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As a landlord, the way that you do your accounting related to property income might be changing from April 2026.

Rather than submitting Self Assessment tax returns, you may need to follow Making Tax Digital for Income Tax rules.

To help you understand the new requirements and what they means for landlords, in this article we cover an overview of what Making Tax Digital for Income Tax is, and share answers to questions you may have about it.

Here’s what we cover:

Making Tax Digital: An overview for landlords

Making Tax Digital for Income Tax is part of the UK government’s long-running plans to digitalise the tax system.

Doing so makes life easier for individuals and businesses who, because their records are digital, get improved visibility into their finances. This empowers better decision-making and early identification of issues.

Since 2019, the Making Tax Digital (MTD) programme required VAT-registered businesses over the VAT threshold (then £85,000) to use software for their VAT accounting.

Since April 2022, this requirement was extended to all VAT-registered businesses, regardless of turnover.

As of April 2026, many individuals currently using Self Assessment will be required to switch to using MTD for Income Tax for their income tax accounting and reporting.

This includes landlords, but only those whose income from their property or properties (e.g. rent) exceeds £50,000 per year.

This threshold drops to £30,000 in April 2027 and then to income above £20,000 from April 2028.

Making Tax Digital for Income Tax also affects sole traders.

If a landlord is a sole trader too, then the income from the sole trader business(es) they own, plus the income from properties, are added together for the purpose of determining if that individual is mandated for Making Tax Digital for Income Tax.

If you’ve put your properties into a limited company then, obviously, corporation tax is due on the property income. Therefore, the rental income will not count for the purposes of MTD for Income Tax. Dividend incomes are not currently covered by MTD for Income Tax, so you should continue using Self Assessment for that.

What do landlords need to do for Making Tax Digital for Income Tax?

If you’re within its scope, the rules of MTD for Income Tax are as follows:

• Software compatible with MTD for Income Tax must be used for your income tax accounting. All accounting records related to income tax, such as the details from invoices and expenses, must be stored digitally and retained for five years following the end of the tax year. Note that you may need to activate the MTD for Income Tax functionality within your software—speak to your software vendor in advance to ensure compliance.
• You or your accountant must register you for MTD for Income Tax before 6 April 2026, if your income is more than £50,000. If you’re already registered for Self Assessment, or have already registered for MTD for VAT, you won’t be transferred across automatically when MTD for Income Tax begins.
• You’ll no longer need to send a Self Assessment return for income tax. Instead, there are new quarterly update and digital tax return requirements, as detailed below.
• You must submit quarterly updates to HMRC using MTD compatible software. You can send more than quarterly updates if it helps your situation. While there’s no legal requirement for the updates to be fully accurate, it should include all relevant income and expenses to the best of your knowledge. Providing accurate information can help you better estimate your tax and National Insurance liability. If you let property in the UK and abroad, separate updates must be submitted for UK properties and foreign properties.
• By 31 January following the end of the tax year, you must use the MTD software to create and sign a tax return. If you have any income from a sole trader business, this will need to be included too.
• By 31 January, you’ll need to pay the balance of any tax and National Insurance contributions due. Note that the payment on account system will continue, so you may need to make a further payment on 31 July of the same year.

How do landlords work out their income for Making Tax Digital for Income Tax?

If you’re not a sole trader, all you need do is calculate the rental income you receive from the one or more of the properties you own (or have a share in).

Your property income can include the following:

• Rental income from UK land or property
• Rental income from foreign land or property
• Income from letting furnished rooms in your own home
• Income from Furnished Holiday Lettings (FHL) and Non-Furnished Holiday Lettings (non-FHL) in the UK
• Premiums from leasing UK land
• Inducements to take an interest in letting a property (a reverse premium).

If this total income you receive from property is more than £50,000 from April 2026, £30,000 from April 2027, or £20,000 from April 2028, you must register for and use MTD for Income Tax for your property income.

If you’re a sole trader who uses Self Assessment for other businesses unrelated to being a landlord, it’s a little more complicated.

To work out your income for the purposes of MTD for Income Tax, the rental income should be combined with income from any sole trader businesses you own.

If the total comes to more than £50,000, you need to register for and use MTD for Income Tax for accounting relating to income from your property rental, as well as from your business(es).

Here’s some examples:

• Individual A has a property that brings in rental income of £52,000 per year. This is above the initial £50,000 threshold for April 2026 so they will need to use Making Tax Digital for Income Tax for the accounting relating to their property. Additionally, if they carry on employment as a sole trader, they’ll need to use Making Tax Digital for Income Tax for the accounting relating to this, too.
• Individual B inherited a property that is rented for £49,000 a year. They have full-time employment and pay tax and National Insurance through their employer’s payroll. Because their income from property is below £50,000, they do not need to use it. Instead, they should continue using the Self Assessment system.
• Individual C is a buy-to-let landlord with a property that brings in £48,000 in income through rents each year. They work as a sole trader, with an income of £9,000. The aggregated income is £57,000, which is above the £50,000 threshold. They are required to use Making Tax Digital for Income Tax.

What information do landlords need to send as part of Making Tax Digital for Income Tax?

There’s no real change to the kind of information you’ll need to provide compared to completing a Self Assessment tax return.

For example, you’ll still need to declare your income, and where it came from. You’ll still need to declare your allowable expenses.

The difference is you’ll need to provide this information to HMRC more frequently (at least quarterly), and via MTD-compatible software.

How do landlords sign up to Making Tax Digital for Income Tax?

Although you might be able to join the Making Tax Digital for Income Tax beta programme, you can’t currently sign up to the full Making Tax Digital for Income Tax scheme.

This beta allows landlords to familiarise themselves with the system before it becomes mandatory.

It’s anticipated HMRC will open the portal to sign up to Making Tax Digital for Income Tax closer to the 6 April 2026 mandation date as it’s still in the testing phase.

Should landlords join the Making Tax Digital for Income Tax beta?

Signing up to MTD for Income Tax ahead of time via the beta scheme certainly makes sense if it’s right for you.

You’ll get a chance to get to grips with the requirements and any new software as required, and make use of HMRC’s support services before they become overwhelmed because millions of people are signing up.

If you use an accountant, speak to them ahead of signing up for MTD for Income Tax, because they might need to update their systems too.

There are some limitations as to who can sign-up to the beta programme. Some of those pertinent to landlords are as follows:

• You must be up to date with your taxes, including payments.
• You must be UK resident.
• You can’t claim Married Couple’s Allowance or Blind Person’s Allowance.
• You can’t be insolvent, or about to be so, or subject to a compliance enquiry.

I don’t run a business. I receive rental income from a single inherited property. Does Making Tax Digital for Income Tax apply for me?

Yes, if your annual rental income is above £50,000 on 6 April 2026, £30,000 on 6 April 2027, or £20,000 on 6 April 2028.

If you rent out property, then HMRC considers you to be running a business. It doesn’t matter if you’re employed full time doing something else and already pay taxes that way.

Your work as a landlord might be part time, only letting a holiday property, or even something that demands hardly any of your time, but the income must still be declared.

I receive income from shares in a Real Estate Investment Trust (REIT). Does Making Tax Digital for Income Tax affect me?

No. As of MTD for Income Tax’s launch in 2026, only rental income from property ownership will be considered to be within scope.

Income from shares in a REIT is considered investment, not rental income. As such, it’s not within the scope of MTD for Income Tax.

I’m a buy-to-let landlord. Does Making Tax Digital for Income Tax affect me?

Yes—if the rental income you receive personally is more than £50,000 (or is above £50,000 when combined with sole trader income) from April 2026, £30,000 from April 2027, or £20,000 from April 2028, then MTD for Income Tax applies.

If your buy-to-let properties are owned by a limited company you set up for the purpose, MTD for Income Tax won’t apply.

Are Furnished Holiday Lettings (FHLs) included in Making Tax Digital for Income Tax?

The government announced as part of the 2024 Spring Budget that the FHL scheme would be abolished from 6 April 2025.

This was confirmed following the most recent general election and means income from FHL is treated the same as other property income for tax purposes, and the separate FHL rules no longer apply.

I jointly own a rental property with another person. How is this handled for MTD for Income Tax?

Put simply, there are no significant changes compared to how joint landlords already handle sharing income and expenses for Self Assessment.

Married couples jointly owning a rental property will split income and expenses 50/50, and their share of the income will be considered for the purposes of MTD for Income Tax. Note that only the individual’s share of the income is considered, and not the total income from the property.

Other types of shared ownership outside marriage will likely have an existing split for income and expenses which again will be carried across to any MTD for Income Tax considerations.

If your share of the income from property rental (plus any sole trader businesses) takes you above the MTD for Income Tax threshold then you must follow the MTD for Income Tax rules. You will then use this share of the income (again, not the total income from the property) for quarterly updates and the final tax return.

This means that, with joint ownership, both owners may need to use separate MTD-compatible software if they’re required to follow the MTD for Income Tax rules.

Is rental income from foreign (non-UK) property I own included in Making Tax Digital for Income Tax?

Yes, if you are domiciled in the UK, and your rental income is above either threshold (as mentioned above, if you’re a sole trader then income from your business also contributes to this threshold).

Any foreign income, including property rental, must be reported separately to your UK income. This means separate quarterly updates.

For those not domiciled in the UK, only UK self-employment or UK property income counts toward the MTD qualifying threshold.

As with the existing Self Assessment scheme, you may be able to claim double tax relief if the income is also taxed in the country where your property is.

Does Making Tax Digital for Income Tax apply to rental income from flats/apartments?

If the rental income is over the threshold (or is above it when combined with sole trader income) then MTD for Income Tax applies.

No distinction is made for the type of property.

Whether the property is furnished or unfurnished has no bearing on MTD for Income Tax either. It’s solely about the rental income an individual receives and for which income tax is therefore due.

Similarly, income from commercial lets is also within scope of MTD for Income Tax if the threshold is breached and that property is owned by an individual (or more than one person).

If I sell or dispose of a property, does the income count towards Making Tax Digital for Income Tax?

That would typically be classed as a capital gains tax, so is outside the scope of MTD for Income Tax. Speak to an accountant if you’re in any doubt.

I’m already registered for Making Tax Digital for VAT. Do I need to register for and/or use Making Tax Digital for Income Tax?

Yes, if your property income is above the threshold (either on its own or combined with your income from sole trader businesses you own).

MTD for VAT and MTD for Income Tax are independent of each other. They apply to different types of tax.

I own a share of a property and receive a share of the rental income. Does Making Tax Digital for Income Tax apply?

HMRC has introduced easements for joint property owners under MTD for Income Tax.

These allow joint owners to report gross rental income in their quarterly updates and provide expense details during the year-end finalisation.

Furthermore, joint owners can maintain a single digital record for each category of income and expense related to the jointly held property, simplifying the reporting process.

MTD for Income Tax will apply if this income is above the threshold (either on its own or combined with your income from sole trader businesses you own).

Does the Making Tax Digital for Income Tax threshold apply to each property?

MTD for Income Tax thresholds apply to your total income. It doesn’t matter if this income is from one small flat or a portfolio of houses, it’s the total income that’s used in the calculation.

The income threshold applies to your personal income for which income tax might be deducted —whether that’s from rental income, or income from any sole trader business(es) you own.

Is it just rental income from property that’s considered for Making Tax Digital for Income Tax?

If you keep any tenancy deposit for repairs then, as currently, this will be considered income and then whatever you spend on the repair could be considered an allowable expense.

As for other types of regular income from a property, it’s not yet clear. There might cases where ongoing royalties on mineral rights are received, for example.

These might need to be included alongside rental income, but you’ll have to consult the wording of the MTD for Income Tax legislation to be sure.

My properties are owned by an incorporated company, from which I pay myself a salary and/or dividend. Does Making Tax Digital for Income Tax apply?

In short, it’s unlikely MTD for Income Tax will apply.

Since the properties are owned by the incorporated company, corporation tax will apply to the rental income.

If you’re employed by the company, and your salary is paid through its payroll (PAYE), MTD for Income Tax will not apply to your salary.

Dividends from the company should be reported and paid through the usual Self Assessment route and are not within scope of MTD for Income Tax at the present time.

If any property is disposed of, the income would be considered a chargeable gain for corporation tax purposes.

Can I leave it to my accountant to handle Making Tax Digital for Income Tax for my properties?

Yes and no.

You’ll need to use software for your accounting relating to income tax. That can’t be avoided.

Considering the admin time savings modern cloud accounting software offers, this is something that should be embraced.

However, you can still rely on an accountant to work out your quarterly updates and tax return each year. They’ll be able to help you make any necessary adjustments and reliefs.

They can submit the quarterly updates for you, but you’ll still need to review and sign the tax return.

Irrespective of whether you calculate and submit the quarterly updates and end of year totals, or your accountants does this for you, as the taxpayer you remain responsible for ensuring the information is submitted and for any tax that may be due.

