Making Tax Digital for Landlords: A Complete Guide to Digital Records, Quarterly Updates, and Software Setup
Making Tax Digital represents a fundamental shift in how landlords report property income to HMRC. Starting in April 2026, landlords with gross property income of £50,000 or more must abandon traditional paper-based tax returns in favour of digital record-keeping and quarterly reporting through approved software.
You will need to maintain digital records, submit quarterly updates through MTD-compatible software, and meet specific deadlines throughout the tax year instead of filing a single annual Self Assessment return. This change affects how you track rental income, record allowable expenses, and communicate with HMRC about your property business.
The transition to Making Tax Digital for landlords requires careful preparation. You need to understand whether you fall within the eligibility thresholds, choose suitable software for your circumstances, and establish new processes for managing your tax obligations throughout the year rather than once annually.
Key Requirements for Landlords Under Making Tax Digital
Making Tax Digital for Income Tax introduces three core obligations for landlords: maintaining digital records throughout the year, submitting quarterly updates of property income and expenses, and completing a final declaration after the tax year ends. These requirements replace the traditional approach of keeping paper records and filing a single annual tax return.
Digital Record-Keeping Obligations
You must keep digital records of all your rental income and allowable property expenses using MTD-compatible software. Paper records and spreadsheets that aren't linked to approved software will no longer satisfy HMRC's requirements.
Your digital records must include:
- Rental income: All rent received, deposits retained for damages, and any other property-related income
- Allowable expenses: Repairs, maintenance, insurance, letting agent fees, professional fees, and other qualifying costs
- Property details: Addresses, tenancy dates, and occupancy information
The records must be kept digitally from the start of your accounting period. You cannot keep paper records during the year and digitise them later. Your software must preserve these records for at least five years after the 31 January submission deadline following the end of the relevant tax year.
If you have multiple properties, all rental income and expenses must be recorded in your MTD-compatible software, even if they generate different levels of income.
Quarterly Updates and Deadlines
You must submit quarterly updates to HMRC summarising your rental income and property expenses for each quarter. These updates are due within one month of each quarter end.
For landlords starting from 6 April 2026, your quarterly deadlines will typically fall on:
- 5 August (for the period to 5 July)
- 5 November (for the period to 5 October)
- 5 February (for the period to 5 January)
- 5 May (for the period to 5 April)
The quarterly updates are not tax calculations or payments. They are simply summaries of your property income and expenses for that period. You submit these updates directly through your MTD-compatible software, which connects to HMRC's systems.
Missing a quarterly deadline can result in penalties, so it's essential to maintain up-to-date records throughout each quarter rather than leaving everything until the deadline approaches.
Final Declaration and Year-End Submission
After the tax year ends on 5 April, you must submit a final declaration by 31 January of the following year. This final declaration replaces the traditional self assessment tax return for your property income.
The final declaration allows you to review all four quarterly updates, make any necessary adjustments, and confirm the figures are correct. You can adjust for any income or expenses that were incorrectly reported in your quarterly updates or account for items you weren't aware of during the year.
Your final declaration will also calculate your actual tax liability for your rental income. This is when you'll confirm the tax you owe and arrange payment to HMRC. The 31 January deadline aligns with the existing self assessment payment deadline, so the timing for tax payments remains unchanged from the current system.
If you have other income sources covered by MTD for Income Tax, such as self-employment income, your final declaration will incorporate all income streams into a single submission.
Eligibility, Thresholds and Exemptions
Making Tax Digital for Income Tax affects landlords based on their total qualifying income from self-employment and property. The rollout follows a phased approach with different thresholds determining when you must comply.
Income Thresholds and Relevant Dates
The £50,000 threshold applies from April 2026 for the first phase of Making Tax Digital. If your total gross income from self-employment and property exceeds this amount, you must comply with the new rules.
Your qualifying income includes gross rental income from UK and overseas properties, furnished holiday lettings, and any self-employment income. You calculate this before deducting expenses or allowances.
From April 2027, the threshold drops to £30,000. This second phase brings more landlords into the system. You must monitor your income annually to determine when compliance becomes mandatory.
Who Must Sign Up
You must register for Making Tax Digital if you're an individual landlord or sole trader whose qualifying income exceeds the relevant threshold. This applies whether you own one property or multiple properties.
Joint ownership requires careful consideration. Each joint owner calculates their share of the rental income separately. If your individual share exceeds the threshold, you must comply with Making Tax Digital requirements.
Landlords who also have self-employment income must combine both income streams when calculating their total qualifying income. Your PAYE employment income does not count towards the threshold.
Exemptions and Special Circumstances
Limited companies are not covered by Making Tax Digital for Income Tax. If you operate through a limited company, you continue filing company tax returns under existing rules. Real Estate Investment Trusts (REITs) also fall outside the scope.
MTD exemptions exist for those who cannot use digital tools due to age, disability, remoteness of location, or religious beliefs. You must apply to HMRC for an exemption and provide evidence supporting your claim.
Some landlords qualify for temporary exemptions during life events such as serious illness or bereavement. HMRC assesses these on a case-by-case basis. You should contact HMRC directly if you believe you qualify for an exemption based on special circumstances.
Setting Up Digital Records and MTD-Compatible Software
Landlords must select HMRC-recognised software and configure it to manage property income digitally. The software needs to handle digital bookkeeping, track expenses, and connect to bank accounts for automated transaction recording.
