What Is Making Tax Digital for Landlords

Making Tax Digital (MTD) is a major change to the UK tax system that will affect how landlords record and report their rental income to HMRC. The goal is to replace traditional paper or annual tax returns with a digital process that provides quarterly updates and uses approved accounting software. For landlords with rental income above certain thresholds, these changes will become mandatory over the next few years. This article explains what Making Tax Digital means for landlords, when it starts, and how you can prepare to meet the new requirements.

What Is Making Tax Digital

Making Tax Digital is HMRC’s initiative to modernise the tax system by moving from paper-based reporting to a fully digital process. Instead of submitting a single annual tax return, individuals and businesses will send quarterly updates of their income and expenses using HMRC-approved software.

The aim is to make tax reporting more accurate, reduce errors, and give taxpayers a clearer picture of their finances throughout the year.

When MTD Will Apply to Landlords

Making Tax Digital for Income Tax, also known as MTD for ITSA (Income Tax Self Assessment), will gradually be introduced for landlords from April 2026.

The rollout schedule is as follows:

  • From April 2026, landlords and self-employed individuals with a total income above £50,000 will need to comply.

  • From April 2027, this requirement will extend to those earning between £30,000 and £50,000.

If your property income is below £30,000, HMRC currently has no set date for when MTD will apply, although future expansion is possible.

Who Is Affected

MTD applies to landlords who receive income from:

  • Residential properties.

  • Commercial properties.

  • Furnished holiday lets.

  • UK or overseas rental income.

If you already complete a Self Assessment tax return to declare rental income, you will be affected once your total property and business income exceeds the threshold.

For jointly owned properties, each owner is responsible for reporting their share of the income and expenses under MTD.

What Landlords Must Do Under MTD

When Making Tax Digital becomes mandatory, landlords will have to:

  1. Keep digital records:
    You must record your rental income and expenses using HMRC-approved accounting software. Spreadsheets can still be used, but they must be linked to digital software that can submit information directly to HMRC.

  2. Submit quarterly updates:
    Every three months, you will send a digital summary of your income and expenses to HMRC. These updates provide an estimate of your tax liability throughout the year.

  3. Submit an End of Period Statement (EOPS):
    After the tax year ends, you must finalise your figures by submitting an EOPS. This confirms the total income, expenses, and adjustments for the year.

  4. Submit a final declaration:
    This replaces the annual Self Assessment tax return. It combines all income sources, including wages, dividends, and pensions, to calculate your total tax due.

Example of How It Works

Suppose you are a landlord earning £60,000 a year from three rental properties. From April 2026, you will need to:

  • Keep digital records of all rent received and allowable expenses such as insurance, repairs, and letting agent fees.

  • Submit quarterly updates (for example, in July, October, January, and April) using approved software.

  • Send an End of Period Statement after the tax year ends to confirm final figures.

  • Make a final declaration to HMRC to determine your total tax owed for the year.

This system replaces the traditional annual Self Assessment return and is designed to provide a more consistent and up-to-date view of your tax position.

Benefits of Making Tax Digital for Landlords

Although it requires some adjustment, MTD offers several potential benefits for landlords:

  • Fewer errors: Digital reporting reduces the risk of mistakes that can occur with manual record keeping.

  • More accurate tax estimates: Quarterly updates help you plan for upcoming tax bills and manage cash flow more effectively.

  • Easier record keeping: Cloud-based accounting software makes it simpler to track income, expenses, and receipts in real time.

  • Improved efficiency: Submissions are faster and automatically stored, reducing the time spent on paperwork.

By switching to digital accounting early, landlords can adapt gradually rather than rushing close to the deadline.

Challenges Landlords May Face

While the system offers benefits, there are also challenges to consider:

  • Initial setup costs: You may need to purchase new accounting software or upgrade existing systems.

  • Learning curve: Understanding how to use the software and manage quarterly updates may take time.

  • Increased reporting frequency: Submitting updates every three months means staying organised throughout the year rather than focusing on one annual return.

  • Multiple income streams: If you have both property and business income, you will need to keep separate records for each source under MTD.

Working with an accountant or bookkeeper can make these tasks easier and ensure your digital records meet HMRC standards.

Choosing the Right Software

HMRC-approved software must be capable of maintaining digital records, producing quarterly updates, and communicating directly with HMRC’s systems through an API (application programming interface).

Popular options for landlords include:

  • QuickBooks

  • Xero

  • FreeAgent

  • Sage

  • Landlord-specific tools like Hammock or GoSimpleTax

Before choosing, check that the software supports MTD for Income Tax and can handle property income specifically.

How an Accountant Can Help

An accountant experienced in landlord taxation can help you transition smoothly to MTD by:

  • Setting up your digital record-keeping system.

  • Advising on which software best suits your property portfolio.

  • Managing quarterly submissions and year-end statements.

  • Ensuring all allowable expenses and reliefs are claimed.

  • Providing ongoing support to avoid penalties or errors.

Professional guidance ensures your rental accounts are compliant and that you are prepared well before the new rules take effect.

How to Prepare for MTD Now

Even though MTD for landlords starts in 2026, it’s sensible to start preparing early. You can:

  • Begin keeping digital records now using software or spreadsheets.

  • Review your current bookkeeping processes to ensure they meet HMRC standards.

  • Register for updates from HMRC about MTD deadlines and requirements.

  • Speak to your accountant about aligning your tax year, rental income, and expense tracking systems.

Taking these steps now will make the transition smoother and reduce the risk of disruption when the new system becomes mandatory.

Summary

Making Tax Digital for landlords is HMRC’s plan to modernise how property income is reported. From April 2026, landlords earning over £50,000 will need to keep digital records and submit quarterly updates, with those earning between £30,000 and £50,000 following a year later.

Although the change means more frequent reporting, it also provides greater accuracy, fewer errors, and better financial visibility. Preparing early, adopting suitable software, and seeking advice from an accountant will ensure you stay compliant and make the most of the new digital tax system.