I’m new to being a landlord, having only just purchased or inherited a property. When will Making Tax Digital for Income Tax apply to me?

In theory, if your property income is over £50,000 then MTD for Income Tax applies (with the sole trader proviso, as above) from 6 April 2026, £30,000 from 6 April 2027, or £20,000 from 6 April 2028.

However, the reality is that nobody goes straight into following the MTD for Income Tax rules. New landlords or new sole traders first have to register for Self Assessment and complete a tax return. Based on the gross income you declare, HMRC might then decide you should use MTD for Income Tax, but you won’t be required to do so until the start of the next tax year.

In other words, you’ll have to undertake two full years of Self Assessment.

You can sign up voluntarily to MTD for Income Tax after you’ve started Self Assessment. This can be done even if your income does not reach the threshold for inclusion. You’d then start MTD for Income Tax at the start of the next tax year, but you’ll still have to complete a year of Self Assessment.

If I have to keep a tenancy deposit to pay for repairs, is it included in my Making Tax Digital for Income Tax calculations?

Yes, but only if you don’t return any of it to the tenant.

It will be considered income and then whatever you spend on the repair could be considered an allowable expense.

If in doubt, consult an accountant.

How to get started with Making Tax Digital for Income Tax if you’re a landlord

Making Tax Digital might sound daunting but it doesn’t have to be the case.

Here are the steps to get started with it:

1. Sign up ahead of time

The start date for those accounting for income for property through MTD for Income Tax is 6 April 2026. This is known as the digital start date and rental income received after this date must be accounted for using MTD for Income Tax.

2. Consider joining the beta

This lets you sign up for MTD for Income Tax earlier than the mandated digital start date.

Your Self Assessment returns and payments must be up to date. See above: Should landlords join the MTD for Income Tax beta?

3. Update to accounting software that’s ready for MTD for Income Tax

You must use software for your accounting relating to income tax, and it needs to be compatible with MTD for Income Tax.

You should ensure any software you use is updated in time. You might find that some older accounting packages won’t be updated.

Cloud accounting software will almost certainly be updated well in time—but consult your software vendor to check.

If you use separate software for managing property income, you’ll need to ensure it’s digitally linked to your MTD-compatible accounting software. Note that copying or cutting and pasting accounting data between two places isn’t permitted under the MTD for Income Tax rules, which can create issues when using spreadsheets to track things like depreciation of furnishings.

4. Here’s the initial timeline of requirements for landlords using MTD for Income Tax from April 2026

This is a minimum list of requirements.

You can make more than quarterly updates, for example, if that suits your admin processes. And remember that you may need to make additional updates, not listed below, if you also have any sole trader businesses:

• Before April 2026, sign up for MTD for Income Tax (assuming you haven’t already signed up to the beta). Potentially upgrade your accounting to MTD for Income Tax-compatible software and inform your accountant.
• For those in the beta, you should be able to submit your quarterly returns for the 2025/26 tax year through MTD as usual.
• For those submitting Self Assessment tax returns, the 2024/25 tax year’s final income amount will determine if you might already fall into the scope of MTD for the 2026/27 tax year. HMRC will inform you by writing if this is the case.

HMRC has outlined the deadlines for quarterly submissions as follows:

Update period	Update deadline
6 April to 5 July	7 August
6 July to 5 October	7 November
6 October to 5 January	7 February
6 January to 5 April	7 May

The tax return is to be sent by 31 January of the first year after the tax period, just as you would for a Self Assessment tax return, but through your software.

Final thoughts on Making Tax Digital for Income Tax for landlords

MTD for Income Tax is a landslide change for landlords and sole traders. It impacts millions of individuals; some of whom may not even realise they’re running a business and that MTD for Income Tax therefore applies to them.

Because accounting relating to property income can be simply a matter of logging rents alongside any money spent on the property, you might still be using written record-keeping, or a spreadsheet.

The legally enforced requirement to use software may come as a surprise.

Spreadsheets can be used for MTD for Income Tax accounting but are unlikely to be a user-friendly option considering the need to submit regular updates (they can be used elsewhere within your accounting, as required, of course).

Preparation work for Making Tax Digital for Income Tax should begin sooner rather than later.

April 2026 will be here before we know it. Diving head-first into Making Tax Digital for Income Tax when you have no choice is unlikely to be a pleasant experience.

Starting now with your preparations, and getting up to speed ahead of time, will bring the best results for you.

Editor’s note: This article was first published in July 2021 and has been updated for relevance several times to track developments.

There’s surely few accountants and bookkeepers who have not have heard of MTD for Income Tax. With the first introduction date of April 2026 rapidly approaching, much work needs to be done for practice readiness.

This article can help. Read on to learn how you can get to grips with MTD for Income Tax across what you do, regardless of the size of your practice or the nature of your clients.

Here’s what we discuss:

Making Tax Digital for Income Tax: An overview

The government has said MTD for Income Tax will be mandated in at least three phases.

It will affect sole traders and landlords (or individuals who are both) that have gross income above £50,000 from April 2026, above £30,000 from April 2027, and above £20,000 from April 2028.

As happened with MTD for VAT, clients will turn to accountants for advice and guidance.

More than this, the government is again likely relying at least partially on accountants to educate their clients about the requirements and ongoing process adaptations.

It’s vital to realise how Making Tax Digital for Income Tax provides opportunities:

• Clients can modernise their accounting processes, to get the benefits of massively reduced admin and a closer, more active relationship with their accountant. Considering AI productivity assistants are now within accounting software, the improvements could be revolutionary—and not as technically onerous compared to the old days.
• Accountants have an opportunity to grow their services via increased client touchpoints through quarterly updates and the digital tax return—not to mention initial guidance on signing up, adjusting admin processes, and helping with software choices. Better and accurate visibility into client data can inspire a vast range of services.

If your practice has income tax clients that fall under the scope of MTD for Income Tax, you need to start putting plans into practice today, if you haven’t already. The scale of clients impacted, which is significantly higher than for VAT a few years ago, means the quantity of work cannot be underestimated.

What is the MTD for Income Tax digital start date for my client’s business?

Most businesses within scope will be required to follow MTD for Income Tax rules in their first full accounting period starting on or after 6 April 2026, if their self-employment yearly gross income is above £50,000 (as of 2024/25), 6 April 2027 if it’s above £30,000 (as of 2025/26), and 6 April 2028 if it’s more than £20,000 (as of 2026/27).

HMRC will inform clients in writing if they need to use MTD for Income Tax.

For accounting periods prior to their MTD start date, those within scope will continue to use the Self Assessment system for the business.

In other words, even after signing up for MTD for Income Tax, your clients will still need to submit a Self Assessment return for the 2025/26 tax year by 31 January 2027, or 30 December 2026 if they want HMRC to collect taxes due from wages and pensions via PAYE (although if they’ve already signed up for the MTD for Income Tax pilot, this will not be required).

Self Assessment will still be required for individuals outside of the scope of MTD for Income Tax, such as those below the threshold, some company directors, or those whose gross pension income is above the personal allowance.

Which clients will be affected by MTD for Income Tax—and how?

To fall under the MTD for Income Tax scope, all of the £50,000/£30,000/£20,000+ income will have to come from either sole trade businesses, or property rents, or a combination of both. No other income matters for this calculation.

For example, should one of your clients have just £49,000 from property rental to declare for income tax, and £2,000 from savings interest income, that won’t require them to sign up for MTD for Income Tax. All of this is before allowable expenses, of course.

But if they had £45,000 from sole trade income and £10,000 from property rental income, then their gross income will be £55,000—pushing them above the threshold for the April 2026 rollout. HMRC bases their decision for this based on the gross income for the 2024/25 tax year, as shown on the Self Assessment tax return.

Care needs to be taken, however, because for some clients, 2024/25 may have had an unusually long basis period because of basis period reform (BPR) measures. Therefore, their earnings might be artificially high. If you believe this is the case for your client, and that their income is typically below the threshold, contact HMRC to discuss the issue.

Those new to a sole trader or property rental will use the Self Assessment system, and never go straight to using MTD for Income Tax, even if it’s clear their income will rise above £50,000 (or £30,000/£20,000 as of 2027/2028).

Effectively, this means these clients will always complete two years of Self Assessment prior to moving to MTD for Income Tax, unless they opt to voluntarily do sign-up. This can be done even if their earnings are below the threshold. If this option is chosen, the client will complete a single year’s Self Assessment before moving to MTD for Income Tax at the start of the subsequent tax year.

What are MTD for Income Tax accounting quarterly updates and the digital tax return?

For those signed up to MTD for Income Tax, there will no longer be a need to send a Self Assessment tax return with regard to income for the tax years occurring after their start date.

Instead, updates will be made to HMRC using functional compatible software, as follows, along with a tax return by 31 January.

Here are the MTD for Income Tax requirements in brief:

Digital records for MTD for Income Tax

A digital record is a line item of income or expense, which is to say, each transaction. The minimum data that needs to be recorded is as follows:

• Amount.
• Date.
• The tax category, as defined by HMRC, such as turnover, cost of goods bought for resale, or wages, salaries and other staff costs. Car, van and travel expenses are also categorised.

Obviously, MTD-compatible accounting software will make it easy to record these details via automation.

None of this is outside the scope of data already recorded for Self Assessment, of course. The difference is simply that it must be recorded ASAP, and certainly prior to any quarterly update submission.

Quarterly updates for MTD for Income Tax

• These are generated in MTD-compatible software by you or the client. You or their bookkeeper can submit them on behalf of the client.
• Totals must be provided for each income and expense category for the previous quarter. HMRC does not require individual income or expenditure records at this point, or for the tax return.
• The latest each update can be sent is 7 August (for the 1st update covering period ending 5 July), 7 November (for the 2nd update covering period ending 5 October), 7 February (for the 3rd update covering period ending 5 January) and 7 May (for the 4th update covering period ending 5 April). This is true even if the client uses the fiscal year (1 April – 31 March) for their basis period.
• An update doesn’t include any obligation or statement that the data is complete and accurate, and no tax is paid at that point.
• Corrections for previous quarters can be sent, too.
• HMRC returns a calculation of the estimated tax liability based on the information sent. This should be discussed with clients, with potential inaccuracies notified (pending later adjustments).

Digital tax return for MTD for Income Tax

• Very similar to Self Assessment, the tax return is to be completed and submitted via MTD-compatible software at the end of the tax period or any point after this date and up to the following 31 January.
• A separate Business Source Adjustable Summary (BSAS) can be requested from HMRC, via the MTD-compatible software, for each business and property income. This is the foundation used by accountants to make adjustments for each income source, such as capital allowances, private use adjustments, corrections, and disallowable expenses. Accountants should not simply use the fourth quarterly update as the numbers for the tax return. BSAS totals are not a substitute for completing the digital tax return and accountants must make adjustments as required.
• Remember that the MTD rules mean any adjustments/corrections must be undertaken in MTD-compatible software and legally-compliant digital links must be used between software and systems if data is transferred (e.g. from a spreadsheet to accounting software—it is not legally possible to cut/copy and paste data).
• The submission is a declaration that the information is complete and correct. The client must review and sign. As with Self Assessment, you are unable to do this for them.
• Once submitted, HMRC returns a tax calculation.

The digital tax return effectively replaces the SA100 tax return. Additionally:

• 31 January continues to be the deadline for filing.
• Any income tax liability must also be paid by 31 January (payments on account will continue).
• HMRC will not provide any submission interface to allow filing without the need for software. In other words, MTD-compatible software must be used all the way through. If more than one piece of software or system is used, it must be digitally linked in a legally-compliant way.
• If any information that needs to be included in the final declaration isn’t supported via software submission, then the client will also need to complete a Self Assessment tax return.
• However, if data cannot be submitted digitally for whatever reason, then a SA100 may still be required.

Supplementary forms for income tax like SA102, SA105 and so forth, are no longer required because of the use of quarterly updates to provide the data or the fact the software is connected to HMRC, so can automatically pull in detais like employment income.

What information will clients submit for MTD for Income Tax?

The following are non-exhaustive lists and subject to change and confirmation by HMRC.

For a self-employment business, the data required is likely to include:

• Business income (e.g. turnover)
• Business expenses (total and disallowable by type of expense, such as travel costs)
• Tax allowances for vehicles and equipment (e.g. capital allowances)
• Adjustments (e.g. basis adjustment)
• Balancing charges
• Goods and services for client’s own use.

For a property business, the data required is likely to include the following:

• UK and foreign property business income
• UK and foreign property business expenses (e.g. premises running costs)
• Allowances for property (e.g. annual investment allowance)
• Adjustments on property letting (e.g. loss brought forward)
• Balancing charges.

For the tax return, the individual is likely to be required to include the following among other things:

• Total UK dividend income for a tax year
• Taxed UK savings interest
• Untaxed UK savings interest
• Other income sources
• Any claims or elections.

Can clients opt out of MTD for Income Tax?

