Landlords set to receive Making Tax Digital letters

Sara White, Editor, Business & Accountancy Daily

HMRC plans to start sending letters to taxpayers affected by introduction of Making Tax Digital for income tax advising them they will have to report quarterly

The first letters will hit the post in April with landlords, sole traders and self employed with income over £50,000 first to receive them. 

The imminent rollout of the new income tax element of Making Tax Digital (MTD) for Income Tax self assessment will see self employed, sole traders and landlords earning more than £50,000 in annual income in the 2024-25 self assessment tax return subject to quarterly reporting to HMRC.

The rules kick in from 6 April 2026, but this will be the first time individuals have been told personally by HMRC that they will have to comply with the new MTD reporting requirements.

HMRC confirmed: ‘From April 2025, we’ll write to customers whose 2023 to 2024 self assessment tax return shows their income from these sources was close to, or over, £50,000. This letter will let them know that they may need to use Making Tax Digital for Income Tax.’

Accountants have also been told to start informing their clients of the imminent changes, with HMRC warning: ‘If any of your clients are affected by this change, they’ll need to be signed up for Making Tax Digital for Income Tax by April 2026. You may also be able to sign up your clients now.’

Now that the initial testing phase is reaching completion, HMRC confirmed that from April 2025, there will be two sign up options to enrol in MTD:

Option 1 is to sign up for the 2025-26 tax year to prepare accountancy firms and clients, and to familiarise with the changes.

Early adopters will also have the benefit of access to a specialist HMRC customer support team to help them through any teething problems experienced by advisers and accountants.

HMRC said: ‘Firms and clients that sign up now will have exclusive access to HMRC’s Making Tax Digital customer support team – they’ll support you with Making Tax Digital for Income Tax and help you with some of your clients’ other income tax queries.’

Option 2 is to sign up for the 2026-27 tax year.

HMRC leaves it to accountants to decide which option to use, simply saying: ‘You should discuss the options with your clients and agree which one to choose.’

It is important to note the taxpayer clients who sign up during the testing period, will not be able to claim carry back of losses, or change their accounting period and accounting method.

There are a host of types of client that cannot participate in the trial period, including anyone on an HMRC payment plan, earning income from a trust or a furnished holiday let, as well as users of ‘averaging’ due to variable profits throughout the year, which would include farmers, artists and writers, for example.

As with all HMRC digital services, there are a couple of exemptions for taxpayers once the rules become mandatory in 2026. These are very limited and anyone applying has to provide an adequate explanation of why they should be exempt. The main exemption factors are age, disability and location meaning it is not practical to use software to keep digital records. In addition, practising members of certain religious societies or orders which ban the use of electronic communications can also secure an exemption.

Anyone exempted for MTD for VAT by HMRC does not have to reapply. The HMRC guidance states: ‘If HMRC has already confirmed you’re exempt from Making Tax Digital for VAT for one of these reasons, then you’ll not need to apply for an exemption for Making Tax Digital for Income Tax.’

Now the general public is going to learn whether they are captured by phase one of Making Tax Digital for Income Tax it will be vital for accountants and tax advisors to ensure they are up to speed with the upcoming changes and understand how it will affect clients.