MTD for Landlords

If you own a rental property, significant changes are coming to the way you report your income to HMRC. The UK government is modernising the tax system with Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), and landlords will be directly affected.

What is Making Tax Digital (MTD)?

Making Tax Digital is the government’s plan to transform the tax system by replacing traditional annual Self Assessment returns with digital record-keeping and more frequent reporting. The aim is to make tax administration more efficient, accurate, and easier for taxpayers to stay on top of their obligations.

Under MTD, landlords and self-employed individuals will need to:

• Keep digital accounting records

• Use HMRC-approved software

• Send quarterly updates of income and expenses

• File a final declaration at the end of each tax year

This means no more relying solely on manual spreadsheets or paper records.

When will landlords need to join MTD?

The government has set out a phased timetable for when landlords and the self-employed will have to comply.

• From April 2026 – If your combined self-employment and property income is above £50,000, you will be required to join MTD.

• From April 2027 – The threshold lowers to £30,000.

• From April 2028 – It is expected to apply to individuals with income above £20,000.

Importantly, the threshold is based on gross income, not profit. So, if you earn £25,000 in rental income but have £10,000 of expenses, your qualifying income is still £25,000.

If your income falls below the threshold, you won’t be required to join MTD just yet, but you can still sign up voluntarily.

Who is affected by MTD for landlords?

The rules apply to:

• Individuals who earn rental income from residential, commercial, overseas property, or furnished holiday lets

• Those who own property jointly – each owner is assessed individually against the threshold

• Landlords with Houses in Multiple Occupation (HMOs)

• Self-employed individuals with additional property income (combined for the threshold test)

If you receive rental income through a limited company, you will not be affected by MTD for ITSA, as companies report via Corporation Tax, which has its own digitalisation roadmap.

What will landlords need to do under MTD?

Once you’re within the scope of MTD, the way you report your tax will change significantly.

Keep digital records: You must maintain digital records of your rental income and expenses. This doesn’t mean you need to throw away your spreadsheets entirely, but the records must be held in HMRC-recognised software or connected to such software through bridging tools.

Digital records must include:

• All rental income received

• Allowable expenses (e.g. repairs, insurance, mortgage interest where applicable)

• Capital allowances and reliefs

• Adjustments for private or mixed use

Submit quarterly updates: Instead of filing a single Self Assessment once a year, landlords will submit four quarterly updates during the tax year. These updates provide HMRC with a running picture of your income and expenses.

The typical deadlines are:

• 7 August – covering 6 April to 5 July

• 7 November – covering 6 July to 5 October

• 7 February – covering 6 October to 5 January

• 7 May – covering 6 January to 5 April

These updates are cumulative, meaning you can correct errors in later submissions if needed.

Submit a final declaration

At the end of the tax year, you will submit a final declaration (sometimes called an End of Period Statement). This pulls together all income sources, claims reliefs, and calculates your final tax liability.

You must file the declaration by 31 January following the end of the tax year, just like the current Self Assessment deadline.

Use MTD-compatible software

To comply with MTD, landlords must use HMRC-approved software. Many popular accounting platforms already offer MTD compatibility, including specialist landlord apps that integrate with bank accounts and allow receipt scanning.

Features typically include:

• Automatic transaction imports from your bank

• Receipt capture via mobile phone

• Categorisation of income and expenses

• Automatic quarterly update submissions

This software makes it easier to stay organised, but it may involve new subscription costs.

What are the benefits of MTD for landlords?

Although many landlords are understandably cautious about these changes, there are benefits:

• Improved accuracy – Reduces errors from manual data entry

• Real-time tax position – Quarterly updates help forecast how much tax you owe

• Less year-end pressure – No more rushing to gather receipts and records at the last minute

• Better financial planning – Landlords can track profitability throughout the year

What are the challenges of MTD?

At the same time, there are challenges you should be aware of:

• Software costs – Subscriptions for accounting or landlord software may add ongoing expenses

• Learning curve – Moving from spreadsheets or paper to digital systems takes time

• More frequent reporting – Quarterly updates mean you can’t leave bookkeeping until the year-end

• Penalties – Once the penalty system is fully active, late submissions and late payments may attract fines

How can landlords prepare now?

Even if you don’t fall within the first April 2026 deadline, it makes sense to prepare early. Here’s a step-by-step action plan:

1. Check your income level – Review your last Self Assessment and calculate whether your gross income will place you above the £50,000 or £30,000 thresholds in the coming years.

2. Choose software – Research HMRC-compatible software that fits your property business, whether you own one property or a large portfolio.

3. Digitise your records – If you still rely on paper receipts and manual logs, start scanning and storing everything digitally.

4. Test quarterly reporting – Even before it’s mandatory, you can simulate quarterly updates to get used to the process.

5. Get professional advice – Speak with a tax accountant who specialises in property to ensure you transition smoothly.

6. Stay informed – HMRC will continue to update guidance as deadlines approach. Make sure you keep up with changes.

Common misconceptions about MTD for landlords

• “It starts in 2024.” – Incorrect. The first group of landlords will only join in April 2026.

• “Only rental profits count towards the threshold.” – Wrong. The threshold is based on gross income before expenses.

• “I can still use spreadsheets.” – Not on their own. Spreadsheets must be linked to MTD-compliant software.

• “If my income drops below the threshold later, I can leave MTD.” – Not automatically. Once you’re in, you generally stay in unless HMRC allows an exemption.

The move to Making Tax Digital for landlords is one of the biggest changes to property tax reporting in decades. While the new rules may seem overwhelming at first, with the right preparation and software, the process can be streamlined and even beneficial.

Starting early will not only help you avoid last-minute stress but will also give you valuable insights into your property income and expenses throughout the year.

Need help with MTD for landlords?

If you are a landlord and want specialist guidance on how MTD will affect you, our experts are here to help. We can review your property income, assess whether you’ll be caught by the new thresholds, and recommend the right software and processes to stay compliant.

Call us today on 0800 135 7323 for tailored advice on Making Tax Digital for landlords.