What is the income threshold for Making Tax Digital for landlords?

From April 2026, MTD for Income Tax applies to landlords with gross property income (or combined property and self-employment income) over £50,000. From April 2027, the threshold drops to £30,000. HMRC has indicated it may lower the threshold further in future years.

What software is compatible with Making Tax Digital?

HMRC maintains a list of MTD-compatible software. Popular options for landlords include FreeAgent, Xero, QuickBooks, Hammock, GoSimpleTax, and HMRC's own free software. Your chosen software must be able to submit quarterly updates and end-of-period statements digitally to HMRC.

What are the penalties for not complying with MTD?

HMRC uses a points-based penalty system. You receive one point for each late quarterly submission, and once you hit the penalty threshold (4 points for quarterly obligations), you receive a £200 fine. Additional late submissions incur further £200 penalties. Late payment penalties are charged at 2% of tax owed after 15 days, rising to 4% after 30 days.

What records do landlords need to keep for MTD?

You must keep digital records of all rental income (including dates and amounts), allowable expenses categorised by type, tenant details, property details, and any capital expenditure. Records must be maintained in MTD-compatible software — spreadsheets alone are not sufficient unless they can digitally link to MTD software for submission.

Making Tax Digital for Landlords: Complete 2026 Guide

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s plan to kill off the annual Self Assessment return. You’ll keep digital records and send quarterly updates to HMRC through compatible software instead.

For landlords, this is the biggest shake-up to tax reporting in decades. Your yearly paper scramble gets replaced by a rolling digital process. HMRC sees your numbers throughout the year. So do you. That part is actually useful.

MTD already applies to VAT-registered businesses. Now it’s coming for Income Tax Self Assessment (ITSA). That means landlords with property income above certain thresholds are next in line.

You need to know three things: what’s changing, when it hits you, and how to get ready before it does. This guide covers all of it.

MTD Timeline: Key Dates for Landlords

April 2026 — First Phase

MTD for Income Tax kicks in on 6 April 2026 for anyone with gross income from self-employment and/or property over £50,000 per year.

Total rental income before expenses across all your properties counts. Got self-employment income too? HMRC adds the two together. Exceed £50,000 combined and you’re in.

April 2027 — Second Phase

The threshold drops to £30,000 from 6 April 2027. Far more landlords get caught at this level. Two or three properties in the south of England will easily push you past £30,000 in gross rent.

Future Phases

HMRC wants to bring the threshold down further. Probably £20,000. Possibly lower. No firm dates exist for anything below £30,000 yet. Expect further expansion by 2028 or 2029.

Start using digital record-keeping now regardless of your income level. You’ll be ahead of the game when the threshold reaches you. Better records also mean fewer tax mistakes and less stress at year-end.

How Quarterly Reporting Works

MTD splits the tax year into four quarters. Each quarter you send a summary of income and expenses to HMRC through your MTD software.

The Quarterly Cycle

Quarter	Period	Submission Deadline
Q1	6 April – 5 July	7 August
Q2	6 July – 5 October	7 November
Q3	6 October – 5 January	7 February
Q4	6 January – 5 April	7 May

After Q4 you submit an End of Period Statement (EOPS) by 31 January following the tax year end. This is where you make adjustments, claim reliefs, and finalise everything.

Then you submit a Final Declaration by 31 January. This replaces your old Self Assessment return. It confirms your total income and tax liability for the year.

What Goes Into Each Quarterly Update

Each submission covers three things:

Total rental income received during that quarter
Allowable expenses broken down by type (repairs, insurance, management fees, etc.)
Running totals for the year so far

Your software calculates the tax. You don’t need to work out your liability each quarter. The quarterly updates are summaries based on your digital records. They must be accurate though.

Estimated vs Actual Figures

HMRC accepts estimates in quarterly updates. Some expenses won’t be finalised mid-quarter and that’s fine. Your End of Period Statement must contain actual figures. Use reasonable estimates quarterly and correct them at year-end. That’s standard practice.

Who Exactly Is Affected?

