Landlords may soon have to pay their tax every month under new Treasury proposals that are currently being considered. The plans would calculate monthly tax payments using income declared in the previous tax year, rather than waiting until the end of the current one.
The proposal comes shortly after the introduction of Making Tax Digital (MTD), which already requires many landlords and self-employed individuals to submit financial updates to HMRC every quarter.
Monthly Tax Payments Could Begin in 2030
Under the consultation, HMRC would estimate a taxpayer’s annual tax bill based on their most recent tax return and divide that amount into 12 monthly instalments.
For example, someone who declared an annual income of £30,000 in the previous tax year could be expected to pay around £290 each month towards their tax bill.
The Government is considering introducing the system from April 2030. While the income threshold has not yet been confirmed, the proposals would apply to landlords and self-employed workers earning above a set level.
Concerns Over Landlords’ Cash Flow
Many landlords have expressed concerns that fixed monthly tax payments may not reflect the reality of rental income, which can vary significantly throughout the year.
Unexpected property repairs, vacant periods, rising mortgage costs and delayed rent payments can all affect monthly cash flow, making it difficult to meet regular tax payments based on previous earnings.
Tax specialists have also warned that although paying tax closer to the time income is earned may seem sensible, predicting future income is rarely straightforward. If earnings fall during the year, landlords could end up paying more tax than necessary before later receiving a refund from HMRC.
Making Tax Digital Already Changing Reporting
The consultation follows the rollout of Making Tax Digital for Income Tax, which began earlier this year.
Landlords and self-employed taxpayers earning more than £50,000 must now use HMRC-approved software to keep digital records and submit financial updates every three months.
The qualifying income threshold is due to reduce to £30,000 next year and then to £20,000 from 2028, bringing many more landlords into the scheme.
Although annual tax returns will still be required, the quarterly reporting rules add further administrative responsibilities for landlords managing their finances.
HMRC Seeking Feedback
Making Tax Digital has already faced several delays and exceeded its original budget, leading some to question whether HMRC is prepared for another significant overhaul of the tax system.
HMRC says the proposed monthly payment model could help taxpayers avoid large annual tax bills and reduce the likelihood of falling into tax debt by spreading payments more evenly across the year.
The department has acknowledged that landlords and self-employed workers often experience fluctuating incomes and says it is consulting with the industry before making any final decisions. Feedback gathered during the consultation will help shape how the system could operate in practice if it moves forward.
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