As with MTD for VAT, it won’t be possible for most clients to opt out of MTD for Income Tax if they fall within its scope.

However, if they joined voluntarily in the public beta, they can opt out.

And that’s also the case if they’re in specific categories that are automatically exempt, including:

• Trustees
• Personal representatives
• Foster carers
• Those without a National Insurance number in the January before the start of the tax year.
• Non-resident companies.

Those who fall under the digital exclusion rules as defined by MTD for VAT will automatically be exempted from MTD for Income Tax (although there will be no harm in checking this!).

This includes people whose disabilities mean they can’t use software, for example, for people whose remote location means internet access is impossible.

Additionally, your clients will be exempt from Making Tax Digital if their qualifying income falls below the threshold for three consecutive tax years (bearing in mind this threshold will fall each year after 2026, until reaching £20,000 for 2028/29.

What software do clients require for MTD for Income Tax?

Clients will require MTD-compatible software of some kind. Understandably, they may look for free solutions. Sage Accounting Individual Free is a great example, and can help clients with simple tax affairs manage their finances with software that makes bookkeeping, transaction tracking, and both MTD for Income Tax and Self Assessment easy.

However, as an accounting professional, you will require them to have more sophisticated software if you intend to collaborate with them for quarterly updates and the tax return. There are a variety of Sage Accounting plans to meet both yours and your client needs, and will grow in features as they grow, too. Examples include VAT accounting and payroll.

A Sage for Accountants plan offers the chance to upsell Sage Accounting directly to clients, and comes with a host of free software for accountants, such as Final Accounts and Tax, Client Management, plus free AutoEntry, GoProposal and Futrli credits each month.

Most of the big-name cloud accounting software has already been updated for MTD for Income Tax, although this might not necessarily be true for desktop accounting software. You or your clients may need to consult the software vendor to ensure updates and patches are installed in time.

Older software packages that are no longer supported may not be updated, so might require the client migrate their accounting to a different package.

It will be possible to use spreadsheets for MTD for Income Tax accounting through the use of either bridging software, or special spreadsheets/worksheets that facilitate digital linking with cloud services.

Remember that the digital linking rules say that copying and pasting of MTD accounting records is not allowed, and all transfer of MTD for Income Tax data must be both digital and automated.

Because of this and other issues, using a spreadsheet is unlikely to be the most user-friendly solution.

Additionally, MTD-compatible software must be able to:

• Create and store digital records
• Send quarterly updates
• Submit the final declaration
• Receive information from HMRC.

What is digital linking for MTD for Income Tax?

You may recall the digital linking rules from the implementation of MTD for VAT.

In summary, it aims to legally enforce a fully digital path for relevant tax data once it has entered the system.

For example, once an expense record is entered into accounting software, that value cannot then be copied into a spreadsheet for further processing, before being pasted back. The expense record must be transferred digitally by the software, via the cloud, for example.

There’s less of a focus on digital linking in MTD for Income Tax because there are likely to be fewer interconnected applications or systems compared to VAT. But it still applies if spreadsheets are in use, as a key example, and could impact retail clients who use electronic point of sale (EPOS) systems with accounting software, or who use online auction software.

In such a case, the two (or more) systems must be digitally linked in a legally compliant way, typically by sharing data in the cloud (e.g. the EPOS system will be available as an add-in extension for the accounting software, via the accounting software’s App Store).

Furthermore, if you work with clients then you’ll need to ensure data transfer happens digitally (although emailing and transferring files via a USB memory stick are acceptable).

Do clients signed up for MTD for VAT need to sign up for MTD for Income Tax?

The two Making Tax Digital schemes for VAT and Income Tax operate independently, with their own sign up criteria.

It isn’t the case that MTD for Income Tax applies only to those already using MTD for VAT—although many businesses already using MTD for VAT will find themselves having to sign up for MTD for Income Tax too.

What are the MTD for Income Tax easements for clients?

Following feedback, HMRC has provided a handful of easements to assist certain kinds of businesses:

Joint property ownership

A joint owner of a property only needs to submit their own share of income and expenses (e.g. one record for each), and not the full figures for the property.

They will need to provide records for total rent, other income from the property, premiums for the grant of a lease, and reverse premiums and inducements. For expenses, records should include property repairs and maintenance, residential finance costs, professional fees, and more (for more details, see sections 2.1 and 2.2 of HMRC’s MTD for Income Tax Update Notice).

Each joint owner will need to separately and independently follow the MTD for Income Tax rules, however, such as using MTD-compatible software. Furthermore, legally-compliant digital linking is required between applications and systems. Landlords who use spreadsheets to track depreciation of assets cannot copy and paste data into their accounting software, for example. In situations like this, use of professional MTD-compatible property management software is advisable.

3-line accounts

Already possible for Self Assessment, this easement can also be used for MTD for Income Tax.

Clients with an annual turnover below the VAT registration threshold (currently £90,000) may opt to submit total income and expenses rather than breaking these figures down by tax category.

However, given the requirement to keep digital records of income and expenditure in any event, and the use of MTD-compatible software that will automatically produce detailed quarterly updates and a tax return based on those records, it’s unclear how useful this easement will be.

Retail sales

Clients may choose to record the daily gross takings for all retail sales as a single digital record. This must include all payments from cash paying customers, plus credit sales, gift card redemptions, sales competed via third-party booking platforms, and so on. For more details, see section 3 of HMRC’s MTD for Income Tax Digital Record Keeping Notice.

What does MTD for Income Tax means for accountants?

It’s hard to overstate the changes MTD for Income Tax will bring for you.

Here are two things to be aware of:

1. Your clients will have to use software

Your clients will be required to use compatible software to record their business and property income and expenditure and send five updates/reports every year to HMRC.

There’s likely to be automation for each of these steps, minimising the administrative impact. But your clients still need to be aware of the requirements expected of them.

This will require a substantial change in attitude from your clients in how they approach their accounting.

It’s certainly the case that the “shoebox” client who dumps receipts on their accountant’s desk in January each year will have to change their ways.

It’s your role to communicate this need for change, and to encourage it to happen.

In return, you’ re given significant privilege to guide your clients towards the best solution for their needs—and to bring positive changes to their clients’ businesses.

This presents additional opportunities.

Not partnering with a software vendor to sell solutions to your clients, for example, is to discard a potentially large income source.

Needless to say, an MTD for Income Tax-compatible cloud accounting solution that ties into your own systems is best for both you and your client.

You can offer training in the software, perhaps as part of the sales package, or as a separate service offering.

At the very least, every UK accountant will need to be proficient in the free software package the government will probably offer, because accountants will be facing client enquiries about this on a very regular basis.

2. You have the opportunity to offer additional advisory services

Although MTD for Income Tax should mean clients are more aware of their accounting, it doesn’t mean your fundamental role will change.

You’ll still be required to help your clients be compliant, and to support them with fundamentals such as making deductions and calculating a final income tax bill.

While it’s possible some small business owners may have an epiphany moment when they get to grips with accounting software and realise the power it delivers, the fundamental fact that many people hate dealing with figures and the ensuing admin burden isn’t going to change.

You have nothing to fear from technology and, in fact, lots to gain.

But this is only scratching the surface of the potential that MTD for Income Tax will deliver.

You’ll go from having a single point of contact each year to potentially having at least five situations where your clients may need help with their accounting when they make those quarterly reports and the final declaration.

These situations can be used to forge stronger relationships where you’re not viewed as just a number cruncher but more of a business partner.

Using cloud software that ties in with your clients’ accounting gives you the ability to monitor for problems or opportunities, and to provide advice based on this.

Final thoughts on MTD for Income Tax

If your practice dealt with the implementation of MTD for VAT ahead of it being mandated in April 2019, you’ll be well aware that starting early with preparations will put you and your clients in good stead.

If it didn’t, the best advice is to start now.

Look at your processes, start talking to your clients, and take the steps now to not only meet the requirements for MTD for Income Tax but to use it as an opportunity to help your practice and your clients really flourish.

Editor’s note: This article was first published in October 2020 and has been updated for relevance.

Buying or owning property for rental is popular in the UK.

Good financial record keeping for landlords needs to be at the centre of any property rental planning.

In this article, we examine what landlords need to know about accounting and bookkeeping, so you can be sure to stay on the right side of the law—while maximising income.

Here’s what we cover:

Landlords and taxes—the reason for financial records

If you get rental income from privately owned property then two things are true:

1. You’re a landlord (even if you don’t think of yourself as one).
2. It’s very likely you have to pay income tax on the rents you receive.

This is a key reason why you need to keep good financial records.

HMRC has suggested 700,000 landlords either don’t pay tax, or don’t pay enough. It has even created the Let Property Campaign as a form of amnesty so landlords can come clean and pay up.

Tax also needs to be paid on additional payments you receive for the use of furniture, or any services you provide, such as heating, repairs, and cleaning of communal areas such as hallways.

But the good news is that you can deduct expenses and allowances from the income.

What you’re left with is the profit upon which you pay income tax.

(Note that you can’t claim expenses if you’re claiming the tax-free property income allowance when your rental income is less than £1,000.)

Most private landlords use the Self Assessment system to calculate and then pay their taxes, and there are special boxes on the Self Assessment tax return that relate solely to property income, expenses that relate to the income, and exemptions.

If you complete a paper-based return, these boxes are included on the SA105 form, which should be submitted as a supplement to your Self Assessment tax return (SA100).

What kind of landlord am I?

Most small landlords within the UK are private individuals who use Self Assessment to declare and pay income tax due on rental income—and that’s what we focus on here.

But let’s briefly look at the different kinds of landlords that exist when it comes to taxation:

• Resident landlords: Those letting a room in their own home might be able to use the Rent a Room scheme. This means the first £7,500 of rental income is exempt from tax (£3,750 if you jointly own the property). If the room(s) you let are bed and breakfast, or you’re operating a guest house from your home, then this is considered a trade and not rental income.
• Professional landlords: Those who privately own and rent properties as a full-time occupation are considered to be operating a trade. This means they not only pay tax but also National Insurance contributions. A professional landlord is typically defined by the fact being a landlord is a person’s main job. They will also own multiple properties and typically are actively looking for more.
• Limited company: Incorporating a company and putting your properties into it is becoming increasingly popular for semi-professional landlords. This means corporation tax becomes due, rather than income tax, and this can be more tax efficient. The individual receives income by optionally taking dividends from the company.

There was also a former type of category called furnished holiday lettings, or FHL. There were special tax rules for FHL such as being able to claim Capital Gains Tax relief for traders, being able to count profits as earnings for pension purposes, and considering items capital allowance purposes. However, FHL was abolished by the UK government as of April 2025, and FHL properties are now considered just like any other rental property for income tax purposes.

Why do landlords need to keep financial records?

For smaller landlords, it might seem ridiculous to keep financial records. After all, it’s a very predictable income.

You receive a set amount each month, that you mention on the Self Assessment return in January each year.

Why is record keeping for landlords even required?

There’s a handful of very good reasons, as follows:

• The government requires you do so. As mentioned above, it’s all about tax. We explain exactly what you need to keep below, and for how long, but this is a basic part of the Self Assessment rules.
• Working out your expenses. You might be spending the odd bit of cash here or there paying for things such as a new fridge for your tenants, or minor repairs. You might consider these inconsequential to the point where you don’t even make a note. But they can add up and can reduce your tax bill.
• Accurately claiming tax relief. This allows private landlords to potentially claim relief on finance costs at the basic rate of income tax (20%). Depending on your personal circumstances and the amount of your expenses, this can reduce the amount of tax you pay. Higher-rate taxpayers cannot claim additoinal relief on finance costs.

There are other miscellaneous other reasons why good record keeping for landlords is vital, such as it being a requirement if you intend to purchase more properties in the future.

For a buy-to-let mortgage, lenders will want to see how effective your existing rental business has been, and how well you’ve managed the property.

And depending on what kind of accounting method you use (cash accounting vs traditional accounting), you might be able to bring losses forward across tax years.

Again, you will need good accounting records to be able to do this.

What is Making Tax Digital for Income Tax and how does it affect landlords?

Perhaps the biggest reason for good financial record keeping for landlords is the impending introduction of Making Tax Digital (MTD) for Income Tax (also known as MTD for Income Tax),

MTD for Income Tax starts as of April 2026, so affects the 2026/27 tax year.

Inclusion and start dates

MTD for Income Tax is being introduced in three phases, starting in April 2026. Whether you’ll need to follow the MTD for Income Tax rules will depend on the gross income you receive from your rental property (or properties).

If you work as a sole trader, then the gross income from your businesses are also added to this gross income total to decide if you need to follow the MTD for Income Tax rules.

You’ll need to follow MTD for Income Tax’s rules as of the following dates, dependant on the gross income:

• April 2026: If you have gross income over £50,000 in the 2024/25 tax year and subsequent tax years.
• April 2027: If you have gross income over £30,000 in the 2025/26 tax year and subsequent tax years.
• April 2028: if you have gross income over £20,000 in the 2026 to 2027 tax year and subsequent tax years.

