Making Tax Digital for Income Tax arrives in April 2026, and landlords are among the first groups required to comply.
If your rental income exceeds £50,000, you will need compatible software, digital record-keeping, and the ability to submit quarterly updates to HMRC.
According to Savills, less than 5% of private individual landlords report gross income over £50,000, so the first wave affects a relatively small number.
But if you are in that group, the time to prepare is now, not April.
This guide explains exactly what MTD means for landlords, when you need to comply, what software you will need, and the practical steps to take before the deadline.
Key Takeaways
- From April 2026, landlords with gross rental income over £50,000 must use Making Tax Digital
- The threshold drops to £30,000 from April 2027 and £20,000 from April 2028
- You must keep digital records and submit quarterly updates to HMRC using compatible software
- You must register for MTD yourself—it is not automatic, even if HMRC writes to you
- A new points-based penalty system applies, though no late-filing penalties for quarterly updates in the first year (2026/27)
- Limited company landlords are exempt—MTD only affects unincorporated landlords
- You will still need to file a final Self Assessment return for 2025/26
What Making Tax Digital Actually Means for Landlords
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) changes how you record and report your rental income to HMRC.
Currently, you submit one Self Assessment tax return each year, typically by 31 January.
Under MTD, this single annual return is replaced by a more frequent reporting system.
The New Reporting Requirements
Under MTD, landlords must:
- Keep digital records – All income and expenses must be recorded using HMRC-compatible software, not paper records or basic spreadsheets
- Submit quarterly updates – A summary of your rental income and expenses goes to HMRC every three months
- File a Final Declaration – This replaces your Self Assessment tax return and includes all your income sources
The Final Declaration deadline remains 31 January following the end of the tax year, the same as the current Self Assessment deadline.
HMRC says that where landlords have kept accurate digital records, the quarterly updates will be a simple check and send of a report generated by their software.
Why HMRC Is Introducing MTD
HMRC believes that requiring digital records and more frequent reporting will reduce errors and close the tax gap—the difference between tax owed and tax collected.
The government estimates that 60% of the tax gap comes from Self Assessment taxpayers, including landlords.
By requiring quarterly updates, HMRC can identify discrepancies earlier rather than waiting until the following January to see your annual figures.
When MTD Applies to You: The Income Thresholds
MTD for landlords is being introduced in phases based on your gross rental income.
This is your total rental income before any expenses or allowances are deducted.
The Implementation Timeline
- April 2026 – Landlords with gross income over £50,000 in the 2024/25 tax year
- April 2027 – Landlords with gross income over £30,000 in the 2025/26 tax year
- April 2028 – Landlords with gross income over £20,000 in the 2026/27 tax year
HMRC will write to affected landlords after processing their 2024/25 tax returns.
Do not assume you are exempt simply because you have not yet received notification.
HMRC has placed greater responsibility on taxpayers to determine their own qualifying income rather than waiting for a letter.
How to Calculate Your Qualifying Income
Your qualifying income includes:
- All rental income from residential properties (buy-to-let, HMOs)
- Commercial property rental income
- Holiday let income
- Any self-employment income (this is combined with rental income)
Your qualifying income does not include:
- Employment income (PAYE)
- Pension income
- Dividend income
- Interest income
- Capital gains from property sales
Joint Property Owners
If you own property jointly, only your share of the rental income counts toward the threshold.
For example, if a property generates £80,000 gross rental income and you own it 50/50 with your spouse, your qualifying income is £40,000.
You would not need to comply with MTD until April 2027 when the threshold drops to £30,000.
For married couples or civil partners, the default split is 50/50 unless you have declared different beneficial interests to HMRC using Form 17.
The Three-Year Lock-In
Once you enter the MTD system, you must continue complying for a minimum of three tax years, even if your income subsequently drops below the threshold.
If you qualify for MTD in April 2026 based on your 2024/25 income, you would need to maintain MTD compliance until at least 2029/30, regardless of any income fluctuations.
The Quarterly Reporting Calendar
Under MTD, you will submit four quarterly updates each year, plus your Final Declaration.
Standard Quarterly Deadlines
For landlords following the standard tax year quarters:
- Quarter 1 (6 April to 5 July) – Submit by 7 August
- Quarter 2 (6 July to 5 October) – Submit by 7 November
- Quarter 3 (6 October to 5 January) – Submit by 7 February
- Quarter 4 (6 January to 5 April) – Submit by 7 May
- Final Declaration – Submit by 31 January
Calendar Quarter Option
You can choose to align your quarters with calendar months if this makes administration easier:
- Quarter 1: 1 April to 30 June
- Quarter 2: 1 July to 30 September
- Quarter 3: 1 October to 31 December
- Quarter 4: 1 January to 31 March
The submission deadlines remain the same—the 7th of the month following the quarter end.
