self-employed income.
Yes. You’ll need HMRC-compatible software for the full MTD process.
As holiday letting specialists, we’re happy to help owners understand what MTD means for their property and how to prepare. Give us a call on 01929 553443 / 07913 119878 or email Blake on [email protected].
Making Tax Digital (MTD) is HMRC’s initiative to move the tax system fully online.
Under MTD for Income Tax, affected individuals will need to:
These quarterly updates are not tax returns and no tax payment is required at each submission. The final tax position is still confirmed at the end of the tax year.
HMRC’s aim is to reduce errors and give taxpayers a clearer, more up-to-date view of their tax position throughout the year.
MTD for Income Tax applies to individuals with:
Your income is assessed on a gross basis and includes combined income from self-employment and rental properties.
You can check whether MTD will apply to you using HMRC’s eligibility checker.
Joint Owners
If a jointly owned property generates £50,000 in gross income and the income is split 50/50, each owner is treated as earning £25,000.
Partnerships
MTD for Income Tax will be introduced in stages:
If your income fluctuates, it’s worth monitoring your figures well in advance.
Once enrolled in MTD, you will need to:
Key points to remember:
MTD treats different types of income separately:
UK Property
Foreign Property
Self-Employment
Self-employed income must be reported separately from property income
You may be able to apply for an exemption if:
You can apply for an exemption here.
Penalties for Non-Compliance
HMRC will be introducing a new points-based penalty system for MTD.
Penalties will depend on:
Understanding your obligations early is the best way to avoid unnecessary penalties.
What Software Will You Need?
MTD requires approved accounting software for the entire reporting journey.
If you already use software:
If you use a bookkeeper or accountant:
HMRC’s official list of compatible software can be found here.
Can You Sign Up Early?
Yes — HMRC allows voluntary early sign-up.
Benefits include:
Preparation now will make the transition far smoother later.
As holiday letting specialists, we work closely with property owners every day and understand how changes like Making Tax Digital affect real-world letting businesses.
If you’d like guidance on how MTD may apply to your holiday let, or simply want to talk through the changes, I’m always happy to help.
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