Digital record keeping

Software must be used to keep accounting records relating to sole trader and landlord income that you declare as income tax.

For example, data from invoices you send or receive must be stored digitally, using MTD-compatible software, as must expenses.

Updates

Using MTD-compatible software, you’ll need to make at least quarterly updates to HMRC for your total rental income and expenses across the properties you own.

Depending on the software you use, these will be largely automated, so shouldn’t be too difficult. You’ll just need to review, and the click or tap to submit.

By 31 January each year, you’ll also need to provide a single tax return for all your income. This replaces the Self Assessment tax return, and you’ll also use it to tell HMRC about things like taxable interest on savings, for example.

Joint property ownership

If you jointly own a property with another person, then you only need to account for your share of the rental income and expenses. You don’t need to provide full income and expenses details for the property.

Digital linking

Potentially one of the trickiest areas of adopting MTD for Income Tax for landlords could be ensuring compliance with the digital linking requirements.

Put simply, it’s a legal requirement within MTD to ensure that relevant tax data is transferred in a digital way once it’s in the system. It’s not legally compliant to copy/cut and paste data between two places, and nor is it possible to write it down and then enter it manually. It must be digitally transferred via features built into the software, for example.

For landlords that use spreadsheets for a variety of purposes, such as monitoring depreciation, this could present challenges. A solution is simply to use dedicated MTD-compatible property management software that automatically enables correct and legally-compliant digital linking between systems and applications.

What records should landlords keep and for how long?

HMRC currently requires you keep details of the following as part of the Self Assessment rules:

• Dates when you let your property. This will be listed on any tenancy/lease agreements that you should be keeping anyway.
• Rental income you receive, including rent books, receipts, invoices and bank statements relating to this. Remember that weekly rents always require a rent book, but a tenant can request one in any event—and the law says you must comply.
• Income from services you provide to your tenants, such as if you charge them for repairs.
• Allowable expenses you wish to claim and that you pay in order to run the property. This could include receipts or invoices, for example. It could also include non-property-specific things such as mileage that you claim while carrying out your property business work.

Where should landlords keep financial records?

Until the introduction of MTD for Income Tax in April 2026, which legally requires you keep digital records if income is above £50,000, you can keep records on paper or using software.

Whatever you choose, the records must be accurate and legible. HMRC can impose a penalty if this isn’t the case.

In other words, you should always assume a third party will view your financial records.

If using a computer, you can use spreadsheets or dedicated accounting software.

Once MTD for Income Tax is introduced in April 2026, and if you have to follow the rules, you must use software for accounting relating to income tax.

This could be a spreadsheet but you’ll need to use an add-on called bridging software that communicates with HMRC in order to submit the periodic updates and tax return.

Because this can be something of a messy solution, most landlords will use accounting software.

HMRC says two million small businesses, landlords and the self-employed who are expected to start using MTD for Income Tax already use software.

How long should landlords keep financial records?

Until MTD for Income Tax begins, private landlords must follow the rules of Self Assessment, which state that non-business records must be kept for at least 22 months after the end of the tax year, but rental income records must be kept for at least five years.

In other words, for the 2026/27 tax year that ends in on 5 April 2026, you’ll need to keep the records until the end of January 2033.

5 top tips on keeping good financial records

Here are five tips to help you keep good financial records if you’re a landlord.

Providing expert input is James Wood, Policy Manager for the National Residential Landlords Association (NRLA).

1. Use software and apps

A key trick to happy landlord financial record keeping is to ensure the vital data, such as money spent or received, is transferred into your accounting system as soon as possible.

“Anything that you can do to make sure that your record-keeping is up to date is always going to be a bonus,” says James.

“The vast majority of landlords do this in addition to their other work.

“So, anything like apps that can save time and allow you to accurately record details is going to be an improvement.”

Nowadays, you can get apps for your phone or laptop that make this a cinch—everything from automatically reconciling bank payments, to scanning in the details from receipts and invoices by simply taking a picture of them.

Why make life harder for yourself by recording everything on paper, or by trudging through spreadsheets?

2. Work to a monthly schedule

Most rents are paid monthly, and you’re probably already used to checking the bank account around that time.

Why not use the opportunity to take care of bookkeeping/accounting tasks at that time, too?

“Landlords need to be keeping records of both their rental income and any times where the rent has not been paid,” says James.

“That can all go into a singular rent statement. It makes sense to record any outgoing expenses at this time, too.”

In other words, doing a little bit at a time means you can keep on top of it—and you also get the satisfaction of sleeping at night knowing everything is running smoothly.

Don’t let all this important data linger as a pile of paperwork that you hate tackling each January.

Doing a little at a time also helps avoid errors that creep in if you tackle a mountain of paperwork all at once.

3. Get confirmation from tenants

“When a tenancy begins, you’re required to provide a significant amount of paperwork,” says James.

This includes the tenancy agreement, of course, but also things such as mandatory safety certificates that must be handed over to tenants.

It’s about ensuring compliance with legal requirements.

“The most important thing in being a good landlord is knowing what the regulations are, and showing that you’ve complied with them,” continues James.

“A good idea is to use a checklist that tenants sign, to show you’ve complied with everything.

“If you don’t get evidence then later on you may have to serve the paperwork again to the tenant, which increases your workload.”

4. Get expert help

“Tax can be an extremely complex area,” says James.

“A lot of the time it depends on specifics of your property and your personal situation as to what you write on the Self Assessment form.”

There are accountants and tax advisers who are experts in property rental. Examples of those the National Residential Landlords Association (NRLA) suggests its members consult include Rita 4 Rent, Tax Scouts, and Less Tax 4 Landlords.

As well as being able to simply hand off your accounting, tax experts such as these are also likely to be full of wisdom built up over years.

Sharing it with you is simply part of their job.

Thinking of expanding your portfolio, for example? They’ll know the best way to be tax-efficient, and how to make life easier when it comes to accounting.

“The best advice for anybody starting out is to ensure you’re aware of your role and requirements,” says James.

“There’s a huge amount of regulations to follow and understand. Ignorance of the law is no excuse.

“A big hidden cost can be enforcement action against you—from HMRC, your local council, and others. It can be difficult without specialist support through organisations like the NRLA.”

5. Switch to cash basis accounting

This is the default accounting method for new landlords since 2017, but if you’ve owned rental property for longer then you might’ve been forced to use accrual (traditional) accounting.

Cash basis offers a number of advantages for landlords, perhaps the biggest of which is simplicity.

Switching from accrual to cash basis accounting is straightforward, and involves a handful of adjustments.

Final thoughts on landlords keeping financial records

Some might be surprised to learn that accounting for landlords is more sophisticated than it might sound. There are certainly more obligations than it might seem at first glance.

Add in compliance issues like safety checks and a lot of paperwork can start flying around.

However, keeping on top of things isn’t very difficult and using software is a must if you want to make things as fuss-free as possible.

This blog was first published in July 2022 and has been updated for relevance.

Making Tax Digital (MTD) for Income Tax comes into force from April 2026.

If you’re a sole trader or landlord who meets the criteria, the new requirements from HMRC will offer you a great opportunity to overhaul your accounting admin tasks for the better.

By choosing the best cloud accounting software, and following the MTD for Income Tax rules, you’ll spend less time on admin and more time developing your products and services, adding value for your customers and clients, and growing your business.

In this article, we reveal how MTD for Income Tax will benefit you and your business.

Here’s what we cover:

An overview of Making Tax Digital for Income Tax

Making Tax Digital (MTD) for Income Tax is a HMRC’s new tax system that will be launched across three phases, in April 2026, April 2027 and April 2028.

It affects sole traders and landlords that have income over £50,000 in the first phase, over £30,000 in the second phase, and over £20,000 in the third phase.

The new rules mean you’ll be required to manage your taxes by using functional compatible software for your accounting.

Across each year, you’ll need to provide four quarterly reports, then a digital tax return by 31 January.

This might sound like a lot of additional work but that’s where the software will come into play.

Most tasks required to complete the various steps will be automated, and the data should be there ready and waiting when the time comes.

Below are five ways that MTD for Income Tax will make life easier for you and your business.

1. You’ll have more clarity of your financial position

Making Tax Digital for Income Tax can be so beneficial for your business.

Yes, you’re required to pay more attention to your accounting than you might be used to.

But this means you’re more likely to know your financial position at any given moment. You’ll know about the cash flowing in and out, and how much money you have to operate with.

Compare that to how some businesses are run, where the owner might only get this kind of insight once a year when they visit their accountant at tax return time.

Additionally, if you use mobile accounting apps, you can get this kind of insight at any time of the day.

You can always be connected to your business finances, reducing the amount of times that you need to sit down at a desk to work out and understand your numbers.

2. You’ll know how much tax you owe

One key benefit of MTD for Income Tax is that you’re able to keep on top of your tax liability across the year.

In short, it means you have the best possible idea of how much you’re likely to owe.

This benefits cash flow.

You might be used to setting aside a quarter or a third of your income for tax purposes. This is often more than enough to cover January’s tax bill, but the idea is that saving too much is better than saving too little.

But instead, you can set aside how much you’re actually likely to owe, based on the data shown in your quarterly reports.

This amount will still be an estimate, of course, and because of the potential need to make adjustments and reliefs in January it continues to be a good idea to be generous in your estimate.

But you can certainly avoid setting aside far too much each year.

As with any software, what you see in your accounting software for the quarterly reports is only going to be as accurate as the data you input.

But if you get the simple steps of MTD for Income Tax correct, the rest of your accounting should follow suit.

3. It will be easier to spot accounting mistakes and amend them

Making mistakes with your accounting can not only give you a false idea of your cash flow position, it can also attract penalties from HMRC.

Similarly, late submissions can attract penalties, too.

To accompany MTD for VAT and MTD for Income Tax, a new points-based penalty system has been introduced by HMRC that will mean automatic £200 fines are applied if a certain number of points is exceeded in a time frame.

This came into force on 1 January 2023 for MTD for VAT customers, and will apply as soon as taxpayers become mandated for MTD for Income Tax in either 2026, 2027 or 2028, depending on their income.

But fines and points are just one of your worries.

Accounting mistakes also eat your time when they must be corrected. And you don’t want yet more admin tasks on top of what you’re already doing.

MTD for Income Tax makes it harder to make mistakes and easier to spot any you do make because of the requirement to send quarterly updates to HMRC. Essentially, you’re checking your accounting data every three months.

Perhaps surprisingly, there’s no legal requirement for the quarterly reports to be correct. But it’s obviously a good idea to be as accurate as you can be.

And while your accounting software can only be as accurate as the data you input, MTD-compatible accounting software will automate much of the work required to create the quarterly reports.

In many cases, it’ll simply be a matter of checking the report and then opting to submit it.

4. Working with your accountant could become more effective

Good-quality MTD for Income Tax software will be cloud-enabled and will offer an option to connect to your accountant’s systems.

This means the accountant can see the same financial data as you do, so can help with the periodic reporting requirements of Making Tax Digital.

And depending on your needs, this insight means they can evolve into more of a business partner.

After all, they have the knowledge to examine financial data and vast amounts of experience in businesses of all kinds due to their work with other clients.

Your accountant will be able to spot any problems that might arise long before they actually become a problem. And they can spot opportunities for you too.

If nothing else, connecting your accounting system to theirs makes it much easier each January when you need to make the digital tax return for your business(es) or property income, and pay your tax.

And that means you can say goodbye to the days of visiting them with a big box full of paperwork and receipts.

5. You’ll bring new tech into your business and work more efficiently

Choosing good-quality MTD for Income Tax-compatible software is an opportunity to get the most from technology for the benefit of your business.

It would certainly be a mistake to assume that all software solutions are essentially the same. In fact, being able to handle your accounting is just the very basic level for the best accounting software.

Key developments in recent years include artificial intelligence in the form of machine learning. This can make bank reconciliation much quicker, for example, by automatically matching incoming payments against invoices.

Similarly, taking a snapshot of a receipt using your phone can mean the data is captured and inserted automatically into your accounting.

All this means you’ll save time that can be used for other tasks and opportunities, such as freeing up your staff, adding value to your customers, growing your business. and getting your weekends back.

Final thoughts

Adapting to MTD for Income Tax provides you with an opportunity to truly get to grips with your business accounting.

It’d be wrong to assume this means spending more time on the task.

Quite the opposite is true.

If you’re really managing your business accounting well, you should find the time you spend doing it is reduced.

Additionally, the amount of vital information you learn about your business will increase.

This will allow you to be more agile in your decision making, and means more opportunities can be harnessed, which leads to a stronger business and faster growth.

Editor’s note: This article was first published in September 2021 and has been updated for relevance.

Get the lowdown on how Making Tax Digital will change the way sole traders submit tax returns, and what that means for Self Assessment.