What Goes in Each Quarterly Update
Quarterly updates are relatively simple summaries. You report:
- Total rental income received during the quarter
- Total expenses paid during the quarter
- Category of each expense (repairs, insurance, management fees, etc.)
You do not need to make tax adjustments or calculate allowable expenses at the quarterly stage.
Multiple Income Sources and Overseas Property
If you have both rental income and self-employment income, you must submit separate quarterly updates for each income source. This means eight quarterly submissions per year, not four.
UK rental property and overseas rental property must also be reported as separate income sources, each with their own quarterly updates. They cannot be combined.
Software Requirements: What You Need
HMRC will not provide free software for MTD. You must use third-party commercial software that HMRC has approved for Making Tax Digital.
Your Software Options
Option 1: Full accounting or landlord software
Dedicated platforms like Xero, QuickBooks, FreeAgent, or specialist landlord solutions (Hammock, Landlord Studio) that:
- Automate record keeping
- Connect to bank feeds
- Categorise transactions
- Submit all MTD updates directly to HMRC
Note: FreeAgent is currently available free if you hold a business current account with NatWest, Royal Bank of Scotland, or Ulster Bank—worth checking before paying for a separate subscription.
Option 2: Spreadsheets with bridging software
If you want to continue using spreadsheets, you need bridging software to transfer your data to HMRC in a compliant format.
You cannot simply upload a spreadsheet manually. Bridging software adds an extra step but can work well if you only have one or two properties.
What the Software Must Do
Your MTD software must maintain “digital links” throughout your record-keeping process. This means:
- Data cannot be manually copied between systems
- No manipulation outside of MTD-compliant software
- An unbroken digital audit trail from initial record to tax submission
Software Costs
Most MTD-compatible software requires a subscription. Expect to pay:
- Basic packages – £10-15 per month
- Mid-range packages – £20-35 per month
- Premium packages with full accountant access – £40+ per month
Some providers offer free versions with limited functionality, but these may not meet full MTD requirements.
HMRC maintains a list of approved software providers on gov.uk.
The New MTD Penalty System
From April 2026, HMRC is introducing a new points-based penalty system for MTD. This replaces the previous fixed penalties for late Self Assessment returns.
How Penalty Points Work
- You receive one penalty point for each missed quarterly deadline
- Points accumulate throughout the year
- A £200 fine is triggered once you reach four penalty points
- Points expire after 24 months of compliant filing
Penalty Point Thresholds
Submission frequency Points threshold for £200 penalty
Quarterly (landlords) 4 points
Annual 2 points
First-Year Grace Period for 2026/27
The 2025 Autumn Budget confirmed that no penalties will apply for late quarterly submissions during the 2026/27 tax year for landlords required to join MTD from April 2026.
This grace period acknowledges there will be teething problems.
The grace period applies only to the four quarterly updates. It does not apply to:
- The Final Declaration due by 31 January 2028
- Late payment penalties, which will apply from April 2026
- Late payment charges increase further from April 2027
Late Payment Penalties
Separate penalties apply for paying tax late:
- 15 days late – No penalty (previously 30 days)
- 16-30 days late – 2% of tax owed
- 31+ days late – Additional 2% of tax owed
- After 31 days – 4% per annum on outstanding balance
Who Is Exempt from MTD
Not all landlords need to comply with MTD. Several exemptions exist.
Automatic Exemptions
- Limited company landlords – If your properties are held in a limited company, you are exempt. HMRC confirmed in late 2025 that plans for MTD for Corporation Tax have been abandoned, so limited company landlords will continue submitting Company Tax Returns and accounts to Companies House under existing rules
- Trusts and estates – Trustees and executors administering estates are exempt (likely deferred to April 2027 at the earliest)
- REIT investors – If you only receive income from shares in a Real Estate Investment Trust, you are exempt
- Below the threshold – If your gross rental and self-employment income is under £50,000 in 2024/25, you are not in the first wave
Exemptions You Can Apply For
You can apply for an exemption if:
- Your age, disability, or location makes using digital tools unreasonable
- You have no internet access at your location
- You object to using computers on religious grounds
- You are subject to an insolvency procedure
- You are subject to a power of attorney or deputyship (new exemption confirmed in 2025 Budget)
HMRC considers each application on its merits and provides a decision in writing. You must apply for exemption before the date you are required to start using MTD.
Practical Steps to Prepare Now
With April 2026 fast approaching, now is the time to prepare. Do not wait until the deadline.
Step 1: Check Your Income Threshold
Review your 2024/25 rental income once you complete that tax year. If your gross rental income (before expenses) exceeds £50,000, you must comply from April 2026.
Remember to include any self-employment income in this calculation. If you own property jointly, only your share counts.
