What Is Making Tax Digital for Landlords

At Towerstone Accountants we provide specialist property accountant services for landlords property investors and individuals dealing with property tax and reporting obligations across the UK. This article has been written to explain What is Making Tax Digital for landlords in clear practical terms so you understand how the rules apply in real situations. Our aim is to help you make informed decisions avoid costly mistakes and know when professional advice is worthwhile.

As a chartered accountant running my own firm, Making Tax Digital for landlords is one of the biggest upcoming changes I discuss with property owners. Many landlords are aware of Making Tax Digital in name only. Others assume it is something for businesses with staff or complex accounts. In reality, Making Tax Digital for landlords will affect a huge number of individuals who currently file one tax return a year and think very little about reporting until January.

Making Tax Digital, often shortened to MTD, represents a fundamental shift in how HMRC expect landlords to keep records and report income. It is not just a software change. It is a behavioural change that moves landlords from annual reporting to near real time interaction with HMRC.

In this article, I want to explain clearly and practically what Making Tax Digital for landlords actually is, who it applies to, when it starts, what landlords will need to do differently, and how to prepare properly. This is written exactly how I explain it to clients, without technical jargon, and focused on what this means in day to day terms rather than policy headlines.

The basic idea behind Making Tax Digital

Making Tax Digital is HMRC’s long term plan to modernise the UK tax system.

The core aim is simple.

HMRC want taxpayers to:

• Keep digital records

• Use approved software

• Submit updates to HMRC more frequently

• Reduce errors caused by manual reporting

• Move away from annual tax surprises

For landlords, this means a move away from one Self Assessment return per year and towards regular digital reporting of rental income and expenses.

Making Tax Digital for landlords is not optional

One of the most important points to understand is that Making Tax Digital for landlords is not a choice.

Once it applies to you, it is mandatory.

You will not be able to file your property income through the traditional Self Assessment system in the same way as before.

Landlords who do not comply may face penalties, interest, and compliance action.

When Making Tax Digital for landlords starts

Making Tax Digital for landlords is being introduced in stages.

The key start date for most landlords is April 2026.

From that point, Making Tax Digital will apply to landlords who:

• Have gross rental income above a certain threshold

• Receive income from UK or overseas property

• Currently file Self Assessment returns

A further group of landlords will be brought in from April 2027.

The exact timing depends on your level of income, which I will explain shortly.

Which landlords will be affected first

The first group affected will be landlords whose gross property income exceeds £50,000 per year.

Gross income means:

• Total rental income before expenses

• Not profit

• Not after mortgage interest

• Not after agent fees

This includes income from:

• Buy to let properties

• Holiday lets

• Airbnb

• Overseas property

If your gross rental income is above £50,000, Making Tax Digital will apply from April 2026.

The second phase of Making Tax Digital for landlords

From April 2027, Making Tax Digital will extend to landlords with gross property income above £30,000 per year.

This brings a much larger number of landlords into the system.

Over time, it is widely expected that the threshold may reduce further, although no final decision has been confirmed.

What Making Tax Digital actually requires landlords to do

Making Tax Digital changes both how records are kept and how information is submitted.

Under Making Tax Digital for landlords, you will be required to:

• Keep digital records of rental income and expenses

• Use MTD compatible software

• Submit quarterly updates to HMRC

• Submit an end of period statement

• Submit a final declaration each year

This is very different from the current annual process.

Keeping digital records under MTD

Under MTD, landlords must keep their property records digitally.

This means:

• Income records must be digital

• Expense records must be digital

• Figures must be recorded in software or digital systems

• Manual spreadsheets alone will not be enough unless connected properly

HMRC want data entered digitally and maintained in a way that reduces manual intervention.

What counts as digital records

Digital records include:

• Dates of rental income

• Amounts received

• Expense dates

• Expense amounts

• Categories of expense

You do not need to upload receipts to HMRC, but you must keep them in case of enquiry.

The key change is that totals cannot simply be added up at year end and typed into a tax return.

Quarterly updates explained simply

One of the biggest changes under Making Tax Digital is quarterly reporting.

Landlords will need to submit four quarterly updates each tax year.

These updates will include:

• Total rental income for the quarter

• Total allowable expenses for the quarter

• Basic summary figures

These are not full tax returns, and no tax is paid at this stage.

They are updates, not final calculations.

Important point about quarterly updates

Quarterly updates do not mean you pay tax quarterly.

This is a very common misunderstanding.

Quarterly updates are purely reporting.

Tax is still calculated and paid after the end of the tax year.

However, HMRC will have a much clearer picture of your income throughout the year.

The end of period statement

After the end of the tax year, landlords must submit an end of period statement.

This is where:

• Final adjustments are made

• Allowances are applied

• Capital allowances are included if relevant

• Any corrections to quarterly figures are made

This step finalises the property income figures for the year.

The final declaration

The final declaration replaces the current Self Assessment return.

It confirms:

• All income sources

• All reliefs and allowances

• The final tax position for the year

Only after this step is your tax bill finalised.

In practice, Making Tax Digital replaces one annual return with five digital submissions.

How Making Tax Digital affects landlords with multiple properties

Making Tax Digital applies to the landlord as a whole, not to each property separately.

This means:

• All rental properties are reported together

• UK and overseas property are reported separately but within the same system

• Quarterly updates cover the total rental activity

This can be more complex for landlords with multiple properties or mixed types of letting.