You Must Comply If

You’re an individual landlord (not a limited company) with gross property income over the threshold
You’re a partner in a property partnership where your share exceeds the threshold
You have combined self-employment and property income over the threshold
You’re a sole trader who also rents out property and the combined total exceeds the threshold

You’re Exempt If

Your property is held in a limited company — MTD for Corporation Tax has a separate timeline coming later
Your gross property income falls below the threshold with no self-employment income pushing you over
You are a trust or estate — currently exempt from MTD ITSA
You have a reasonable excuse (disability, age-related digital exclusion) — HMRC considers exemptions case by case

Gross Income, Not Profit

This trips up loads of landlords. The threshold is based on gross income, not profit. Pull in £55,000 in rent but spend £30,000 on expenses? Your profit is only £25,000. Doesn’t matter. You still exceed the £50,000 threshold. You still must comply.

This catches more people than you’d expect. Multiple properties or anything in a higher-rent area and you’re probably over the line.

Compatible Software: Your Options

You need software that HMRC officially recognises as MTD-compatible. Spreadsheets alone won’t cut it unless they digitally link to an MTD submission tool.

Popular MTD Software for Landlords

FreeAgent (from £14.50/month)

Works well for landlords with straightforward portfolios
Bank feed integration pulls transactions in automatically
Built-in MTD submission
Decent mobile app for logging expenses on the move

Xero (from £15/month)

Better for larger portfolios or multiple income streams
Strong multi-property tracking
Your accountant can log in and collaborate directly
Big app marketplace for bolt-ons

QuickBooks (from £12/month)

Easy to use even if you’re not tech-savvy
Receipt capture through the mobile app
Handles MTD submissions automatically
Works with most UK banks

Hammock (from £8/month)

Built specifically for landlords
Tracks income and expenses per property
Generates your SA105 figures automatically
Quarterly MTD submission built right in

GoSimpleTax (from £58.50/year)

Cheapest option that still does the job
Designed for Self Assessment and MTD
Fewer bells and whistles but covers the essentials
Good if you want minimal software faff

HMRC Free Software

HMRC will offer its own free MTD software
Limited features compared to the paid options
Fine if you’ve got one or two properties and simple expenses

How to Choose

Pick your MTD software based on five things:

Number of properties — More properties means you need better categorisation and reporting
Expense complexity — Mixed-use properties or former furnished holiday lets need more capable software
Accountant compatibility — Pick something your accountant already supports
Bank feeds — Automatic bank imports save you hours every quarter
Cost — Monthly fees add up. Claim them as allowable expenses

What Records You Must Keep Digitally

MTD requires specific digital records. Here’s exactly what HMRC expects.

Income Records

Date each rental payment landed in your account
Amount of each payment
Tenant name (or letting agent if they collect rent)
Which property the income relates to
Any other property income (parking charges, service charges passed through, etc.)

Expense Records

Date of each expense
Amount paid
Category (repairs, insurance, professional fees, etc.)
Which property it relates to (apportion across multiple properties if needed)
Digital copies of receipts and invoices (not mandatory but strongly recommended)

Property Records

Address of each rental property
Dates the property was available for letting
Void periods and reasons

What “Digital” Actually Means

Your records must live in software that can submit to HMRC digitally.

Acceptable: MTD-compatible accounting software, spreadsheets linked to MTD submission software
Not acceptable: Paper records, standalone spreadsheets with no digital link, PDFs sitting on your hard drive

Keep paper receipts as source documents if you want. The data must also exist in your digital system. Most landlords photograph receipts through their software’s mobile app. That gives you a digital record and a backup of the original.

Check our landlord tax deductions guide for a full list of what you can claim.

Step-by-Step: How to Prepare for MTD

Step 1: Check If You’re Affected

Add up your gross property income for the current tax year. Gross means total rent received before deducting any expenses. Include self-employment income if you have any.

Over £50,000? Be MTD-ready by April 2026
Over £30,000? Be MTD-ready by April 2027
Under £30,000? Not mandatory yet. Prepare anyway

Register for MTD through HMRC’s online services. This is separate from your existing Self Assessment registration. HMRC will send instructions but don’t wait for them. Sign up early and avoid the rush.