Step 2: Choose Your Software
Research HMRC-approved software options now. Consider:
- Does it connect to your bank accounts?
- Can it categorise rental income and expenses automatically?
- Does it support multiple properties?
- Can your accountant access it directly?
- What does it cost annually?
- Is it specifically designed for landlords (such as Hammock or Landlord Studio) or a general accounting package?
Step 3: Start Using Digital Records Now
Begin recording your rental income and expenses digitally before MTD becomes mandatory. This gives you time to:
- Learn the software interface
- Identify any issues with your record-keeping
- Get comfortable with categorising transactions
- Build a full year of digital records before your first submission
Step 4: Register for MTD
You must register for MTD through HMRC’s online service. Registration is not automatic, even if HMRC sends you a letter identifying you as needing to comply.
You need a Government Gateway account to register.
If you do not have one, create it well ahead of the deadline. Do not leave registration until the last minute—HMRC’s systems can be slow during peak periods.
Step 5: Coordinate With Your Letting Agent
If you use a letting agent who collects rent and incurs expenses on your behalf, ask them now how they will support Making Tax Digital. Specifically:
- How will they provide you with digital records of rent received?
- How will they supply digital receipts for expenses they incur on your behalf?
- Can they export data in a format your MTD software can import?
- Will they report income and expenses separately (as required) rather than just a net payment figure?
Getting this right early avoids scrambling when your first quarterly deadline arrives.
Step 6: Speak to Your Accountant
If you use an accountant, discuss how they will handle MTD submissions. Questions to ask:
- Will they submit quarterly updates on your behalf?
- What software will they use?
- How will you share transaction data with them?
- Will their fees increase?
Many accountants are adjusting their service models for MTD, so it is worth understanding changes to your arrangements now.
Step 7: Consider Voluntary Early Adoption
HMRC runs a pilot scheme allowing landlords to join MTD voluntarily before the mandatory date. This lets you:
- Test the system without immediate late-submission penalties
- Identify problems before compliance becomes compulsory
- Get comfortable with quarterly reporting
What Happens to Self Assessment?
Once you are in MTD, you no longer complete an annual Self Assessment tax return through HMRC’s online portal.
Instead, your Final Declaration submitted through MTD software fulfils the same purpose.
Important: File Your 2025/26 Return as Normal
Even if you enter MTD from April 2026, you will still need to file a normal Self Assessment tax return for the 2025/26 tax year (the year ending 5 April 2026).
This will be your final Self Assessment return. From 2026/27 onwards, your Final Declaration through MTD replaces it.
Payment Dates Stay the Same
Despite the shift to quarterly reporting, when you pay your tax does not change:
- 31 January – First payment on account plus any balancing payment
- 31 July – Second payment on account
The quarterly updates are about reporting your income, not paying tax. Your tax bill is still calculated and paid on the existing schedule.
If You Have Other Income
Your Final Declaration must include all your taxable income, not just rental income. This includes:
- Employment income (pulled from PAYE records)
- Pension income
- Dividend income
- Interest income
- Capital gains
The Final Declaration effectively replaces your Self Assessment tax return, capturing your complete tax position for the year.
MTD for Landlords FAQs
Q1: When does Making Tax Digital start for landlords?
A: MTD starts from April 2026 for landlords with gross rental income over £50,000 in the 2024/25 tax year. The threshold reduces to £30,000 from April 2027 and £20,000 from April 2028. Your gross income is your total rental income before any expenses are deducted. HMRC will write to affected landlords but you should check your own qualifying income rather than waiting for notification.
Q2: Do I need special software for Making Tax Digital?
A: Yes, you must use HMRC-approved software to keep digital records and submit your quarterly updates. HMRC does not provide free software—you need to purchase or subscribe to a commercial package. Spreadsheets alone are not sufficient unless combined with bridging software.
Q3: What happens if I miss a quarterly MTD deadline?
A: You receive one penalty point for each missed deadline. Once you accumulate four penalty points, a £200 fine is triggered. However, the 2025 Budget confirmed no late-filing penalties will apply for the four quarterly updates during the 2026/27 tax year for landlords in the first wave. Late payment penalties still apply from April 2026.
Q4: Are limited company landlords affected by MTD?
A: No, if your rental properties are held within a limited company, you are exempt from MTD for Income Tax. HMRC confirmed in late 2025 that plans for quarterly corporate reporting under MTD have been abandoned. Limited companies continue to submit Company Tax Returns and annual accounts under existing rules.
Q5: Do I need to register for MTD or does HMRC do it automatically?
A: You must register for MTD yourself through HMRC’s online service using your Government Gateway account. Registration is not automatic, even if you already use MTD for VAT or are registered for Self Assessment. Failing to register is itself a compliance issue, so do not leave it to the last minute.