You may have heard of Making Tax Digital. You might have also heard that it means the end of Self Assessment.

As usual, the truth is a little more nuanced.

From April 2026, sole traders earning over £50,000 will have to switch to using Making Tax Digital (MTD) for their income tax. They’ll stop using traditional tax returns for their self-employment income.

The same goes for those earning over £30,000 from April 2027, and over £20,000 from April 2028.

Those earning under the thresholds will continue to use Self Assessment.

For now, this article will look at the details and at what’s changing with MTD.

Here’s what we cover:

How Self Assessment works now

The Self Assessment system is built around a yearly tax return, where you inform HMRC of your income, business-related allowable expenses, and any adjustments or allowances required.

Using these figures, HMRC calculates your final income tax and National Insurance bill.

Some people fill in their own Self Assessment form, while others have their accountant do it on their behalf.

Most people submit their Self Assessment online, through HMRC’s digital service, with a deadline of midnight on 31 January following the end of the tax year.

But it’s also possible to fill in the paper SA100 and post it to HMRC, in which case it must arrive no later than 31 October following the end of the tax year.

Any outstanding tax and National Insurance amounts must be paid by 31 January.

If you pay tax on account, at this point you’ll also make your first payment on account for the most recent tax year (with the second due by 31 July).

How things will change with Making Tax Digital for Income Tax

If you earn over £50,000 in total from a combination of income as a sole trader and/or from rental income as a landlord, you’ll need to start following the rules of Making Tax Digital for Income Tax (also known as MTD for Income Tax) from April 2026.

If you earn less than £50,000 but more than £30,000, you’ll need to start following the rules from April 2027. And you’ll need to comply from April 2028 if you earn more than £20,000.

What does this mean? You’ll no longer need to fill in a Self Assessment return.

MTD for Income Tax means you’ll need to use a functional compatible software to digitally keep your accounting records relating to income tax. This makes it easier for sole traders and landlords to manage their taxes.

There are three further key requirements that you or your accountant must do:

• Provide quarterly updates to HMRC, at least every three months. This must be via functional compatible software. You’ll need to provide separate updates for each business you run (if more than one), as well as a separate one for all rental income you receive as a landlord.
• Provide a digital tax return of all your income for each business and for rental income. This must be submitted no later than 31 January following the end of the tax year. It summarises the income, allowances, and adjustments for each business and rental income. It will also need to include any claims for personal allowances such as High Income Child Benefit Charge or Marriage Allowance.
• Pay any tax and national insurance you owe, no later than 31 January following the end of the tax year. Note that the payment on account system will continue, so you may need to make a further payment on 31 July of the same year.

And that’s all that’s new.

MTD for Income Tax doesn’t change the rules of income tax. The rules around allowable expenses, personal tax allowances, National Insurance contributions, and so on, all remain the same.

Similarly, you’ll continue to pay tax and National Insurance in the same way, and the bill shouldn’t be any different had you done it via Self Assessment (assuming your accounting is correct).

All that changes with MTD for Income Tax are the requirements and processes around reporting the information to HMRC.

Why MTD can make life easier for sole traders

Despite the initial challenge of these changes to processes, MTD for Income Tax isn’t that difficult.

The goal is to give you better insight into your taxes and by extension, you get better visibility into your business finances.

This includes your all-important cash flow.

Many of the additional processes required for MTD for Income Tax will be automated, provided you use HMRC-recognised accounting software.

And for your periodic updates, it’ll simply be a matter of clicking or tapping a button to prepare the report, then checking it briefly, before sending it off.

You should know there’s no legal requirement for the periodic updates to even be accurate—although it’s best if they are.

For the digital tax return, you’ll need to ensure that any adjustments have been included both for each business and also as an individual before submitting.

It’ll be straightforward to get all the information together, provided you’ve made good use of your accounting software.

If you use an accountant, they can help with the periodic updates and digital tax return, just as they provide support with Self Assessment tax returns.

The level of financial insight provided by Making Tax Digital can make planning for growth so much easier.

For example, if you want to save for some capital expenditure, such as getting a new van, this should become a lot more straightforward.

Similarly, it becomes a cinch to spot trends, so you can capitalise on things such as seasonal business movements.

Furthermore, because of the insight you gain into your cash flow, you can also spot problems before they arise.

Of course, MTD for Income Tax means having a good idea throughout the year of your likely tax bill too.

Rather than setting aside a nebulous 25% to 30% of your income for the bill, you can set aside a more accurate amount.

Although until the digital tax return is complete and any adjustments and allowances are accounted for, it will continue to be tricky to predict the precise amount you owe.

Self Assessment vs Making Tax Digital for Income Tax—what’s required?

For Self Assessment, the sole reporting requirement is to complete and submit a Self Assessment tax return (and pay your tax and National Insurance bill, of course). 

You also need to keep the underlying records for a period of time, the exact period varies depending on:

• When you submit your Self Assessment tax returns
• If you’re also VAT registered
• If you’re registered for the Mini One Stop Shop (MOSS)
• If there are any ongoing discussions with HMRC.

However, how you do your accounting is up to you. You can currently record it using a paper notebook, or a spreadsheet, or you could use dedicated accounting software.

This all changes radically under MTD for Income Tax.

The biggest change is that you must use functional compatible software and send quarterly updates and a digital tax return to HMRC through the software.

What is functional compatible software?

Functional compatible software is the HMRC name for:

• All the pieces of software you use to create the original digital records of your business activity (such as sales, purchases and any accounting adjustments)
• The software that then generates the HMRC updates (normally by summarising the data from your original digital records)
• The software that then electronically submits the updates to HMRC.

The journey from the digital records (once created) to the digital submission must all be digital, meaning no copying and pasting is permitted. 

This is a point of law, and there’s no getting around it unless there’s a very good reason (you live in a remote location without an internet connection, for example, or your religious beliefs mean you can’t use a computer).

Can you use spreadsheets for MTD for Income Tax?

You do have some flexibility in how you use software to keep your accounting records.

It’s possible to use a spreadsheet, for example, along with bridging software that will use formulas to gather together the details from the various cells on the spreadsheet and then prepare your periodic updates and digital tax return, as each is required.

This would help you be legally compliant but, as you might’ve realised, it would barely be more than a makeshift solution. Under the mandate, you also must keep your spreadsheet data intact, including ensuring that you have separate records (cells in the spreadsheet) for any adjustments.

Furthermore, using a spreadsheet runs the risk of breaking the rules around digital linking, as Making Tax Digital requires the movement of data to be both digital and automated. Manually copying and pasting from one place to another is prohibited most of the time.

Why using MTD-recognised software is the better approach

Due to issues with spreadsheets, most people will find it much easier to use MTD-recognised accounting software. Since using it encourages basic accounting practices, such as using the software to submit invoices and record payments, creating and submitting your periodic updates, payment tracking, automatic tax calculations and the digital tax return will be simple.

The data will already be in the system, and up to date.

HMRC has said it’s working with software vendors such as Sage to ensure there will be free software available to meet the needs of the simplest businesses. However, it’s not yet clear what form this will take, or what features it will have.

If you already have a cloud accounting software subscription, it’s very likely it will be ready for MTD for Income Tax.

What sole traders can do now to prepare for MTD for Income Tax

While the introduction of MTD for Income Tax sounds like it’s a long way away, the reality is that it’ll be here in no time. It’s worth getting prepared now.

Here’s three ways you can do that:

1. Start using accounting software and keeping digital records

This is the basic legal requirement of Making Tax Digital. If you’re not doing so already, you should look to switch to using some kind of software for your accounting.

If you are a sole trader, and your income is blended into a personal banking account or you have multiple income streams, you may also want to consider getting a business account for each. This makes it easier for the software to collate the relevant data from each business for your MTD for Income Tax quarterly reports and the digital tax return.

Alternatively, as mentioned earlier, this could be using a spreadsheet to create a makeshift ledger to log your incomings and outgoings.

But one thing you can’t do is keep a paper-based ledger.

Many sole traders simply rely upon accounting software. This means they can issue invoices with ease, reconcile their bank statements against their outgoings, and more. It means they have perfect visibility into their cash flow.

Accounting software also grows with your business and helps you cope with more complex finances.

Using it means your accounting records are always kept in a legally compliant digital way—and for the required period (usually five to seven years). This method removes the worry and stress of managing the data collection yourself through spreadsheets.

2. Photograph your receipts

Whenever you spend money for your business, you need to record that information as soon as possible.

This is a requirement for basic good accounting, but recording it digitally is a requirement of Making Tax Digital. Digital recording doesn’t mean keeping a digital photo, it means creating digital information that can be used by computer systems.

One of the big advantages of cloud accounting software is the ability to create digital records like those required by MTD, from digital photos. This is often called Optical Character Recognition or OCR.

AutoEntry, for example, lets you use your phone or a PC and scanner to grab an image of the receipt. The information is then automatically extracted and can be sent straight to your accounting software.

If you buy something in a shop and are handed a paper receipt, you can take a snap of it using your phone.

The information such as the retailer details, amount, date, VAT amount, and so on, will be extracted automatically.

3. Get support with the changes

It’s a good idea to get help when first implementing MTD for Income Tax.

Luckily, this kind of help is available on every high street in the form of accountants and tax advisers.

These people have amazing experience of every aspect of tax and running a business, and can advise you on how to both start the MTD-ball rolling in your business and then ensure you’re ready in time for your 2026, 2027 or 2028 deadline.

You can hand off a some of the workload around MTD to your accountant once MTD for Income Tax is up and running but you still need to use software to keep your accounting records digitally.

Your accountant will be able to advise the best way forward, and how best you can work with them.

Contact your software vendor too. They’ll have a massive amount of experience with both tax and, unsurprisingly, accounting software.

As MTD for Income Tax approaches, your accountant or tax adviser will have dedicated support where you can learn if the software you use is MTD-ready, and what Making Tax Digital means for you, too.

Final thoughts

To paraphrase Mark Twain, reports of the end of the Self Assessment tax return are perhaps premature.

It will remain a legal requirement for many following the start of Making Tax Digital for Income Tax in April 2026.

But for those required to switch to MTD for Income Tax, Self Assessment reporting won’t be required for tax years following April 2026 (although you’ll still need to submit your final Self Assessment return, for 2025/26, by 31 January 2027).

If you’re someone who hates poring over your Self Assessment tax return each January, the arrival of MTD for Income Tax will surely be welcome.

By creating periodic updates, you’ll find the data you require is already present and correct because you’ve been updating it across the year.

Therefore, submitting your digital tax return by 31 January will be much easier compared to how things are now.

Pretty soon, the Self Assessment tax return will become a forgotten memory—while you reap the benefits of better and clearer accounting that reduces admin and frees up time to do more of what you love.

Frequently asked questions on Making Tax Digital for Income Tax

What if it costs me too much money to switch to digital accounting? Do I still have to declare tax for Making Tax Digital?

As a sole trader, if you meet the threshold for switching to MTD for Income Tax, you should treat the requirement as a legal obligation.

This means budgeting in your business for expenses related to Making Tax Digital compliance such as hiring an accountant or using a digital accounting software subscription.

Don’t forget, you might be able to claim certain things back as allowable expenses, so make sure you know what can be claimed for, such as the cost of using an accountant, and what can’t.

Can I manage my Making Tax Digital requirements myself rather than hire an accountant?

Yes if you keep accurate digital records, usually via cloud accounting software to make it easier to compile and submit your quarterly updates and your digital tax return.

Many digital accounting software providers are aimed at medium to large businesses, so make sure you find one that doesn’t overcharge you for services you won’t need as a sole trader.

There are some limitations around how you keep your records.

For example, using spreadsheets will no longer be acceptable as a way to collate financial information unless you use bridging software to verify the data.

Any on-desktop or paper records must be kept unchanged for several years to ensure the data can be verified, or you’ll risk getting into trouble with HMRC should it ask for your financial data.

Editor’s note: This article was first published in January 2022 and has been updated for relevance.

Is it really the end of Self Assessment for landlords? Discover how property income will be affected by Making Tax Digital for Income Tax.

Have you heard that Self Assessment might be coming to an end?

And that the need for you to file an annual tax return might be on its way out?

Well, back in 2015, the then-Chancellor announced the death of the tax return. This would be achieved, he added, by the digitalisation of taxes.

It would mean the end of the Self Assessment tax return, used by many landlords to declare rental income among other things.

It’s taken a little longer than anticipated but this is now happening.

The Making Tax Digital (MTD) revolution will soon encompass non-incorporated landlords (those who own and rent out properties as individuals, rather than as limited companies).

This will be via the Making Tax Digital for Income Tax (also known as MTD for Income Tax, and MTD for Income Tax Self Assessment) system.

It all begins as of 6 April 2026.

Initially, it will only affect those with property income over £50,000 (along with sole traders) creating a requirement for earnings to be declared.

From 6 April 2027, those with property income over £30,000 will also be affected.