Furnished Holiday Lets and MTD

Furnished holiday lets are included within Making Tax Digital.

Income from furnished holiday lets must be:

• Recorded digitally

• Included in quarterly updates

• Finalised at year end

This applies whether the property is let through Airbnb or other platforms.

Jointly owned properties under Making Tax Digital

Joint ownership does not remove MTD obligations.

Each owner must:

• Keep their own digital records

• Report their share of the income

• Submit their own quarterly updates if within scope

This can be challenging where one person manages the property and the other is passive.

What software do landlords need to use

Landlords will need to use MTD compatible software.

This may include:

• Cloud accounting software

• Property specific software

• Bridging software linked to spreadsheets

HMRC will not allow manual entry directly into their systems.

Choosing the right software is one of the most important preparation steps.

Spreadsheets and Making Tax Digital

Many landlords currently use spreadsheets.

Spreadsheets are not banned, but:

• They must be digitally linked to MTD software

• Figures must flow without manual rekeying

• Copy and paste is not considered a digital link

In practice, many landlords will need to adapt or move away from standalone spreadsheets.

How Making Tax Digital changes the landlord experience

Making Tax Digital changes behaviour as much as compliance.

Landlords will need to:

• Keep records up to date throughout the year

• Review income and expenses quarterly

• Engage with their numbers more often

• Work more closely with software or advisers

For some, this will feel like extra admin. For others, it will provide much better control.

Benefits of Making Tax Digital for landlords

While MTD is often viewed negatively, there are potential benefits.

These include:

• Better visibility of income and expenses

• Fewer year end surprises

• Improved cash flow planning

• Earlier identification of issues

• Cleaner records if HMRC enquire

Landlords who already keep good records may find the transition easier than expected.

Challenges landlords are likely to face

In my experience, the main challenges will be:

• Adjusting to quarterly reporting

• Choosing and learning new software

• Keeping records consistently

• Coordinating joint ownership reporting

• Understanding what needs to be submitted and when

These challenges are manageable, but they need planning.

Penalties under Making Tax Digital

Making Tax Digital introduces a new penalty system.

Penalties may apply for:

• Late submissions

• Failure to keep digital records

• Failure to use approved software

• Persistent non compliance

HMRC have indicated a light touch approach initially, but penalties will still exist.

What happens if you do nothing

Ignoring Making Tax Digital is not an option.

If you are within scope and do not comply:

• HMRC may issue penalties

• Returns may be rejected

• Compliance checks may follow

• Stress and costs will increase

Early preparation is far easier than reacting under pressure.

How landlords should prepare now

The best preparation for Making Tax Digital starts well before it becomes mandatory.

Practical steps include:

• Reviewing your current record keeping

• Understanding your gross rental income level

• Identifying when MTD will apply to you

• Testing software options

• Cleaning up historic records

• Getting used to quarterly reviews

Starting early spreads the workload and reduces disruption.

The role of accountants under Making Tax Digital

Accountants do not become redundant under MTD. Their role changes.

A good accountant will:

• Help select and set up software

• Review quarterly submissions

• Ensure compliance with HMRC rules

• Handle end of period statements

• Manage final declarations

• Act as a buffer with HMRC

For many landlords, professional support will become more valuable, not less.

Making Tax Digital for landlords with small portfolios

Even landlords with one or two properties can be caught by MTD.

If gross income exceeds the threshold, the rules apply regardless of portfolio size.

MTD is not aimed only at professional landlords.

Overseas property and Making Tax Digital

Overseas property income is included in MTD.

This adds complexity because:

• Foreign income rules apply

• Exchange rates must be handled correctly

• Separate reporting categories are required

Landlords with overseas property should plan particularly carefully.

What Making Tax Digital does not change

It is also important to understand what MTD does not change.

It does not change:

• The amount of tax you pay

• The rules on allowable expenses

• Mortgage interest restrictions

• Capital Gains Tax rules

• VAT obligations

MTD changes how and when information is reported, not the underlying tax law.

Common myths about Making Tax Digital

I often hear landlords say:

• MTD means I pay tax quarterly

• MTD is only for large landlords

• My letting agent will handle it

• HMRC will delay it again

• Spreadsheets will always be fine

These assumptions are risky.

The safest approach is to plan based on current confirmed rules.

When to seek professional advice

In my professional opinion, advice is particularly important where:

• Income is close to the thresholds

• Multiple properties are owned

• Joint ownership is involved

• Furnished holiday lets are included

• Overseas property is involved

• Record keeping is currently poor

The earlier advice is taken, the smoother the transition.

A practical way to think about MTD

The simplest way to think about Making Tax Digital for landlords is this.

HMRC want to move from:

• Once a year reporting
  to

• Ongoing digital reporting

Landlords who already run their property activity like a business will adapt more easily than those who treat it as an occasional task.

Final thoughts from real world experience

Making Tax Digital for landlords is one of the most significant changes to property taxation in recent years. It will require adjustment, but it does not need to be feared.

In my experience, the landlords who struggle most are those who delay preparation or hope the rules will not apply to them. Those who engage early, improve their records, and get the right support usually find the transition manageable and sometimes beneficial.

Making Tax Digital is coming whether landlords like it or not. The choice is not whether to comply, but how prepared you will be when it arrives.

You may also find our guidance on When will landlords have to file digital tax returns and What records do landlords need to keep for tax useful when exploring related property tax questions. For a broader overview of property tax reporting and planning topics you can visit our property hub which brings all related guidance together.