Making Tax Digital for Landlords

Making Tax Digital for Income Tax (MTD for ITSA) changes how landlords report rental income to HMRC. Instead of one Self Assessment return a year, you keep digital records and submit updates roughly every quarter through compatible software, followed by a final declaration for the year. It is being phased in by income threshold, and the first wave of landlords is already in it: if your qualifying income was over £50,000 in the 2024-25 tax year, you should have started using it from 6 April 2026.

This guide covers who is in scope, the rollout timeline, what a quarterly update actually involves, the software requirement, and what to do now if your threshold is coming but has not arrived yet.

Who is in scope

MTD for ITSA applies to sole traders and landlords registered for Self Assessment whose total qualifying income from self-employment and property, combined and before expenses, exceeds the relevant threshold for the tax year being tested. Qualifying income is your gross income, not profit, so a landlord with a high turnover and high costs can still be well within scope even with a modest actual profit.

The rules look at your income for a specific earlier tax year to decide whether you are mandated from a specific future date, so there is always a run-up period once your income crosses a threshold, not an immediate switch the moment your rent increases. If you are close to a threshold, it is worth checking your position each year rather than assuming last year's answer still holds.

Landlords below the current threshold can still sign up voluntarily, and some do so to get used to quarterly reporting before it becomes compulsory, or because they are already keeping digital records through accounting software and quarterly updates add little extra work.

A worked example. Say you own two rental properties with combined annual rent of £42,000, and you also do a small amount of self-employed consulting bringing in £9,000 a year before expenses. Your qualifying income for MTD purposes is the combined gross figure, £51,000, not your profit after mortgage interest, letting agent fees and other costs. Even if your actual taxable profit across both activities is much lower once expenses are deducted, the £51,000 gross figure is what is tested against the £50,000 threshold, which means this landlord was mandated into MTD for ITSA from 6 April 2026 despite a comparatively modest real profit.

This gross-income test is the detail that catches landlords out most often. Two landlords with identical actual profit can land on opposite sides of a threshold purely because one has higher costs against similar rent, since costs are irrelevant to the qualifying income test itself.

Timeline

The rollout happens in three stages, each based on qualifying income for a specific earlier tax year:

• From 6 April 2026: mandatory if your qualifying income for the 2024-25 tax year was over £50,000. This wave is already live.
• From 6 April 2027: mandatory if your qualifying income for the 2025-26 tax year is over £30,000.
• From 6 April 2028: mandatory if your qualifying income for the 2026-27 tax year is over £20,000.

Each threshold is measured against a specific earlier year's income, so it is worth working out your likely qualifying income for the relevant reference year in good time, rather than waiting for a letter from HMRC to arrive close to the deadline. Landlords with more than one property, or with a property portfolio plus other self-employment income, often reach these thresholds sooner than they expect once income is measured on a gross basis.

Quarterly updates

Once you are in MTD for ITSA, you send HMRC a summary of income and expenses roughly every three months through your software, rather than filing everything in one annual return. These quarterly updates are cumulative running totals, not a full tax calculation, and you can correct figures in a later update if an earlier one needs adjusting.

At the end of the tax year, you still need to submit a final declaration, which is where reliefs, allowances and any adjustments not captured in the quarterly figures are applied to arrive at your actual tax bill. In other words, MTD does not replace the annual reconciliation, it adds more frequent reporting on top of it, and shifts record keeping from an annual task to an ongoing one.

The practical effect on most landlords is less about the tax calculation itself, which still follows the same rules covered in our tax on rental income guide, and more about timing and habit. You cannot leave categorising a year of transactions until January anymore, because the first quarterly deadline arrives roughly three months after your accounting period starts, whether your records are ready or not. Missing a quarterly update, or submitting one that is clearly wrong, can attract penalties under HMRC's points-based system for late or inaccurate submissions, in the same way persistent lateness under the old annual system could.

Software requirements

You cannot submit MTD for ITSA updates through the old Self Assessment online portal for a return that includes property or business income once you are in scope; you need software that is compatible with HMRC's Making Tax Digital service, either a dedicated accounting package or bridging software that can take data from a spreadsheet and submit it in the right format.

This is the point where landlords who have relied on a spreadsheet for years often decide it is time to move to proper software, since a spreadsheet on its own is not compatible without a bridging tool layered on top, and quarterly submission errors are harder to spot and fix than an annual one. Bridging software can be a sensible short-term bridge if you already have a spreadsheet system you trust, but most landlords find that once they are updating figures every quarter rather than once a year, dedicated software with a bank feed pays for itself in time saved fairly quickly. Our landlord accounting software guide covers what to look for specifically for MTD readiness, and our landlord allowable expenses guide is a useful companion for making sure what you are recording each quarter is actually correct.

It is also worth checking whether your existing accountant offers MTD support as part of their fee or as an add-on, since some firms will handle quarterly submissions on your behalf if you give them access to compatible software, while others expect you to submit directly and only get involved at the final declaration stage. Knowing which model your accountant works to avoids a surprise gap where neither of you thinks the quarterly submission is being handled.

Preparing now

Whether or not your threshold has arrived yet, the practical preparation is the same:

• Move to digital record keeping now rather than waiting for the deadline, so the transition to quarterly updates is a change of frequency, not a change of method learned under time pressure.
• Separate rental banking from personal banking if you have not already, since clean transaction data is the foundation of accurate quarterly figures.
• Categorise income and expenses by property as they happen, which is exactly the discipline MTD assumes and rewards.
• Talk to your accountant about which software they support, since many firms have a preferred platform they can connect to directly, which can reduce both your admin and their fee.
• Check your likely qualifying income against the next threshold down, even if you are comfortably below the current one, so you are not surprised when the £30,000 or £20,000 wave arrives.

Landlords who treat this as a gradual shift in habits, starting well before their mandate date, generally find the actual transition to quarterly reporting uneventful. Landlords who leave it until a letter from HMRC arrives tend to find the first couple of quarters genuinely stressful.

How Property HQ helps

Property HQ connects to your bank accounts via Open Banking, categorises transactions by property as they clear, and keeps digital records in the format Making Tax Digital expects, so quarterly updates are a review and submit step rather than a data entry exercise every three months.

Disclaimer

This guide is general information for UK landlords, not legal, tax or mortgage advice. Check GOV.UK, HMRC or a qualified adviser for your situation.