And from April 2028, it will include those who earn more than £20,000, as announced in the 2025 Spring Statement.

Let’s take a look at what landlords need to know.

Here’s what we cover:

How Self Assessment for landlords works now

Some landlords run property businesses as their sole occupation, while others may have purchased one or more buy-to-let properties as a sideline to their main income.

Some may have inherited a property that they let out, or perhaps even live in a property while renting out a part of it.

Those landlords who don’t own and run the property (or a property portfolio) through a limited company typically must use a yearly Self Assessment tax return to declare their property income.

Since this is a form of income, it’s no surprise that income tax applies. Using Self Assessment means they can work out how much tax and National Insurance is due.

How much they pay will therefore depend on their personal circumstances.

For example, they may be taxed on this income at a higher rate because of their day job, where their salary is paid by their employer through PAYE.

The great news is that the first £1,000 from property income (called the property allowance) may be tax-free. If you receive between £1,000 and £2,500 from property, you might not need to use Self Assessment either and should contact HMRC for more information.

It’s a good idea to check the Self Assessment guidelines every year.

However, you must use Self Assessment if the income is:

• £2,500 to £9,999 after allowable expenses
• £10,000 or more before allowable expenses.

What allowable expenses are there for landlords?

Buying, renovating or improving properties isn’t included, unfortunately.

However, wear and tear repairs between tenants can probably be claimed, as can repairs or maintenance that returns the property back to an original condition before the damage (such as  replacing roof tiles that blew off or replacing a boiler).

But the rules around what counts as repairs and maintenance, and what’s considered as actually improving a property, are complicated.

You should check the rules before making a claim.

Other allowable expenses for landlords include things you expend money for in the day-to-day running of the property, such as:

• Fees, such as letting agents, accountants and legal fees (for lets of a year or less, or renewing a lease for less than 50 years)
• Insurance (buildings and contents)
• Bills such as gas, water, electricity, and council tax
• Ground rent and service charges
• Professional property services you employ, such as a gardener or cleaner
• Other costs relating to running a business, such as stationery or advertising.

Relief on interest on the mortgage for a buy-to-let residential property can’t be claimed as an expense of the business. But if it’s included on the Self Assessment return separately, a tax reduction may apply.

How Making Tax Digital will change things for landlords

MTD brings new requirements for how landlords do their accounting relating to property income, and as such can make things much simpler and give you a much clearer insight into your property business finances.

MTD for Income Tax marks the end of the Self Assessment tax return if income from the property is over £50,000 from April 2026, over £30,000 from 2027, and over £20,000 from 2028.

These individuals will be required to use MTD for Income Tax instead, which unlike Self Assessment, is a digital-only submission.

Those who fall below these thresholds will continue to use Self Assessment without significant landlord tax changes.

MTD for landlords doesn’t change how tax works for landlords, as so much of what’s already been described remains true. However, MTD does provision for sole trader income and landlord income to be combined in its threshold.

The Government has also changed the rules for landlords letting or selling holiday rentals effective from 6 April 2025, which brings all landlord income into the same scope.

What does Making Tax Digital mean for landlords?

1. Landlords need to use software for their accounting

To declare your taxes correctly, you must use software for your accounting relating to property income and keep the accounting records digitally.

Using software could mean using a spreadsheet, but this will require bridging software to be able to communicate with HMRC.

Many landlords will use MTD-ready accounting software, which will free up an enormous amount of time otherwise spent on admin.

2. Landlords need to provide periodic updates to HMRC

You must provide periodic updates to HMRC across the year. These should be least quarterly (that is, every three months), and must be submitted via software. Your accountant or bookkeeper can do this for you, if you wish.

This is for all your property income. You don’t need to create period updates for each individual property if you have a portfolio; although if you hold property abroad, then you do them for all UK property, and separately for any foreign property..

3. Landlords need to provide a digital tax return

By 31 January each year, at the latest, you must submit a digital tax return to HMRC. This single tax return details all your income and expenditure, and is what’s used to determine your tax liability. It should include any other income you might receive, too.

Am I a professional landlord?

The first phase of MTD for Income Tax affects any unincorporated landlord with rental income over £50,000. And the second phase affects those earning over £30,000, whiel the third phase covers those earning over £20,000.

HMRC considers these people to be running a business.

This remains true even if it might not feel like you’re running a business.

For example, somebody who rents out an inherited property or holiday letting, or expends the equivalent of just a few days of work a year attending to the property and its tenants is still considered to be running a business.

Similarly, those renting out part of the home might also be affected.

Put simply, if total rental or combined rental and self-employment income you receive is over either threshold, you’ll need to follow the rules of MTD for Income Tax from the appropriate date.

HMRC defines professional landlords in the following way (all of these points must apply to the individual):

• Being a landlord is their main job
• They rent out more than one property
• They’re buying new properties to rent out.

In addition to potentially following MTD for Income Tax rules, these people may also need to pay Class 2 National Insurance contributions if their profits are above £6,725 a year.

The definition of a professional landlord predates the introduction of MTD for Income Tax, but is carried over when the new rules come into effect.

Furthermore, those who rent out part of a property that’s their only or main home are known as resident landlords.

Again, these individuals might need to follow the MTD for Income Tax rules if the rental income is over the thresholds, just as they need to use Self Assessment currently once their property income gets above £7,500 annually (assuming they’re registered under the Rent a Room scheme).

What if I’m a sole trader and a landlord?

If you’re a sole trader, running one or more businesses and using Self Assessment, then MTD for Income Tax could apply to your income.

If you’re both a sole trader and a landlord, then your total income from all sources is taken into account when working out if MTD for Income Tax applies to you.

For example, if your income is £40,000 a year as a plumber and £10,000 from property rental, then MTD for Income Tax will apply to both your income as a plumber and your property income—even though the property income taken on its own isn’t over the threshold.

You’ll have to make separate periodic updates and for the property income, and for any sole trader business(es) you own. You only need to submit a single digital tax return, though, that will list all your income and expenditure.

For example, if you work as a sole trader plumber and also as an electrician, and receive property income, you’ll need to submit quarterly updates for each income source, listing all your income and expenditure. Then by 31 January each year, you will submit a digital tax return.

Why Making Tax Digital can make life easier for landlords

Landlords must keep certain kinds of records, such as details of rent received, plus invoices, bank statements, and more.

But Self Assessment makes no demands on how you keep your accounting—or even if you need to bother doing so.

This changes with MTD for Income Tax.

And that’s a good thing.

The use of modern accounting software provides incredible insight into business finances making it easier than ever to be stress-free MTD landlords. 

You’ll also have a far better idea of how much tax you owe at any given moment too.

Many of the additional processes required for MTD for Income Tax will be automated, provided you use good-quality accounting software.

For your periodic updates, it’ll simply be a matter of tapping a button to prepare the reports, checking the details to ensure everything is correct (and applying adjustments if necessary), then sending them off.

If you use an accountant or bookkeeper, they can help with these processes.

Self Assessment versus MTD for Income Tax: What’s required?

Outside of submitting the yearly Self Assessment tax return, using Self Assessment as a landlord doesn’t present too many requirements.

But to be compliant as a landlord with MTD for Income Tax, you’ll need to use software for your accounting as it relates to property income.

At its most simple, digitalising your property accounting could be using a spreadsheet plus a plugin known as bridging software.

You record income and expenditure details in the spreadsheet, and then tell the bridging software what the key cells are that it needs to use to prepare things such as periodic updatess.

However, it’s so easy to accidentally overtype a cell in a spreadsheet. But the main worry to consider is the rules around digital linking.

MTD rules say the movement of data from one destination to another must be both digital and automated. Manually copying and pasting from one place to another is prohibited most of the time—as incredible as that might sound. If HMRC finds out, you could be penalised.

The solution is to use MTD-ready accounting software.

This encourages basic accounting practices, such as using the software to submit invoices and record payments. Therefore, creating and submitting your quarterly updates will be easier.

What landlords can do now to prepare

To get ready for Making Tax Digital, you need to start using accounting software and keeping digital records.

If you’re not doing so already, you should be looking to switch to using some kind of software for your accounting. An accountant can advise you if you are unable to decide.

Do so as soon as possible; don’t leave it until the last moment.

After all, in April 2026, April 2027 and April 2028, a lot of people will be contacting HMRC with problems trying to adapt to MTD—and if you’re already using software, you’ll be in a far better position.

Many landlords already rely upon accounting software. They can issue invoices with ease, reconcile their bank statement against their outgoings, and more.

The software also grows with them, should they increase their property portfolio.

Tracking income and expenditure for several properties can become complex—but much less so if you’re using good accounting software. And it means your accounting is always kept in a legally compliant digital way—and for the required period (usually five years).

Apps that help you stay on track

One tip is to pick your financial reporting software and use an app to record and start snapping receipts for expenditures, such as property repairs. This removes the need to enter any numbers manually.

AutoEntry lets you use your phone or a computer and scanner to grab an image of the receipt. The information is then automatically extracted and can be sent straight to your accounting software.

For example, if you buy something in a shop for your property and are handed a paper receipt, you can take a snap of it using your phone. The information such as the retailer details, amount, date, VAT amount, and so on, will be extracted automatically.

Where to get support with tax return changes

It’s a good idea to get help when considering how your accounting will change once Making Tax Digital for Income Tax arrives.

Seek out an accountant or tax advisor that specialises in property income and, in return, you get people with amazing experience of every aspect of tax and running a property business.

But care needs to be taken.

You can hand off a lot of the workload around MTD to your accountant once MTD for Income Tax is up and running. But you still need to use software to keep your accounting, and you need to keep your accounting records digitally.

Your accountant will be able to advise the best way forward, and how best you can work with them.

Contact your software vendor too. They will have a massive amount of experience with both tax and, unsurprisingly, accounting software.

As MTD for Income Tax approaches, many will offer dedicated support where you can learn if the software you use is MTD-ready—and what you’ll have to do to make use of the MTD features.

Finally, consider approaching professional landlord associations to see what their advice is.

There’s little doubt that applying the rules of MTD to a property business isn’t like applying it to a sole trader business, and inside information could prove extremely useful.

Final thoughts

Many landlords are sure to find the arrival of Making Tax Digital for Income Tax a surprise. For some, it might mean they have to start taking accounting more seriously than they might have done so previously.

But it’s important to focus on the positives, which includes a much better understanding of your property business finances, and a reduced requirement for onerous administrative tasks.

Frequently asked questions on landlords and Making Tax Digital

What if I am already earning through a PAYE job and earn over £1,000 annual income as a landlord? Do I still have to declare it for MTD?

As a landlord, you should declare your earnings on a Self Assessment form annually if your income exceeds £1,000, even if you are already taxed as a PAYE in your other job.

You won’t need to switch to MTD until you reach its thresholds of first £50,000 and then £30,000 annually but keep an eye on proposed expansions to MTD, for example, to add a threshold that’s less than £30,000 as you could eventually qualify.

Can I do my Making Tax Digital tax returns myself rather than hire an accountant?

Yes, if you keep accurate digital records, usually via cloud accounting software to make it easier to compile and submit your quarterly updates and your digital tax return.

Many digital accounting software providers are aimed at medium to large businesses, so make sure you find one that doesn’t overcharge you for services you won’t need as a sole trader and landlord.

There are some limitations around how you keep your records. For example, using spreadsheets will no longer be acceptable as a way to collate financial information unless you use bridging software.

Any on-desktop or paper records must be kept unchanged for five to seven years to ensure the data can be verified or you will risk getting into trouble with HMRC should it ask for your financial data.

Editor’s note: This article was first published in January 2022 and has been updated for relevance.

Have you ever listened to someone in a meeting saying, ‘Our products have a two-and-a-half-times multiple with a 60% margin and our markup percentage is 150%’, and felt completely out of your depth? 

Do you know how to calculate the retail price from the markup percentage? Or, calculate the cost price of goods when you know the selling price and the markup?  

If the mention of markup makes you feel like you’re presenting on Dragon’s Den and you try to avoid answering – you’ve come to the right place. 

Whether you’re a seasoned entrepreneur or just starting out, having a solid grasp on markup is critical to ensure you get your selling prices right. 

In this article, we will cover the essentials of markup, the differences between markup and margin, and how they both impact your pricing strategy.  

We also have a markup calculator that can quickly give you an answer. Or, you can use this to sense check your own calculations, so you can learn to confidently set your own prices knowing you have covered all your costs. 

By the end of this read, you’ll have a clear understanding of what markup is and how to calculate it so you can make informed pricing strategy choices.  

Most importantly, you will never get your markup and margin confused again. 

Here’s what we’ll cover

Markup calculator

The markup calculator can be used in a variety of ways for your own products.

It can also be used for market research on competitor products. 

Use our markup calculator to find out: 

• What a product should be sold for, based on the cost and the desired markup. 
• How much a product should cost, based on the selling price and a markup percentage. 
• What is the markup percentage of a product, based on the selling price and the cost price. 

