Making Tax Digital for Landlords UK — What You Need to Know

Making Tax Digital (MTD) is coming for landlords. Here’s what changes, when, and how to prepare.

What is Making Tax Digital?

The Basics

Current System	Under MTD
Annual Self Assessment	Quarterly updates + final declaration
Paper records allowed	Digital records required
Submit once a year	Submit 5 times a year
Any recording method	MTD-compatible software only

Why the Change?

HMRC Goal	Impact
Reduce errors	Digital records more accurate
Real-time visibility	HMRC sees income quarterly
Closer to pay-as-you-go	Know tax liability sooner
Modernisation	Digital-first approach

MTD Timeline for Landlords

When Does It Start?

Income Threshold	Start Date
Over £50,000	April 2026
Over £30,000	April 2027
Under £30,000	TBC (likely later)

Which Income Counts?

Counts Toward Threshold	Doesn’t Count
Gross rental income	Employment income
Self-employment income	Pension income
Combined total	Dividend income

Example: £35,000 rental income + £20,000 self-employment = £55,000 → April 2026 start.

Who’s Affected?

You Must Use MTD If:

Situation	MTD Required?
Single buy-to-let, income >£50k gross	Yes (April 2026)
Multiple properties, income >£30k	Yes (April 2027)
Furnished holiday lettings	Yes
Property partnership	Yes
Limited company landlord	No (separate rules)

Exempt Situations

Situation	MTD Status
Property in limited company	Company tax rules apply
Income below threshold	Not yet required
Digitally excluded	Can apply for exemption

What Changes Under MTD

Record Keeping

Current	Under MTD
Paper records acceptable	Must be digital
Any format	Specific data required
Annual totals	Transaction-level detail
Keep for 5 years	Same - 5 years

What Records You Need

Category	Examples
Income	Rent received, dates, amounts
Expenses	Maintenance, insurance, agent fees
Property details	Address, ownership share
Mortgage interest	Amount paid (for tax relief calc)
Capital items	Furniture, appliances

Quarterly Submissions

Submission	Deadline
Q1 (Apr-Jun)	7 August
Q2 (Jul-Sep)	7 November
Q3 (Oct-Dec)	7 February
Q4 (Jan-Mar)	7 May
Final declaration	31 January (following year)

Software Requirements

What You Need

Requirement	Details
MTD-compatible software	HMRC-recognised
Digital records	In software or linked spreadsheet
Quarterly submission	Through software to HMRC
Final declaration	Annual summary

Software Options for Landlords

Software	From (per year)	Best For
HMRC app	Free	Very simple cases
Hammock	£10/month	Property-focused
Landlord Vision	£12/month	Multiple properties
FreeAgent	£19/month	Self-employed + property
QuickBooks	£12/month	General accounting
Xero	£15/month	Full accounts
Spreadsheet + bridging	£50-100/year	Excel lovers

Choosing Software

Factor	Consider
Number of properties	Some charge per property
Self-employment too?	Integrated may be better
Accountant use	They may recommend one
Features needed	Invoicing, reports, mobile
Cost	£100-400/year typical

What You’ll Submit

Quarterly Update Contents

Information	Details
Total income	Rent received this quarter
Total expenses	Allowable costs
By property	If multiple
Running totals	Year to date

Final Declaration

Information	Details
Annual totals	Full year figures
Adjustments	Any corrections
Other income	From other sources
Tax calculation	Software calculates
Payment due	Amount owed

Allowable Expenses for Landlords

What You Can Claim

Expense Category	Examples
Repairs and maintenance	Fixing boiler, decorating
Insurance	Buildings, contents, rent guarantee
Ground rent and service charges	Leasehold costs
Letting agent fees	Management percentage
Legal and accountancy	Tenancy agreements, accounts
Direct costs	Safety certificates, cleaning
Mortgage interest	20% tax reduction
Travel	Property visits

What You Can’t Claim

Not Allowable	Why
Mortgage capital	Not an expense
Improvements (usually)	Capital expenditure
Personal use	Not business expense
Initial purchase costs	Capital item

Mortgage Interest Relief

Current Rule	Relief
Mortgage interest paid	20% tax credit
Not a deduction	But reduces tax bill
Example: £5,000 interest	£1,000 tax reduction

Preparing for MTD

Now (Before April 2026)

Action	Purpose
Check your income threshold	Know your start date
Research software	Find what suits you
Start keeping digital records	Practice the system
Talk to your accountant	Plan the transition

6 Months Before Your Start Date

Action	Purpose
Choose software	Time to learn it
Set up digital records	Transfer existing data
Test submissions	Familiarise yourself
Establish processes	Monthly routine

Ongoing Under MTD

Frequency	Task
Per transaction	Record income and expenses
Monthly	Check records complete
Quarterly	Submit update to HMRC
Annually	Final declaration and pay tax

Record Keeping Tips

What Good Records Look Like

Element	Details
Date	When transaction occurred
Amount	Exact figure
Category	Type of income/expense
Property	Which property (if multiple)
Reference	Invoice, receipt number
VAT (if relevant)	VAT registered only

Organising by Property

Property	Track Separately
1 High Street	Income, expenses, mortgage
2 The Avenue	Income, expenses, mortgage
Totals	Combined for tax

Digital Evidence

Document	How to Store
Receipts	Photo/scan in software
Invoices	PDF attachment
Bank statements	Downloaded or linked
Contracts	Scanned copies

Working with Accountants

MTD Changes for Accountant Relationship

Aspect	Change
Record keeping	You do more digitally
Submissions	Can authorise accountant
Software	May need to share access
Frequency	Quarterly interaction
Costs	May increase initially

Questions for Your Accountant

Question	Why Ask
Which software do you recommend?	Compatibility
How will fees change?	Budget impact
What’s your MTD process?	Expectations
Can you do quarterly submissions?	Service offering

Common Concerns

“This Will Cost Me More”

Factor	Reality
Software costs	£100-300/year typically
Accountant fees	May increase
Your time	More regular input
Benefits	Better financial visibility

“I’m Not Good with Technology”

Option	Details
Use accountant	They handle submissions
Simple software	Designed for non-techies
Support	Most software has help
Exemption	Apply if genuinely unable

“I Only Have One Property”

Situation	Still Applies
One BTL, income >£50k	Yes, April 2026
One BTL, income >£30k	Yes, April 2027
One BTL, income <£30k	Not yet

Penalties Under MTD

Late Submission Penalties

Late By	Penalty
Up to 14 days	Warning
15-30 days	2% of tax
31+ days	4% of tax
Late payment	Interest charges

Points-Based System

Points	What Happens
1 point	Per late submission
Threshold reached (4 for quarterly)	£200 penalty
Points expire	After 24 months of compliance

Summary: MTD Action Plan

Timeframe	Action
Now	Calculate if income exceeds threshold
Now	Start keeping digital records
6 months before	Choose and set up software
3 months before	Practice with software
Go-live	Submit quarterly updates
Ongoing	Maintain digital records, submit on time

MTD requires more regular reporting but can improve your financial oversight of rental properties. Start preparing now to make the transition smooth.