Key Budget changes and HMRC guidance updates every taxpayer should understand The 2025 Budget has brought some welcome clarity to the rollout of Making Tax Digital (MTD) for Income Tax, with several changes that will be particularly relevant for landlords, the self-employed and their advisers. Alongside eye-catching headline measures, the Government confirmed a “soft landing” on penalties for those joining MTD from April 2026, as well as hinting at new exemptions and deferrals for certain taxpayer groups. At the same time, HMRC has quietly updated its MTD guidance, clarifying how qualifying income, allowances and specific reliefs interact with the new regime. This article highlights the key developments and what they mean in practice as MTD implementation draws closer.
Published 27th November 2025
Making Tax Digital: Key Budget changes and HMRC guidance updates every taxpayer should understand.
Key Budget changes and HMRC guidance updates every taxpayer should understand
The 2025 Budget has brought some welcome clarity to the rollout of Making Tax Digital (MTD) for Income Tax, with several changes that will be particularly relevant for landlords, the self-employed and their advisers. Alongside eye-catching headline measures, the Government confirmed a “soft landing” on penalties for those joining MTD from April 2026, as well as hinting at new exemptions and deferrals for certain taxpayer groups. At the same time, HMRC has quietly updated its MTD guidance, clarifying how qualifying income, allowances and specific reliefs interact with the new regime. This article highlights the key developments and what they mean in practice as MTD implementation draws closer.
Key Budget changes and HMRC guidance updates every taxpayer should understand.
Budget announcement and soft landing
The 2025 Budget confirmed a significant “soft landing” for Making Tax Digital (MTD) for Income Tax: taxpayers joining from April 2026 will not face late-filing penalties for quarterly updates during their first year (2026–27). This applies only to quarterly submissions, not the annual Self-Assessment return, and does not affect late payment penalties, which will still apply from April 2026 and increase further from April 2027. The move is widely seen as sensible, given that over 850,000 landlords and self-employed individuals will be brought into MTD, many without agent support, although the relief will not extend beyond the first cohort.
Exemptions, deferrals, and guidance updates
The Budget also signalled new exemptions and deferrals, including a likely deferral to April 2027 for certain groups such as trust and estate income recipients, those using averaging, and qualifying foster carers. A very narrow new exemption will apply to individuals under a power of attorney or deputyship. Alongside the Budget, HMRC updated key MTD guidance, placing greater responsibility on taxpayers to determine their own qualifying income rather than waiting for HMRC prompts, and clarifying how amendments, cessations, and accounting periods affect MTD obligations.
Allowances, Rent-a-Room, and remaining uncertainty
Further guidance clarifies how trading and property allowances and Rent-a-Room relief interact with MTD, particularly when digital records are required and when they are not. In general, very small sources of income below £1,000 may be excluded from digital record-keeping if full relief is claimed, while partial relief or higher income levels bring those sources into scope. However, uncertainties remain, especially around expense record-keeping and edge cases where income fluctuates around thresholds. Overall, the changes represent pragmatic easing, but important practical questions are still unresolved as MTD implementation approaches.
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Making Tax Digital (MTD) for landlords: Making Tax Digital (MTD) is a UK government initiative that requires individuals with qualifying property or self-employment income to keep digital records and send quarterly updates to HMRC using approved software. Find here our free guide to the changes for property landlords and self-employed individuals.
The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.