Simply input either your selling price, cost price or markup percentage into the required fields and press calculate.  

Toggle through the buttons at the top, to calculate either selling price, cost price or markup percentage. 

What is markup?

Markup is the percentage increase over the cost price of an item. You add the percentage to the cost price of a product to determine its selling price.

It’s the amount you’re “marking up” the price from what you paid for it.

Markup is calculated by dividing the profit (selling price minus cost) by the cost price and then multiplying by 100.

Markup formula

Markup = ((Selling price – Cost price) / Cost price) x 100

Example, if you sell a product for £100 that costs you £60 to produce, your markup would be:

Markup = ((100 − 60/60) × 100) = 66.67%

This means you’re selling the product for 66.67% more than it cost to produce.

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In simple terms

Markup uses the cost price as the base and margin uses the selling price as the base.

Because of this, markup percentages will always be higher than margin percentages for the same item.

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Markup percentage or multiplier

Markup is often expressed as a multiplier. For example, the fashion industry standard markup is 2.5.

This is equivalent to 150% markup.

If a dress costs £100 to manufacture, this would be sold for £250.

Common multiple to markup percentages include:

MULTIPLE	MARKUP	MARGIN
1.25	25%	20%
1.5	50%	33.33%
2	100%	50%
2.5	150%	60%
4	300%	75%
5	400%	80%
10	900%	90%

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How to calculate selling price using markup percentage

Determining the selling price of your products using a markup percentage is a straightforward process.

By adding a specified percentage to the cost of your product, you can ensure that your selling price covers your costs and provides the desired profit.

Here’s a step-by-step guide on how to calculate the selling price using markup percentage:

Determine the cost price

The cost price is the total cost incurred to produce or purchase the product.

This includes manufacturing costs, shipping fees, and any other expenses directly associated with getting the product ready for sale (read below).

Decide on the markup percentage

The markup percentage is the percentage by which you want to increase the cost price to arrive at the selling price.

This percentage should account for your desired profit margin and other indirect costs.

Apply the markup percentage

Use the markup formula to calculate the selling price:

Selling Price = Cost Price + (Cost Price × Markup Percentage)

Alternatively, this can be simplified to:

Selling Price = Cost Price × (100% + Markup Percentage)

How to calculate cost price from selling price and markup

Starting with a selling price and reversing the calculation to determine the cost price is useful if you are thinking of launching a new product.

You can also estimate what your competitors’ cost price might be on comparable products.

If you know the selling price and the markup percentage applied, you can easily reverse-calculate to find the original cost price.

Formula for calculating cost price

Cost Price = Selling Price / (100% + Markup Percentage)

Knowing how to calculate the cost price from the selling price and markup allows you to understand the base cost of your products, enabling you to adjust prices strategically without compromising on profitability.

Accurate cost-price calculations also help to value inventory, budget for future purchases, and manage cash flow effectively.

What is the difference between margin and markup?

Let’s clarify the distinction between margin and markup.

These two terms are so often confused and if you get it wrong, you could be selling goods at a loss.

Markup and margin are both business terms used to refer to profitability, but they calculate profit in slightly different ways.

Understanding both markup and margin is crucial for businesses to set effective pricing strategies and analyse profitability.

Have a look at the differences so that you can ensure you make the right calculations.

MARGIN	MARKUP
The percentage of the selling price that is profit	The percentage added to the cost price to arrive at the selling price
Margin = ((Selling Price − Cost Price) / Selling Price) × 100	Markup = ((Selling Price − Cost Price) / Cost Price) × 100
Calculated based on the selling price	Calculated based on the cost price
If a product costs £60 and sells for £100, the margin is 40%	If a product costs £60 and sells for £100, the markup is 66.67%
Helps understand the profitability of sales	Helps determine the selling price needed to achieve desired profits

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Why the difference matters

Understanding the difference between margin and markup is important because it affects your pricing strategy and profitability.

• Pricing accuracy: Getting confused between markup and margin can lead to product underpricing, and a reduction in profit.
• Competitive analysis: Markup is useful for product comparison in different industries, to ensure that you are competitively pricing your products.
• Financial analysis: Margin is important for financial reporting, as it directly impacts your profit and loss statements. It also helps you understand the profitability of individual products and overall business performance.
• Pricing strategy: Both metrics are important for strategic planning. Markup is useful for setting initial selling prices, and margin helps to evaluate ongoing profitability.

Markup vs. Margin calculation example

Consider you own a food truck, and you want to set the selling price for a burger.

You know your cost to make the burger is £5.00 and a 50% markup would give you a competitive advantage.

Markup = £5.00 + (£5.00 × 50%) = £7.50

Another way to calculate this is:

• Your cost price = £5.00
• You want a markup of 50% = £2.50
• Add your markup to the cost price = £7.50

If you want a 50% margin, work backward from the desired margin.

Margin = £5.00 / 50% = £10.00

A 50% margin on a burger costing £5.00 would need a selling price of £10.00

A 50% margin results in a higher selling price (£10.00) compared to a 50% markup on the same burger (£7.50).

This example shows why you need to understand the difference between margin and markup and make sure you get your calculations right.

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What do I need to consider when I calculate markup?

When setting your markup, there are several factors to consider to make sure you set a profitable price that covers your costs and is competitive.

1. Cost of goods sold (COGS)

Overhead costs are essential because they relate to all the indirect expenses required to operate your business, failing to account for these costs can result in underpricing (read below).

2. Profit margin

Determine the profit margin you want to achieve.

This involves understanding your business goals to ensure that the markup not only covers costs but also provides a satisfactory profit.

3. Market conditions

Analyse the pricing strategies of your competitors.

Competitive pricing can help you position your product effectively in the market and attract customers​.

High-demand products can typically sustain higher markups, whereas low-demand items might require lower markups to boost sales.

4. Customer perception

Ensure that the markup reflects the perceived value of the product to the customer.

Luxury items can command higher markups due to their perceived value and exclusivity.

Also, consider the target market’s willingness and ability to pay.

Markups should balance profitability with customer affordability to maintain sales volume​.

5. Industry standards

Research average markups within your industry to ensure your pricing aligns within your vertical.

This helps in setting competitive prices while maintaining profitability.

6. Product life cycle

For new or innovative products, initial markups might be higher to capitalise on early adopters.

Over time, markups may be adjusted as the product moves through its life cycle​.

Adjust markups based on seasonal demand.

Higher markups can be applied during peak seasons, while lower markups might be necessary during off-peak times to stimulate sales.

7. Sales strategy

Factor in planned discounts and promotional activities.

Ensure that even after discounts, the selling price remains profitable​.

Consider offering lower markups on bulk purchases to encourage higher sales volumes, which can lead to economies of scale and increased overall profitability​.

8. Economic factors

Monitor inflation rates, currency fluctuations, and other economic conditions that might affect the cost of goods and adjust your markup accordingly to maintain profitability.

9. Legal and regulatory requirements

Ensure that your pricing complies with legal and regulatory requirements, avoiding practices that could be considered unfair or deceptive​.

Should I include overhead costs in the markup calculation?

Finally, don’t forget to include all your overhead costs when considering your markup.

Your costs of product are not limited to the direct cost of the goods, but also the indirect costs required for the running of the business:

• Direct costs: Include all direct costs associated with producing or purchasing the product, such as materials, labour, and manufacturing expenses.
• Indirect costs: Consider overhead costs such as business rates, rent, utilities, salaries, and administrative expenses that contribute to the overall cost structure.

To include overhead costs in your markup calculation, follow these steps:

Calculate total overhead costs

Identify all indirect costs associated with running your business.

This includes rent, utilities, salaries, office supplies, and other administrative expenses.

Determine overhead rate

Allocate overhead costs to individual products or services.

This can be done by determining an overhead rate, which is typically a percentage of direct costs or a fixed amount allocated based on the number of units produced or sold.

Add overhead to direct costs

Combine overhead costs with direct costs to get the total cost of producing or acquiring a product.

If you don’t consider your overhead costs then you could underprice your products with detrimental impact on your business.

Failing to consider your overheads and indirect costs will mean your cash flow will gradually decline and your income might not be enough to ensure you have sufficient cash flow to continue trading.

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Once you’ve set your markup, monitoring your revenue and profit is crucial to ensure that the chosen markup is working for you.

As you grow, you can use cash flow management software to gain a real-time view of your revenue and profit and adjust your pricing as needed.

That knowledge and ability to act quickly is essential for retail operations.

Cloud financial solutions such as Sage Intacct include all these tools and enable that awareness and ability to act across multiple stores, locations, and organisations.

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Whatever the size of your company, you have any number of contracts, wage laws, workplace policies, and data protection rules to keep track of.

To bring order to this web of requirements there’s nothing better than a good checklist.

It’s a great tool for spotting gaps that could develop into serious problems if they go unnoticed.

Use this article, and our HR compliance checklist, to stay organised and keep your business on the right side of the law.

Here’s what we’ll cover:

What is HR compliance?

HR compliance means making sure your staff management practices stay up to date with the law and follow it correctly.

Compliance in HR touches on a wide range of legal areas—employment contracts, minimum wage, leave entitlements, fair hiring, safe working conditions, and more.

In the UK, HR compliance is shaped by key legislation including the Employment Rights Act 1996, the Working Time Regulations 1998 (WTR 1998), Equality Act 2010, and the Data Protection Act 2018.

Compliance also covers data protection rules like the UK version of GDPR.

You’re responsible for keeping staff information secure, and for being transparent about how it’s used.

If you track absences, performance, or payroll details, those records must meet privacy standards.

Health and safety is part of human resources compliance as well.

You need to assess risks and provide a safe work environment, whether your team is on-site or remote.

On top of legal requirements, you’ll also want to align internal HR policies—like grievance procedures and staff handbooks—with employment law and best practices.

This helps ensure fair treatment for all employees.

Why HR compliance matters more than ever

With the world becoming more digital and employees growing more informed, governments have introduced new rules to protect rights and regulate workplaces.

That includes employment law, which continues to evolve with updated wage thresholds, right-to-work rules, and workplace safety standards.

At the same time, expectations around diversity, data security, and ethical conduct are higher than ever.

The ever-changing rules and responsibilities mean HR compliance has become more complex in 2025, especially for small businesses and startups in the UK.

Aside from presenting a legal risk, falling short on compliance can disrupt operations, damage morale, and harm your reputation.

A single error in hiring, pay, or employee records can trigger an audit—or even a tribunal.

One safeguard in this confusing landscape is to use an HR compliance checklist so you avoid oversights and stay consistent.

Who is responsible for HR compliance?

Big companies tend to have professional HR teams and it’s part of their job to maintain compliance.

But if you’re running a small business, people from various departments may have to pitch in and share the load.

Founders, managers, and even office assistants have been known to juggle HR tasks alongside other duties—but this can lead to confusion over who handles what.

Without clear ownership, key steps can fall through the cracks.

If one person is managing contracts and tracking working hours, someone else should take charge of responding to staff concerns and updating policies, for example.

It depends on each team member’s workload and skillset.

The most important thing is clarity and structure around HR compliance roles and responsibilities.

When assigning HR duties make sure each person understands what’s expected and what resources they can use—like compliance checklists or access to compliant HR software.

HR compliance checklist for employers

Here we break down the checklist into seven key areas to focus on:

1. Employment documentation

When you bring new people onboard, setting clear expectations will keep many other processes on track throughout the employee lifecycle. Chief among these early-stage records and formalities are:

• Employment contracts. These should outline job role, pay, and working hours at the very least.
• Right to work checks. Verify that every new hire is legally allowed to work in the UK.
• Job descriptions and offer letters. Use these to confirm duties, reporting hierarchy, and pay terms before you sign contracts.
• Staff handbooks and HR policies. Outline company rules, benefits, and how you handle issues like grievances or misconduct.

2. HR reporting and recordkeeping

Good recordkeeping doesn’t stop with the onboarding process. There are plenty of other instances where records need to be updated as employees progress through their roles.

• Absence logs. Track sickness, holidays, and unpaid leave to spot trends and meet legal requirements. This should include unauthorised absences.
• Performance documentation. Keep notes from appraisals and improvement plans to support decisions around promotion, guidance or dismissal.
• Training records. Log completed skills training, onboarding sessions, and refresher courses.
• Safety records. Maintain up-to-date logs of health and safety checks, risk assessments, and incident reports.

3. Payroll and benefits compliance

Among the primary considerations for applicants and ongoing employees alike.

Mistakes in payroll compliance can lead to penalties, not to mention broken trust.

• PAYE setup. PAYE rules require registration with the tax office HMRC and deduct tax and National Insurance contibutions correctly.
• National minimum wage. Check that pay rates meet or exceed legal thresholds for each age group in your roster.
• Statutory sick and parental pay. Ensure your system is set up to calculate the correct leave and pay in cases of sickness, maternity, paternity, and shared parental leave.
• Pension auto-enrolment: Enrol eligible employees into a workplace pension and ensure that your payroll software deducts the required contributions.