Choosing HMRC-Recognised Software
You need to select software from HMRC's approved list of MTD-compatible applications. The software must allow you to keep digital records, submit quarterly updates, and file your End of Period Statement digitally.
Popular options for landlords include Xero, FreeAgent for Landlords, and Landlord Studio. Each platform offers different pricing structures and features tailored to property income management. Some software providers offer free trials, allowing you to test functionality before committing.
You should verify that your chosen software appears on HMRC's official list of compatible tools. Not all accounting software meets MTD requirements, even if marketed as suitable for landlords. HMRC-recognised software must support digital links throughout your record-keeping process.
If your existing accounting system doesn't meet MTD standards, you can use bridging software. This connects your current bookkeeping tools to HMRC's systems for digital submissions.
Software Setup for Landlords
Your software configuration begins with creating separate records for each property income source. You must enter details for each rental property, including addresses, tenant information, and rental amounts.
Set up income categories for rent received, deposits, and any additional property-related income. Create expense categories that match your property business costs, such as repairs, maintenance, insurance, and letting agent fees.
You need to input your opening balances and any outstanding invoices or expenses from before your MTD start date. This ensures continuity in your records and accurate profit calculations.
Configure your tax year settings to align with HMRC's reporting periods. The software should generate quarterly update periods automatically based on your accounting period basis.
Digital Bookkeeping and Expense Management
Digital record-keeping requires you to record all property income and expenses using your MTD-compatible software. You must maintain these records digitally rather than on paper or spreadsheets.
Enter rental income as it's received, noting the property, tenant, and period covered. Record all allowable expenses with supporting documentation stored digitally within the software or linked systems.
Your expense management should include receipts captured through mobile apps or uploaded documents. Many HMRC-approved software options allow you to photograph receipts and attach them directly to expense entries.
You need to categorise transactions according to HMRC's property income rules. The software should distinguish between allowable revenue expenses and capital expenditure that requires different tax treatment.
Bank Feeds and Automation Features
Bank feeds connect your business bank account directly to your accounting software, automatically importing transactions. This eliminates manual data entry and reduces errors in your digital records.
You must set up a direct connection between your bank and HMRC-compatible software. Most major UK banks support open banking connections with accounting platforms.
Once activated, bank feeds import transactions daily or in real-time. You review and categorise each transaction, matching them to properties and expense types.
Automation features can apply rules to recurring transactions, such as monthly mortgage payments or regular maintenance contracts. The software learns from your categorisation patterns and suggests matches for similar future transactions.
How to Prepare for MTD Compliance and Ongoing Tax Responsibilities
Preparing for MTD for ITSA requires registering with HMRC, selecting appropriate software, and establishing systems to maintain digital tax reporting. Working with an accountant or agent can simplify the transition whilst understanding penalty structures helps you avoid compliance failures.
Signing Up and Early Adoption
You can sign up for MTD voluntarily before the mandatory date of April 2026, even if your rental income falls below the £50,000 threshold. Early sign-up allows you to familiarise yourself with digital tax reporting requirements and identify potential issues before compliance becomes compulsory.
To sign up, access your Government Gateway account and follow HMRC's registration process for MTD for Income Tax. You'll need to provide your Unique Taxpayer Reference (UTR) and confirm that you have compatible software in place.
Early adoption gives you time to test your chosen software, ensure your digital records meet HMRC requirements, and adjust your record-keeping practices without the pressure of an immediate deadline. HMRC provides guidance documents and toolkits specifically designed to help landlords prepare for the transition.
If you currently use MTD for VAT, some processes will feel familiar, though MTD for ITSA has distinct requirements around quarterly updates and final declarations.
Working with Accountants and Agents
An accountant or agent authorised to handle MTD submissions can manage your quarterly updates, maintain your digital records, and ensure your tax compliance. They access your tax information through their own MTD-compatible software after you grant them permission via your Government Gateway account.
Your agent can submit updates on your behalf, respond to HMRC correspondence, and advise on complex situations involving capital gains tax or multiple income sources. This arrangement proves particularly valuable if you manage multiple properties or lack confidence with digital systems.
Confirm that your accountant uses HMRC-recognised software and understands MTD for Income Tax requirements. They should explain how they'll collect information from you, when they need it, and how quarterly submissions differ from annual Self Assessment returns.
Even with an agent, you remain responsible for ensuring information accuracy and paying tax on time. Review submissions before your agent files them and maintain copies of all records.
Keeping Compliant and Avoiding Penalties
HMRC issues penalties for late submission of quarterly updates, late final declarations, and late payment of tax. Penalties for late quarterly updates start at £200 if you miss a single deadline, increasing for repeated failures.
Set reminders for your quarterly submission deadlines and final declaration due date. Most MTD-compatible software includes alert systems to notify you of approaching deadlines.
Keep your digital records updated throughout each quarter rather than rushing to compile information before submission dates. Regular record-keeping reduces errors and makes quarterly updates straightforward.
Monitor HMRC updates regarding MTD requirements, as guidance evolves and new features become available. HMRC publishes changes through official channels, agent updates, and direct communications to registered users.
Ensure you pay tax owed by the payment deadlines shown in your tax calculations. Missing payment deadlines triggers separate penalties and interest charges beyond those for late reporting.
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