You’ll need:

Your Government Gateway user ID and password
Your National Insurance number
Your business start date (the date you first rented out property)

Step 3: Choose Your Software

Pick MTD-compatible software that fits your situation (see the options above). Most offer free trials. Test at least two before you commit. Pay attention to:

How easy it is to categorise property expenses
Whether it separates income and expenses by property
How smooth the quarterly submission process feels
Whether your accountant can access it

Step 4: Set Up Your Digital Records

Once you’ve picked your software:

Add your properties — Enter each rental property with its address and tenancy details
Connect your bank accounts — Set up bank feeds so transactions pull in automatically
Enter historical transactions — If switching mid-year, put in your year-to-date figures
Configure expense categories — Match them to the SA105 property pages categories
Sort out receipts — Download the mobile app and photograph every receipt straight away

Step 5: Run a Trial Quarter

Do a dry run before your first real submission. Enter a quarter’s worth of income and expenses. Generate the quarterly summary. Review it. Most software has a test mode for this.

Check these things:

All rental income is allocated to the right properties
Expenses sit in the correct categories
Totals match your bank statements
You haven’t missed any transactions

Step 6: Submit Your First Quarterly Update

Review your quarter’s figures in the software and hit submit. The software handles the technical side of sending everything to HMRC. You’ll get confirmation that your update was received.

Save every submission confirmation. HMRC may query a submission months later. You’ll want proof of what you sent and when.

Step 7: Keep the Rhythm Going

Consistency is what makes MTD manageable. Set a calendar reminder for the first week of each submission month (August, November, February, May). Spend 30-60 minutes reviewing and submitting.

Between submissions, keep records current. Reconcile your bank feed every Sunday. Ten minutes a week beats a quarterly panic every time.

Transitioning from Paper Returns

Switching from paper Self Assessment to MTD means changing your habits. It’s not as bad as it sounds though.

What Changes

Before MTD	After MTD
Collect receipts in a shoebox	Log expenses digitally as they happen
Annual scramble to file return	Quarterly 30-minute submissions
Paper or PDF records	Digital records in MTD software
File by 31 January (paper) or 31 October (online)	Quarterly deadlines plus final declaration by 31 January
Single SA105 submission	Four quarterly updates + EOPS + Final Declaration

What Stays the Same

Tax rules haven’t changed. Same income is taxable. Same expenses are deductible.
Tax year still runs 6 April to 5 April
Tax is still due by 31 January (and 31 July for payments on account)
Your allowable expenses remain identical
Capital allowances and reliefs work exactly as before

Tips for a Smooth Transition

Start digital record-keeping now. Don’t wait until you’re forced to.
Don’t digitise years of old paper records. Start fresh from the current tax year.
Use bank feeds to cut manual data entry right down.
Photograph receipts immediately. Paper piles up faster than you think.
Talk to an accountant if software isn’t your thing. Many offer MTD packages for landlords.

Penalties for Non-Compliance

HMRC has a new points-based penalty system for MTD. Know how it works so you don’t get stung.

Late Submission Penalties

Every late quarterly submission earns you one penalty point. Hit 4 points (the threshold for quarterly obligations) and you get a £200 penalty. Every late submission after that also costs £200 until you clear your points.

Reset your points to zero by:

Submitting all outstanding returns
Meeting every deadline for 12 consecutive months

Late Payment Penalties

Payment penalties are separate from submission penalties:

15 days late: 2% charge on the outstanding tax
30 days late: Another 2% on top (4% total)
31+ days late: A further 4% per year on whatever’s still unpaid

Interest on Late Payments

HMRC charges interest at the Bank of England base rate plus 2.5%. With the base rate at 4.5%, that’s 7% per year on unpaid tax. Pay on time.

Reasonable Excuses

HMRC may waive penalties if you have a genuine reason for being late:

Serious illness or bereavement
IT failures (your software or HMRC’s systems going down)
Fire, flood, or natural disaster destroying your records
Errors or delays caused by HMRC themselves

“I didn’t know about MTD” won’t fly. Neither will “I couldn’t figure out the software.” You’ve been warned.

Common Mistakes to Avoid

1. Confusing Gross Income with Profit

The threshold is based on gross rental income. Not profit. Loads of landlords assume their modest profits keep them below the line. Check your total rental receipts. That’s the number HMRC cares about.

2. Forgetting to Include All Properties

Rent-a-Room income counts. Former furnished holiday lets count. Overseas property income counts. Add it all up when checking whether you hit the threshold.

3. Mixing Personal and Property Finances

Open a separate bank account for your rental business. Digital record-keeping becomes ten times simpler. Quarterly submissions become more accurate. And if HMRC ever asks questions, clean records are your best defence.

