As MTD arrives on 6 April, Hazel Tucker of Bishop Fleming explains why quarterly reporting is the catalyst that will finally professionalise the UK’s buy-to-let sector
Like it or not, Making Tax Digital (MTD) is fast approaching. From 6 April, landlords with a gross rental income of over £50,000 will be brought into MTD for self-assessment – a reform many see as little more than red tape.
Yet, for the UK’s buy-to-let market, this shift is accelerating a much bigger trend: the move from informal, sideline income to professionally run property businesses.
There are an estimated 2 million “accidental landlords” across the UK – those who have become property owners through inheritance, relocation or being unable to sell. Many of these landlords, alongside more seasoned property investors, still rely on spreadsheets or paper records, only getting a clear picture of their tax position once a year.
MTD fundamentally changes that model, forcing landlords to engage with their numbers more frequently and, in doing so, providing the tools to run portfolios with far greater commercial discipline.
Rethinking the landlord business model
Now is the time to pause and evaluate how ‘business-ready’ you are for MTD. Quarterly reporting and digital record-keeping might feel like a compliance headache, but the reality is that they provide a useful framework for sharper decision-making.
Switching to cloud accounting platforms – such as Xero and similar systems offering bank feeds, document capture and automated posting – allows landlords to see income, costs and cash flow in near real time.
Over time, this turns MTD data into a useful management tool that can help with:
- Identifying underperforming properties before problems escalate
- Monitoring arrears, voids and rental trends across the portfolio
- Supporting more well-informed decisions around refinancing, refurbishment and disposals
For buy-to-let portfolio landlords in particular, this is the point at which property investment starts to resemble a professional business rather than a series of one-off purchases.
Joint ownership, thresholds and ‘two-tier households’
Where MTD becomes more complex – and where we are seeing the most questions from clients – is around thresholds and ownership.
The new rules initially apply to individuals with gross property income above £50,000, but in practice, that simple line in the sand can create nuanced scenarios.
Consider couples who own one or more properties jointly, while one spouse also holds additional buy-to-lets in their own name. In these ‘two-tier households’, we are already seeing situations where one partner’s total share of property income exceeds £50,000, bringing them into MTD, while the other partner’s share remains below the threshold.
In accounting terms, that means systems must be configured to recognise the correct ownership percentages and ensure that only the in-scope landlord’s income and expenses are reported under MTD. If the software is not properly set up, landlords risk misreporting, amended submissions, and ultimately, penalties.
We are also working with clients whose family members hold minority stakes in properties, often as part of succession or wealth-planning strategies. Here, clear documentation of ownership and careful mapping into the digital accounting system are essential.
Avoiding pitfalls: what landlords should focus on now
Given this complexity, what should buy-to-let investors prioritise in the coming months?
First, understand your position for the 2024/25 self-assessment tax return. You must aggregate your gross rental income across all UK and overseas properties (including your share of jointly owned assets) and add any turnover from sole trades. This will establish if you exceeded the £50,000 threshold.
With the income thresholds due to be reduced to £20,000 over the next two years, it is worth planning when you are likely to fall into scope, even if you are not there today.
Second, map your ownership structures. This should include:
- Which properties are held personally and which via limited companies, partnerships or trusts
- The ownership split for jointly held properties
- Which individuals are likely to be within MTD, and which remain outside
Third, choose software and advisers who understand the issues facing residential landlords. While the technology market has moved quickly to support MTD, buy-to-let landlords need systems that can handle nuances, including multiple owners, mixed-use properties and the wide array of mortgage arrangements.
The end of the ‘side hustle’
Many landlords entering MTD are already directors or shareholders in successful trading businesses, used to accessing real-time financial data reporting. The question is no longer whether property should be treated the same way, but how quickly landlords can adopt the same standards.
In our experience, the landlords who will fare best under MTD are those who accept that quarterly reporting is here to stay and invest in systems that deliver compliance along with meaningful data. They are also proactively seeking advice on complex areas such as joint ownership, property portfolio structuring and maximising the relief on loan interest.
By contrast, those who view MTD purely as an obligation to be met with minimal effort may find themselves left behind in terms of compliance and the performance of their portfolios.
The underlying message for residential landlords is clear: MTD is not going away. Thresholds will increasingly draw more landlords into scope, and the expectations for recordkeeping will only rise. Those who act now to understand their ownership structures, tighten their data and use technology intelligently will be the ones who turn regulatory change into a commercial advantage.
Hazel Tucker is Accountancy Partner at Bishop Fleming, an award-winning accountancy and advisory firm. The firm’s specialist Digital and Cloud Accounting team helps landlords transition to MTD-ready platforms with streamlined workflows and real-time visibility.
Related reading: HMRC clarifies 259,000 landlords affected by MTD from April
