When Will Landlords Have to File Digital Tax Returns

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 When will landlords have to file digital tax returns 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.

This is one of the most important questions landlords are asking right now, and with good reason. The UK tax system is in the middle of its biggest change in decades, and property income sits firmly in HMRC’s sights. Many landlords already feel under pressure from tax changes, interest relief restrictions, and increased compliance, so the move to digital tax returns understandably raises concern.

The short answer is that most landlords will have to file digital tax returns under Making Tax Digital for Income Tax, but the timing depends on how much rental income you earn, how your affairs are structured, and whether you are an individual or operate through a company. The longer answer matters far more, because planning ahead can make the transition far smoother and avoid costly last minute mistakes.

In this article, I am going to explain clearly and practically when landlords will have to file digital tax returns, who is affected first, what digital filing actually means in practice, and how landlords should prepare. I will also explain what is not changing yet, as there is a lot of misinformation circulating.

By the end, you should have a clear timeline, understand whether the rules apply to you, and know what steps to take next.

What is Making Tax Digital?

Making Tax Digital, often shortened to MTD, is a government initiative led by HMRC to modernise the UK tax system.

The core aim of MTD is to:

• Reduce errors caused by manual record keeping

• Move away from annual reporting towards more regular updates

• Require digital records and digital submissions

• Improve transparency and compliance

Making Tax Digital is not one single change. It is a phased programme that applies separately to VAT, Income Tax, and Corporation Tax.

Landlords are affected primarily by Making Tax Digital for Income Tax Self Assessment, often referred to as MTD for ITSA.

What digital tax returns mean for landlords

For landlords, digital tax returns do not simply mean submitting the same annual Self Assessment online. Most landlords already do that.

Instead, MTD for Income Tax requires:

• Digital record keeping

• Quarterly income and expense updates

• Use of MTD compatible software

• An annual final declaration

This is a significant shift from the current system.

The current system for landlords

At the moment, most individual landlords report rental income through an annual Self Assessment tax return.

Under the current system:

• Records can be kept on paper or spreadsheets

• Figures are submitted once per year

• The deadline is usually 31 January following the tax year

• Many landlords only review their numbers once a year

This system will continue for some landlords for a while yet, but not indefinitely.

When will landlords have to file digital tax returns?

The key dates are now clear, although they have changed several times in the past.

From April 2026

From April 2026, landlords will have to follow Making Tax Digital for Income Tax if:

• They are individuals

• They have gross property income over £50,000 per year

This income threshold is based on gross rental income, not profit.

If you meet this criteria, you will be required to:

• Keep digital records

• Submit quarterly updates

• File a digital end of year return

From April 2027

From April 2027, the rules expand further.

Landlords will have to follow Making Tax Digital for Income Tax if:

• They are individuals

• They have gross property income over £30,000 per year

This will bring a much larger number of landlords into the digital system.

What about landlords earning under £30,000?

If your gross rental income is below £30,000 per year, you are not yet required to comply with Making Tax Digital for Income Tax.

However:

• This is a policy position, not a permanent exemption

• Thresholds may change in the future

• HMRC has made it clear that MTD will eventually apply more widely

In my experience, landlords below the threshold should still prepare, even if they are not immediately affected.

How gross rental income is measured

This is a crucial point that many landlords misunderstand.

The income thresholds are based on:

• Gross rental income

• Before expenses

• Before mortgage interest

• Before any deductions

For example:

• Rental income £32,000

• Expenses £20,000

• Profit £12,000

Even though profit is modest, MTD would still apply from April 2027 because gross income exceeds £30,000.

Who does not need to file digital tax returns yet

Not all landlords are affected immediately.

The following are not currently required to comply with MTD for Income Tax:

• Limited companies

• Landlords with income below the threshold

• Some jointly owned properties where individual income is below the limit

• Certain excluded or deferred cases

This distinction between individuals and companies is very important.

Limited company landlords

If you own property through a limited company:

• You are not affected by MTD for Income Tax

• You still file Corporation Tax returns

• MTD for Corporation Tax is a separate programme

For now, company landlords continue under existing Corporation Tax rules.

This often comes as a surprise to landlords who operate through companies and assume all MTD rules apply equally.

What filing digitally actually involves

Once MTD applies to you, your tax reporting will change significantly.

You will be required to:

• Keep digital records of income and expenses

• Use MTD compatible software

• Submit four quarterly updates per year

• Submit an end of period statement

• Submit a final declaration

This is more frequent reporting, although it does not necessarily mean more tax payments.

Quarterly updates explained

Quarterly updates are summaries of income and expenses.

They are:

• Submitted every three months

• Not final tax calculations

• Not used to demand tax immediately

Their purpose is to keep HMRC updated on your position throughout the year.

