Making Tax Digital for Income Tax: what landlords need to know
Making Tax Digital (MTD) for Income Tax is HMRC’s move towards a more digital way of keeping records and reporting Income Tax.
For landlords who currently file a Self-Assessment tax return once a year, the big shift is moving from annual reporting to digital records and more regular updates.
What is Making Tax Digital for Income Tax?
MTD for Income Tax is part of the government’s wider plan to modernise the tax system and reduce errors. In practical terms, it means using HMRC-recognised software to keep records and send updates to HMRC, rather than relying on paper files and a once-a-year submission.
What’s changing
If MTD for Income Tax applies to you, you’ll need to:
- Keep digital records of your rental income and allowable expenses.
- Submit quarterly updates (summaries) to HMRC using compatible software.
- Complete a Final Declaration / end-of-year submission to confirm your figures for the year and include other relevant income and adjustments.
Who needs to comply - and when?
Whether you must follow MTD for Income Tax depends on your qualifying income (based on turnover/gross income), and it’s being introduced in phases.
The rollout timeline
- From April 2026: Landlords and sole traders with a turnover of £50,000 or more.
- From April 2027: The threshold reduces to include Landlords and sole traders with a turnover of £30,000 and above
- From April 2028: The threshold reduces to include Landlords and sole traders with a turnover of £20,000 and above.
If your rental income falls below £20,000, you’ll continue to use self-assessment for now, but it’s worth preparing early.
What “qualifying income” means (and why it’s based on turnover/gross income)
This catches people out, so it’s worth spelling out: the threshold is based on gross income/turnover, not profit (so it’s before you deduct expenses).
If you have both rental income and self-employment income, HMRC looks at them together when working out whether you’re over the threshold.
How Making Tax Digital works for landlords
Once you’re in scope, the day-to-day impact is mainly about how you record information and how often you submit updates.
Digital record keeping: what you’ll need to do
You’ll need a system that keeps your records digitally, including:
- Your rental income
- Your expense categories (for example, repairs, insurance, letting agent fees, and so on)
- Supporting information like receipts and invoices (stored electronically)
Which income streams are included?
MTD for Income Tax doesn’t apply to every type of income you might have, it mainly targets self-employment and property income.
Included income
MTD for Income Tax applies to:
- Rental income (including income from jointly owned properties)
- Self-employment income
Not included income
The rules don’t treat these as part of MTD for Income Tax reporting:
- PAYE income and pensions
- Dividends and savings interest
- Rental income earned through a limited company (because that’s taxed differently)
How to prepare for Making Tax Digital
The important message to all landlords is to make sure you are prepared. Here are our tips on what you can do to get ready for these changes.
Step 1: Get compatible software
Choose HMRC-recognised software for digital record-keeping and submissions. This is a critical first step to ensure compliance. If you’re unsure which software to use, consult HMRC’s guidance or your accountant.
Step 2: Understand the rules
Make sure you’re clear on:
- What counts as qualifying income (gross, not profit)
- How you’ll categorise income and expenses
- What’s included in quarterly updates vs what’s saved for the year-end declaration
Step 3: Adjust your routine
Switching from annual to quarterly submissions means updating your records more frequently. Set aside time regularly to manage your accounts and ensure all data is accurate and up to date.
Step 4: Get support if you need it
If you’re unfamiliar with digital tax reporting or cloud-based accounting, consider hiring an accountant. Look for specialists experienced in working with landlords to make the transition smoother.
Step 5: Consider signing up early (if you’re eligible)
HMRC has supported voluntary participation for some taxpayers, which can be a useful way to practise the new process before it becomes mandatory for you.
