What is Making Tax Digital, and what does it mean for landlords?

If you let out property, you've probably had a letter from HMRC about “Making Tax Digital”. It sounds like a big change. In practice it comes down to two things: keep your records digitally, and send HMRC a short update four times a year instead of one big return.

The old way

Until now, most landlords did one Self Assessment tax return a year. You added up the year's rent and expenses, typed the totals into a form by the end of January, and that was that.

The new way

Under Making Tax Digital for Income Tax, three things change:

• Digital records. You keep a digital record of each bit of rent you receive and each expense you pay, rather than a shoebox of receipts and a spreadsheet at year end.
• Quarterly updates. Four times a year you send HMRC a running total of your income and expenses. It's a summary, not a tax bill, and you don't pay anything at that point.
• A final declaration. After the tax year ends you confirm the figures are complete and correct. This replaces the old once-a-year return.

What stays the same

Your tax is worked out the same way, on the same income, with the same allowances. The deadlines for paying tax don't change either. What changes is the rhythm: little and often, instead of one scramble in January.

Do you have to do this?

Not everyone, and not yet. It's being phased in by income level, starting with higher earners. If your income from property and self-employment is below the current threshold, you carry on with normal Self Assessment for now. We cover the exact numbers in the thresholds guide.

The honest summary

Making Tax Digital is more frequent, not more complicated. If your records are tidy through the year, each quarterly update is a couple of minutes. That's the whole idea behind Quarterwise: keep a clean record as you go, and the updates take care of themselves.