Many landlords worry quarterly updates mean paying tax quarterly. That is not currently the case.

The end of year position

At the end of the tax year, you will still:

• Review all figures

• Make adjustments

• Claim reliefs and allowances

• Finalise taxable profit

This replaces the current Self Assessment return.

The final declaration confirms all income across all sources, not just property.

Payment dates are not changing yet

One important reassurance for landlords is this.

The dates you pay tax are not currently changing.

Even under MTD:

• Income Tax is still normally due by 31 January

• Payments on account still apply where relevant

MTD changes reporting, not payment timing, at least for now.

What software will landlords need to use?

Under MTD, landlords must use compatible software.

This may include:

• Cloud accounting software

• Property specific bookkeeping software

• Bridging software linked to spreadsheets

Manual submissions through the HMRC portal will not be allowed.

This is where preparation makes a real difference.

Can landlords still use spreadsheets?

Yes, but with conditions.

Landlords can continue using spreadsheets if:

• Records are kept digitally

• Data flows digitally into MTD software

• No manual re typing occurs

In practice, many landlords will use bridging software that connects spreadsheets to HMRC.

Why HMRC is focusing on landlords

Property income has always been a focus area for HMRC.

Reasons include:

• High error rates

• Under reporting of income

• Poor record keeping

• Complexity around expenses and finance costs

MTD is designed to reduce these issues by encouraging better record keeping throughout the year.

Common concerns landlords raise

I hear the same worries repeatedly.

“This sounds like a lot more work”

Initially, yes, there is more structure.

However, landlords who already keep decent records often find:

• Quarterly updates are quick

• Year end is less stressful

• Fewer surprises occur

“I only look at my numbers once a year”

This is exactly what HMRC is trying to change.

MTD pushes landlords towards:

• Ongoing bookkeeping

• Regular review

• Better awareness of profitability

“What if I get something wrong?”

Quarterly updates are not final.

Corrections are made:

• At the end of the year

• In the final declaration

This reduces pressure to be perfect every quarter.

Penalties and compliance under MTD

MTD comes with a new penalty regime.

Key points include:

• Penalties focus on repeated failure

• Points based systems apply

• Occasional mistakes are less harshly treated

That said, ignoring MTD obligations entirely will not be risk free.

When landlords should start preparing

Even if MTD does not apply to you until 2026 or 2027, preparation should start earlier.

I usually recommend landlords:

• Move to digital records as soon as possible

• Choose software early

• Get comfortable with quarterly reporting

• Clean up expense categories

• Understand their true gross income

Leaving this until the first mandatory year is a recipe for stress.

Jointly owned property and thresholds

For jointly owned properties, the threshold is based on your share of gross rental income.

For example:

• Property income £60,000

• Owned 50:50

• Each owner’s income £30,000

This sits right on the April 2027 threshold.

This is an area where careful calculation matters.

What about furnished holiday lets?

Furnished holiday lets are currently treated as property income for MTD purposes.

This means:

• They count towards income thresholds

• They are included in digital reporting

Given wider tax changes affecting holiday lets, this is an area to watch closely.

How I advise landlords in practice

When landlords ask me about MTD timing, I focus on three things:

• Confirming gross rental income

• Clarifying ownership structure

• Assessing record keeping readiness

From there, we build a timeline that avoids panic.

The biggest mistake landlords can make

The biggest mistake is assuming:

• MTD will be delayed again

• HMRC will go easy in the first year

• Paper records will still be acceptable

In my experience, those who prepare early adapt with far less disruption.

Why this matters beyond compliance

MTD is not just a tax compliance issue.

Handled properly, it can:

• Improve cash flow awareness

• Highlight unprofitable properties

• Reduce year end stress

• Support better decision making

Landlords who engage with the process often end up more in control of their portfolios.

Final thoughts

Landlords will have to file digital tax returns under Making Tax Digital for Income Tax starting April 2026 if their gross rental income exceeds £50,000, and April 2027 if it exceeds £30,000. This applies to individual landlords, not limited companies, and it represents a major shift from annual reporting to ongoing digital compliance.

Although the change feels daunting, it does not need to be disruptive. With the right preparation, software, and understanding, MTD can be integrated into day to day property management rather than becoming an annual headache.

In my experience, the landlords who struggle most are not those with the largest portfolios, but those who leave preparation too late. If you know MTD is coming for you, starting now gives you time, choice, and control.

If you are unsure whether the rules apply to you, or when they will, getting clarity sooner rather than later can save a great deal of stress when the deadlines arrive.

You may also find our guidance on What is Making Tax Digital for landlords and How do I report property income to HMRC 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.