Making Tax Digital (MTD) is reshaping the UK tax system and represents a significant change for landlords who are used to reporting their rental income through the annual Self Assessment process.
The government’s aim is to modernise tax reporting, reduce errors and give HMRC a more up-to-date picture of taxpayers’ affairs.
For landlords, this means moving away from once-a-year reporting towards ongoing digital record keeping and more frequent submissions. With implementation dates now confirmed, understanding what is changing and how to prepare has become increasingly important.
From April 2026, MTD for Income Tax will apply to landlords and sole traders whose combined gross income from self-employment and property exceeds £50,000. This figure is based on qualifying income, meaning total income before expenses rather than profit. The scope of MTD will widen quickly after this initial rollout, with the threshold falling to £30,000 from April 2027 and to £20,000 from April 2028. As a result, many landlords who currently consider themselves relatively small or straightforward in tax terms are likely to be brought into the regime over the next few years. The relevant income figure is taken from the most recent submitted Self Assessment return, allowing landlords to assess now when MTD will apply to them.
Digital records and quarterly reporting
One of the more significant changes under MTD is the requirement to keep digital records. Landlords will no longer be able to rely on paper files or informal spreadsheets that are updated annually. Instead, income and expenses must be recorded digitally using MTD-compatible software that can maintain records, make corrections and submit information directly to HMRC. While spreadsheets can still be used in some cases, they generally need to be linked to bridging software to meet HMRC’s requirements. Although accountants or agents can manage this process on a landlord’s behalf, responsibility for accurate digital records ultimately remains with the taxpayer.
Alongside digital record keeping comes a new reporting timetable. Rather than submitting a single tax return after the end of the tax year, landlords will be required to submit quarterly updates summarising income and allowable expenses for each three-month period. These updates do not calculate tax due or trigger payments, but they give HMRC a more regular view of a landlord’s tax position. At the end of the tax year, a final declaration will be submitted confirming all income sources and reliefs, replacing the traditional Self Assessment return. The final declaration will still be due by 31 January following the end of the tax year, meaning payment deadlines remain familiar even though reporting becomes more frequent.
Exemptions
While Making Tax Digital will apply to most landlords over time, there are several important exemptions that landlords should understand. The most straightforward exemption is income-based. Landlords whose qualifying income falls below the relevant MTD threshold are not required to join the regime. For the 2026/27 tax year, this means landlords with combined gross income from property and self-employment of £50,000 or less will remain outside MTD. This exemption will narrow in future years as the threshold reduces to £30,000 from April 2027 and £20,000 from April 2028. Landlords should be aware that it is gross income, not profit, that determines whether they fall within scope.
It is also important to note that once a landlord is mandated into MTD because their income exceeds the threshold, they will generally remain within the system even if their income later fluctuates, unless it falls below the threshold for a sustained period and HMRC agrees they can leave the regime. This makes monitoring income levels and planning ahead particularly important for landlords whose rental income sits close to the thresholds.
In addition to income-based exemptions, HMRC has confirmed that limited digital exclusion exemptions will be available. These apply where a landlord cannot reasonably use digital tools due to age, disability, long-term health conditions or a lack of reliable internet access in their area. Digital exclusion exemptions are not automatic and must be applied for, with HMRC reviewing each case individually. Preference, lack of confidence or unfamiliarity with technology alone will not usually be sufficient grounds for exemption.
Certain types of taxpayers are also currently outside the scope of MTD for Income Tax, including trusts, estates and partnerships that include a corporate partner. While these exclusions do not apply to most individual landlords, the scope of MTD is expected to expand further in future, so affected taxpayers should continue to monitor developments.
How landlords can prepare and get support
For many landlords, particularly those with multiple properties or additional income sources, MTD represents a notable increase in administrative workload. Professional bookkeeping services can play a valuable role in managing this transition. Regular bookkeeping ensures rental income and expenses are recorded accurately throughout the year, making quarterly submissions far less time-consuming. It can also help ensure expenses are correctly categorised, reducing the risk of errors, missed deductions or HMRC queries. For landlords who are not confident using digital software or who prefer to focus on managing their properties, outsourcing bookkeeping can provide reassurance and help maintain ongoing compliance.
Despite the scale of the change, awareness of MTD among landlords remains relatively low, and many have yet to take practical steps towards preparation. HMRC has confirmed that exemptions for digital exclusion will be limited and granted only in specific circumstances, as mentioned earlier. Most landlords should therefore assume they will need to adapt their processes rather than rely on exemptions.
In the long term, MTD does not change how rental profits are taxed, but it fundamentally alters how and when information is reported to HMRC. As thresholds reduce and more landlords fall within scope, digital tax compliance will become a routine part of running a property business. Those who prepare early, adopt suitable systems and consider support such as bookkeeping services will be best placed to manage the changes smoothly and avoid unnecessary pressure as the new rules take effect.
If you’re unsure how MTD will impact your property portfolio, get in touch today. We’d be more than happy to offer any guidance or support you need.
