Making Tax Digital (MTD) is a HMRC initiative that will soon transform how landlords record and report their rental income. From April 2026, landlords with annual property income over £50,000 must comply with new digital tax filing requirements. Those earning over £30,000 will follow a year later, from April 2027. This guide explains what landlords need to do now to prepare, remain compliant, and avoid penalties under the upcoming legislation.
Understanding MTD for Landlords
MTD for landlords is part of a wider Government strategy to digitise the UK tax system. Instead of filing a single annual Self Assessment tax return, landlords will be expected to keep digital financial records and submit updates to HMRC every quarter. This applies to unincorporated landlords—typically individuals or sole traders—who receive income from UK property rentals. All financial records must be maintained using software that is compatible with HMRC’s MTD system.
The process will also involve submitting an End of Period Statement (EOPS) at the close of each tax year. This statement will confirm final figures and allow for any accounting or tax adjustments. A Final Declaration will then replace the traditional Self Assessment return.
Who Will Be Affected by MTD?
The first group required to join the scheme from April 2026 will be unincorporated landlords whose total annual business and property income exceeds £50,000. From April 2027, the threshold will drop to £30,000. These figures refer to gross income, not net profit. So even if your rental business is only marginally profitable, you may still fall within the scope of the rules if your turnover crosses the threshold.
Some landlords will be exempt, including those who earn less than £30,000 annually from combined business and rental income. Limited companies are not included in MTD for ITSA (Income Tax Self Assessment) at this stage, although they are subject to MTD for VAT. General partnerships have also been given a longer timeframe, with rules yet to be finalised.
Important Deadlines and Reporting Frequency
Once enrolled in MTD, landlords must submit four digital updates each year. These reports will summarise income and allowable expenses for each quarterly period. The deadlines for submissions are fixed: 5 August, 5 November, 5 February, and 5 May, corresponding to accounting periods that follow the tax year rather than calendar quarters.
After these quarterly updates, an End of Period Statement will need to be filed to finalise the year’s accounts. This is followed by a Final Declaration, which confirms your total income, claims for reliefs, and final tax liability—essentially replacing the Self Assessment tax return.
What Needs to Be Recorded Digitally?
Landlords will be required to maintain digital records of all income and expenses related to their property business. This includes rental income from tenants, receipts from letting agents, and any income received from lodgers. On the expense side, landlords should record costs such as mortgage interest (where deductible), property maintenance and repairs, buildings and landlord insurance, utility bills paid on behalf of tenants, letting agent fees, legal and accountancy charges, and service charges where applicable.
These records must be stored in software that is recognised by HMRC as compatible with MTD. Manual record keeping, including spreadsheets, is no longer sufficient unless linked to bridging software that submits data directly to HMRC.
Selecting MTD-Compatible Software
Landlords will need to use MTD-compatible software to comply with the new requirements. There are many options available, from general-purpose accounting platforms such as Xero, QuickBooks, and Sage, to property-specific software like Hammock, Landlord Vision, and GetGround. Whichever software you choose must be capable of maintaining digital records, submitting quarterly updates, and handling the end-of-year submission process.
When selecting software, landlords should consider whether they want a solution that offers mobile functionality, integrates with their bank accounts, and supports multiple properties. Some platforms are designed specifically with landlords in mind and can allocate income and costs to individual properties, which can make tax planning and reporting easier.
Using an Accountant or Letting Agent for MTD
Landlords are not required to manage the MTD process alone. Engaging CMA Accountancy can help ensure that submissions are accurate and deadlines are met, especially if you manage multiple properties or are new to digital accounting systems. You will also need to grant us permission to use your Government Gateway account.
Challenges and Mistakes to Avoid
Landlords may face several common issues when adjusting to MTD. A major risk is failing to register for MTD in time. This can lead to missed deadlines and penalties. Another common pitfall is continuing to use manual spreadsheets or physical receipts, which will not be accepted under MTD unless they are linked through bridging software. Choosing the wrong software for your portfolio size or reporting needs can also cause problems, resulting in a lack of essential functionality or inadequate support.
To avoid these issues, landlords should start transitioning to digital systems now, before MTD becomes mandatory. Familiarising yourself with software, improving record-keeping habits, and seeking professional advice will ensure you are ready when the rules come into force.
HMRC’s New Penalty System
MTD will introduce a new points-based penalty regime to encourage timely submissions. Landlords will receive one point for each late or missed quarterly report. Once a points threshold is reached—typically four points—a £200 penalty will be issued. Points can expire after a set period of continued compliance, offering some leniency for one-off mistakes.
This system replaces the current late filing penalties and will apply to both quarterly submissions and final declarations. It is essential that landlords understand the rules and deadlines to avoid accumulating points.
Advantages of Going Digital
Although Making Tax Digital introduces new responsibilities, it also offers benefits. Quarterly reporting provides a more accurate view of your tax position throughout the year, helping with budgeting and financial planning. It also reduces the chance of missing deductible expenses and ensures your records are consistently up to date. If you work with an accountant, they can access your financial data in real-time, making collaboration more efficient and less stressful during tax season.
Going digital also simplifies the preparation of mortgage applications, business loans, or financial reviews, as income data can be extracted quickly and accurately from your software.
Final Preparation Steps
Landlords should begin by reviewing their income to determine whether they fall within the £50,000 or £30,000 MTD thresholds. If so, they must register for MTD for Income Tax through their Government Gateway account. Next, choose MTD-compatible software and ensure that all property income and expenses are recorded digitally going forward.
Familiarise yourself with the quarterly deadlines and understand what will be required at the end of each tax year. If you use an agent, confirm they are prepared to handle MTD submissions on your behalf and that they have the correct authorisations in place.
Be Ready for 2026
Making Tax Digital represents a significant change for landlords, but early preparation can make the transition smooth and straightforward. Whether you manage a single property or a large portfolio, understanding your obligations and putting digital systems in place now will ensure full compliance by the time the rules take effect.
For tailored support with MTD for landlords, we offer expert guidance and access to fully compliant software solutions. Get in touch with us today to stay ahead of the deadline and take control of your property finances.