4. GDPR and data protection

Another way to build trust is to let employees know you adhere to these legal duties.

• Employee privacy policy. Explain how you collect, use, and store personal data, including descriptions of what data is included.
• Data processing records. Keep a log of the data you hold, why you hold it, how it’s processed and where it’s stored.
• Secure file storage. Use encrypted systems or password-protected files for storing sensitive information.
• Subject Access Requests (SARs). Know how to respond when an employee requests access to their personal data.

5. Workplace policies

The whole point of policies is consistency and transparency, helping to prevent misunderstandings and clarifying employees’ rights.

Your policies should cover all nine protected characteristics under the Equality Act 2010, including age, disability, race, and sexual orientation.

Pay special attention to:

• Grievance and disciplinary policies. Set out fair procedures for dealing with complaints or misconduct, with ample opportunities for each party to make their case.
• Anti-discrimination and equal opportunity statements. Show your commitment to fair treatment and inclusive hiring.
• Absence and flexible working policies. Explain how leave is handled and outline the process staff should follow for requesting flexible or remote work.

6. Health and safety compliance

Any shared workspace or use of equipment naturally introduces risks—whether from human error, miscommunication, or something breaking down.

• Risk assessments. Identify hazards in the work environment and assess how to manage them.
• Health and safety lead. Appoint someone to take responsibility, even in a small team.
• Safety training. Give staff the right training to handle equipment, emergencies, and daily risks.
• Fire drills: Run regular drills so your team knows what to do in an emergency.
• First aid kits: Make sure kits are available, stocked, and easy to find in every location.

7. Remote and hybrid compliance considerations

All these legal responsibilities apply equally for staff who work remotely or in the field—but that can make it harder to manage.

When team members work in different locations you lose visibility over how, where, and when work is being done.

Here are four areas where you need to pay particular attention:

Health & safety

You’re still responsible for your team’s working conditions, even at home.

That includes making sure they have a safe setup, take proper breaks, and understand how to use equipment safely.

You can’t look over their shoulder, so you’ll need to rely on home workstation assessments, regular check-ins, and clear health and safety training.

Employment eligibility

Right-to-work checks are required for new hires no matter where they work.

But this is solved by digital checks, perhaps involving video calls, the use of scanned documents, or ID verification tools.

However, be sure to follow approved procedures—get it wrong and you could face penalties for employing someone illegally.

Tech systems

The good news is that many corporate systems now run on cloud-based platforms with secure login functionality.

It’s common for hybrid or remote staff to access systems from home networks or personal devices.

The training for data handling and rules on file sharing or storage are often the same for in-house staff.

Logging hours

Finally, just because someone’s not in the office doesn’t mean Working Time Regulations don’t apply.

Use tools to log hours and help staff manage their time without slipping into overwork.

How to stay on top of HR compliance all year round

Laws can shift from one year to the next. People join and leave your organisation. Policies often need refreshing.

To avoid slipping out of step, there are ways to build HR compliance into your ongoing routines:

• Set a regular schedule for reviews. A quarterly HR audit can help you spot issues early—before they become problems. Use this time to review contracts, check training logs, and revisit policy documents. If any laws have changed or staff needs have shifted, this is when you can catch it.
• Monitor employment law updates. Modern HR software can keep you up to date with the latest changes to employment law, health and safety regulations through automatic updates, dedicated HR advice resources and direct access to HR experts. If you work with an accountant or legal advisor, ask if they offer alerts too.
• Use quality HR software. Good systems don’t just store documents—they track expiry dates, send reminders, and help you report on key compliance areas automatically.

How Sage can help you stay compliant

Managing compliance on your own can be time-consuming and stressful, but a lot of the administrative burden can be automated.

HR software helps you deal more efficiently with admin and adhere to legal obligations. It offers a centralised and secure platform for managing employee records, which is a crucial step for data protection.

You can store and manage documents like contracts, job offers, and right-to-work proof in one secure location.

Customisable templates also let you standardise important documentation and templates across your organisation, ensuring a consistent and compliant approach.

The platform also streamlines the distribution of policies, so all your colleagues receive the latest version, and you can keep a record of who has seen and acknowledged it.

HR tools such as Sage HR also helps you stay on top of things with automated alerts for important deadlines, such as contract renewals, training deadlines, or policy updates.

This, and centralisation of tasks, reduces the risk of human error and helps your business maintain HR compliance.

Final thoughts

Staying legally compliant in HR matters can be a minefield, particularly as the legislative landscape is constantly changing.

However, with a proactive strategy—including regular audits, continuous learning, and the use of smart HR technology—you can easily take charge of the admin required.

With compliance taken care of, and built into your everyday processes, you’ll spend less time chasing paperwork and more time focusing on your people.

Get expert advice and guidance

Talk to a CIPD-qualified HR consultant, who can explain the law updates and translate what these changes mean specifically to your business.

Solutions like Sage HR Advice provide SMBs access to cost-effective, reliable advice to keep their businesses compliant.

Diversity in the workplace has evolved from a buzzword to a key driver of your business success. Once viewed primarily as a social issue, its positive impact on business performance is now supported by data and real-world examples.

Beyond being a moral imperative, diversity fuels innovation, drives growth, and boosts employee engagement.

For SMB leaders and HR managers, understanding the importance of diversity in your workplace is essential for building a thriving, inclusive culture that attracts top talent and delivers superior results.

This article will dive into the key benefits of diversity, how it drives innovation and performance, and the strategies you can implement to foster a more inclusive workplace.

Here’s what we’ll cover:

What does workplace diversity mean?

Workplace diversity means bringing together a wide range of perspectives, experiences, and skills within your team.

This can include demographic differences, cognitive diversity (how people think and solve problems), as well as varying values, educational backgrounds, and life experiences.

As an HR manager, when you think about diversity, consider how these different attributes shape your company’s approach to challenges, innovation, and collaboration.

A diverse workforce is more agile and able to respond quickly to change, offering innovative solutions that reflect a broad range of viewpoints.

Ultimately, diversity is about creating an environment where every employee’s unique perspective is valued and harnessed to drive business success.

It’s about building a team that mirrors the richness of society and leveraging those differences to improve your organisation.

Top benefits of a diverse workforce

The benefits of a diverse workforce go far beyond social responsibility—they directly contribute to your business success.

Understanding these advantages can help you build a stronger, more competitive organisation.

Here are some key benefits:

1. Innovation and creativity

Building a team with diverse experiences and backgrounds enables your organisation to approach tasks from unique angles.

Different perspectives challenge the status quo and inspire creative solutions that a homogeneous team might overlook.

According to a report from BCG, companies with diversity in their management teams reported higher innovation revenue, highlighting how diversity is a key driver of creativity and business growth.

2. Better decision-making

Diversity encourages healthier debates and more comprehensive discussions, leading to better decision-making.

When your employees bring diverse viewpoints to the table, it allows for a deeper exploration of ideas and solutions.

According to Cloverpop, inclusive teams make better business decisions 87% of the time, and they reach those decisions twice as quickly, holding half as many meetings.

3. Improved problem-solving skills

A team that values diverse perspectives is better equipped to identify and solve problems quickly and effectively.

Employees from different backgrounds bring a broader range of skills and knowledge, providing a richer pool of ideas.

Diverse teams are more likely to consider multiple angles, making them more adept at overcoming challenges.

4. Enhanced brand reputation

Running a company that prioritise diversity is often seen as progressive and forward-thinking.

This enhances your brand’s reputation, making your business more attractive to customers and prospective employees.

A company that reflects inclusivity and diversity aligns with the values of today’s socially conscious consumers.

5. Higher retention rates

When your employees feel respected and included, they are more likely to remain with your company in the long term.

Diversity fosters an inclusive culture where everyone feels they belong, leading to greater employee satisfaction and loyalty.

Organisations that invest in diversity also have a competitive edge in attracting top talent, which results in better retention rates.

6. Better customer understanding

A diverse team can offer deeper insights into the needs and preferences of a broader customer base.

With a variety of perspectives, your business is better equipped to understand and connect with customers from different walks of life, leading to stronger customer relationships and increased loyalty.

7. Above-average profitability

Enhancing gender diversity can directly contribute to your business’s profitability.

According to research from McKinsey, companies in the top quartile for executive gender diversity are 25% more likely to experience higher profits.

How diversity boosts innovation and performance

One of the most significant advantages of diversity is its ability to drive innovation.

Different perspectives often spark new ideas and approaches that would otherwise be overlooked.

Consider this example: if you’re managing an HR team for a tech company made up of individuals who think similarly and share the same background, the team may produce competent work.

However, it could lack the creativity needed to solve complex problems or break into new markets.

Now, imagine a diverse team made up of individuals from various cultures, experiences, and disciplines.

This team will approach challenges from different angles, uncover opportunities that others might miss, and challenge assumptions that could limit innovation.

Key benefits of diversity for innovation and performance include:

• Creative problem-solving: diverse teams bring varied solutions to the table, helping your business find better, faster, and more efficient ways to tackle challenges.
• Adaptability: a diverse workforce enables your organisation to remain agile, better positioned to navigate market changes and industry disruptions.
• Competitive edge: by embracing diversity, you equip your business with the creativity and innovation needed to stay ahead of the curve.

The link between diversity and employee engagement

If you’re asking why is diversity important in the workplace, it starts with this: when your employees feel seen, heard, and valued, their engagement, morale, and loyalty naturally increase.

Prioritising diversity in your organisation helps employees feel comfortable bringing their whole selves to work.

When they know their unique experiences and perspectives are genuinely appreciated, it builds a culture of trust and respect.

This, in turn, leads to:

• Higher engagement: employees are more motivated and committed to contributing to your business’s success.
• Improved morale: a diverse environment fosters a positive, supportive workplace.
• Stronger loyalty: employees who feel they belong are more likely to stay with your organisation.

According to Gallup’s State of the Global Workplace report, disengaged employees cost the global economy $8.8 trillion in lost productivity each year.

By embracing diversity, you can boost engagement and reduce turnover, helping to retain your top talent.

How to create diversity in your organisation

Creating a diverse workforce takes intentional action and consistent effort.

Your role is key in developing strategies that attract, retain, and support employees from a variety of backgrounds and experiences.

Here are some actionable steps:

1. Inclusive job descriptions

Make sure your job descriptions reflect your commitment to diversity and inclusion.

• Avoid gendered or exclusionary language.
• Highlight the value your organisation places on diverse perspectives.
• Clearly state your commitment to creating an inclusive environment.

2. Unbiased hiring tools

Implement recruitment practices that minimise bias.

• Use blind recruitment methods by removing names and demographic details during initial screening.
• Focus on skills, experience, and potential rather than background or assumptions.
• Leverage hiring tools that help reduce unconscious bias at every stage.

3. Equitable development paths

Provide equal opportunities for growth and advancement.

• Offer mentorship programmes and professional development tailored to a range of learning styles and needs.
• Promote internally based on merit, not personal connections or bias.
• Make sure all employees can access training and leadership pathways.

4. Inclusive leadership

Equip your leaders to manage and support diverse teams.

• Provide training that fosters inclusive behaviour and cultural awareness.
• Encourage leadership styles that are collaborative and respectful of different perspectives.
• Hold managers accountable for creating environments where everyone feels valued and empowered.

By embedding these practices into your HR strategy, you’ll build a stronger, more inclusive culture where all employees can thrive.

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Shaping a stronger workplace through diversity

Your business can reach its full potential when your workforce once your workforce reflects a broad range of experiences, skills, and perspectives.

A diverse team strengthens your organisation, fuels innovation, and provides a clear competitive advantage.

To shape a stronger, more resilient workplace, you need to build an environment where all employees feel respected, valued, and empowered to contribute.

Diversity is about creating a culture of inclusion that drives performance, sparks creativity, and supports long-term success.

By actively investing in diversity and inclusion, you position your business to thrive in today’s fast-moving, ever-changing market—and gain the long-term advantages of diversity in the workplace.

Ready to take the next step?

Explore how talent management software can streamline your HR processes and help you implement and measure your diversity strategy effectively.

FAQs on workplace diversity

1. How to promote diversity in the workplace?

Promoting diversity in the workplace involves creating a culture that values and actively seeks diverse perspectives, experiences, and backgrounds.

This can be achieved by implementing inclusive hiring practices, offering equal opportunities for growth, and making sure everyone feels respected and valued.

Encouraging open dialogue, providing diversity training, and fostering an inclusive leadership style also play a key role in promoting diversity.

By prioritising these strategies, you can build a more innovative, adaptable, and competitive workforce that drives your business forward.

2. What’s the difference between diversity and inclusion?

Diversity is about who is at the table—in terms of background, identity, and experience.

Inclusion is about how they are treated. Inclusion ensures that everyone feels valued, heard, and empowered to contribute fully.

Both are essential to building a thriving workplace.