Making Tax Digital (MTD) is a government initiative designed to transform how people and businesses keep financial records and report tax-related data to HMRC. As the name suggests, the purpose of the system overhaul is to digitalise the tax reporting process, making it more user-friendly for taxpayers and requiring them to use specific software to submit returns to HMRC.
Earlier this year, MTD was due to launch for landlords who fill in self-assessment forms with a business or personal income over £10,000 per annum. But this has now been pushed back to 26 April 2026, giving landlords and other businesses another three years to prepare for digital transformation.
Lucy Frazer, MP, Financial Secretary to the Treasury, says this is due to the pandemic, stating, “it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so.”
To give you a headstart, we’ve rounded up everything we know about MTD. Find out what landlords can expect once the system has been implemented and the penalties for those who don’t follow the rules.
What are the benefits of MTD?
HMRC hope that digitalising the tax system will offer a range of benefits, including:
- Reduced human error through digital submission of tax returns and record keeping.
- Increased visibility of cash flow and awareness of tax obligations to avoid over or underpaying.
- Improved productivity by automating manual tasks.
- Better understanding of your financial position and performance at any time.
- Easy capturing and digitising of receipts with mobile apps.
- Improved collaboration by integrating tax management with various business processes through software.
How will the new MTD reporting process work?
While there will be no changes to existing payment deadlines for income tax and underlying tax rules, landlords should familiarise themselves with other changes.
Five tax returns
MTD replaces the Self Assessment tax return with five reporting obligations that require quarterly updates and a year-end declaration. These updates will be submitted to HMRC, with everyone adhering to the same four dates:
|1||6 April – 5 July||5th August|
|2||6 July – 5 October||5th November|
|3||6 October – 5 January||5th February|
|4||6 January – 5 April||5th May|
The tax liability will continue to be due by January 31 of the following year. The government is considering allowing people to make voluntary payments throughout the year, and mandatory quarterly payments may be required in the future.
To allow taxpayers to adjust to the new system, late filing penalties will not be enforced for at least a year. But the previous late submission penalties for VAT and Income Tax will be replaced with a points-based system, and a £200 penalty will be imposed when a taxpayer reaches the points threshold.
Late payment penalties will now be charged as a percentage of the outstanding balance, and taxpayers will have 15 days to pay without penalty. If a taxpayer has a reasonable excuse, penalties will not be charged, and they will have the right to appeal against points and penalties.
Read Penalties: Making Tax Digital for more information.
All VAT-registered businesses must keep digital records and submit VAT returns using MTD software. So, if your business is still using manual records, spreadsheets, or outdated CRM software, you’ll need to update existing processes to incorporate MTD into your business or find new software that’s MTD-compatible in order to comply with government regulations.
🤔 Not sure whether your system complies with MTD? Read our blog 👉 What making digital means for landlords
According to TechRadar, “the best route to take for making the whole tax filing process even easier is to select a comprehensive accounting solution.” Software options like Arthur can be highly beneficial. Not only does Arthur integrate directly with government-certified solution Xero, but it also offers a range of property management functionality to support broader business needs.
This centralises business activities and responsibilities, significantly reducing administrative time. In turn, this allows you to focus on your core business activities without the added headache of MTD compliance.
While April 2026 might seem far away, it’s important to prepare well in advance. By taking action early, you can make sure that you have ample time to gather the information and make any necessary changes to comply with upcoming regulations, preventing your business from having to pay penalties down the line.
Arthur is an effective way to prepare for MTD. Its powerful automation and integrations can help get your accounts in order for digital filing with minimal hassle.