4. Leaving Everything to the Last Minute

MTD exists to spread the workload across the year. Leave all your record-keeping to the week before each deadline and you’ll hate every minute of it. Update records weekly. Fifteen minutes saves hours of stress.

5. Not Backing Up Digital Records

Your MTD software stores your records. What happens if the provider goes bust? Export your data regularly. Keep backups. HMRC requires records for at least 5 years after the 31 January submission deadline.

6. Ignoring the Software Learning Curve

Don’t sign up for software the week before your first submission. Give yourself 2-3 months minimum. Learn the system. Set up your properties. Run a test cycle. The costliest errors come from rushing the setup.

MTD and Property Partnerships

Own rental property in a partnership (including with your spouse)? MTD adds an extra layer.

Each partner registers individually for MTD if their share of partnership income (combined with any personal property or self-employment income) exceeds the threshold. The partnership itself also keeps digital records and submits quarterly.

One partner acts as the “nominated partner” and submits on behalf of the partnership. Every partner still needs their own MTD registration and must make their own final declaration.

Joint ownership with a spouse outside a formal partnership? The income split (usually 50/50 unless you’ve filed a Form 17 declaration) applies when assessing each person against the threshold.

MTD for Furnished Holiday Lets

The FHL tax regime was abolished from April 2025. Furnished holiday let income now gets the same treatment as standard rental income.

FHL income counts towards your MTD threshold like any other property income. Factor it into your threshold calculation.

Our landlord tax deductions guide covers how the FHL changes affect your overall tax position.

Using an Accountant Under MTD

MTD doesn’t make accountants redundant. It changes how you work with them.

What Accountants Can Do

Set up your MTD software and configure it for your portfolio
Submit quarterly updates on your behalf (you authorise them through HMRC)
Review your categorisation of income and expenses
Handle the End of Period Statement and Final Declaration
Advise on tax planning using your quarterly figures

What You Still Need to Do

Even with an accountant handling submissions, you must:

Keep digital records up to date (they can’t do this efficiently for you)
Provide information before each quarterly deadline
Review and approve submissions before they go
Hang onto receipts and source documents

Cost Implications

Accountancy fees will go up under MTD. Your accountant now has four quarterly touchpoints instead of one annual return. Budget £500-£1,500 per year for a basic MTD landlord package. The exact amount depends on portfolio size and complexity.

These fees are a tax-deductible expense. The actual cost is reduced by your marginal tax rate.

Practical Tools to Make MTD Easier

Beyond your core MTD software, these tools save time and hassle.

Bank Feed Integration

Connect your rental property bank account to your MTD software. Most major UK banks support automatic feeds. Manual data entry disappears. Errors drop.

Receipt Scanning Apps

Use your software’s built-in scanner or a standalone app like Dext (formerly Receipt Bank). Photograph receipts the second you get them. Don’t let paper accumulate in a drawer.

Rental Yield Calculator

Our rental yield calculator helps you assess property performance. Understanding your yield makes tax liability planning and cash flow management much easier across the year.

Calendar Reminders

Set recurring reminders for:

Weekly: Reconcile bank transactions (10 minutes)
Quarterly: Review and submit your MTD update (30-60 minutes)
Annually: End of Period Statement and Final Declaration

What Happens If You Sell a Property

Report rental income received up to the point of sale in your quarterly updates as normal. Capital gains go through a separate process. You must report and pay Capital Gains Tax within 60 days of completion through HMRC’s online CGT service.

Your MTD software won’t handle CGT reporting. It should correctly stop the rental income when the property is sold though.

Selling a property that drops your gross income below the MTD threshold? You may be able to opt out for the following tax year. You’ll need to formally deregister with HMRC if you’re already signed up.

Summary: Your MTD Checklist

Run through this list. Tick everything off before your first deadline.

MTD is a big change. But get set up properly and it actually makes life easier. Real-time visibility of your rental income and expenses means fewer nasty surprises in January. The quarterly habit keeps you on top of your allowable deductions.

Start now. Pick your software. Run a test quarter. By the time your first mandatory submission arrives, you’ll wonder what all the fuss was about.

This guide was last updated in March 2026. Tax rules and MTD thresholds may change — always check the latest HMRC guidance before making decisions about your tax affairs.