Making Tax Digital for Landlords: What You Need to Do in 2026

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) went live on 6 April 2026. If your gross property income — combined with any self-employment income — exceeded £50,000 in the 2024/25 tax year, you are already in scope. The annual Self Assessment tax return you've been filing for years no longer applies to you. Quarterly digital reporting is now the law.

This guide explains who is affected now, who will be affected next, what you actually have to do, and the common mistakes that catch landlords out.

What Is Making Tax Digital for Income Tax?

MTD ITSA is HMRC's replacement for the annual Self Assessment system for higher-earning landlords and self-employed individuals. Instead of one annual tax return, you now:

1. Keep digital records of all income and expenses in MTD-compatible software throughout the year
2. Submit four quarterly updates to HMRC summarising your income and expenditure
3. File a Final Declaration by 31 January each year — broadly similar to today's tax return — confirming total income and claiming allowances

Critically, quarterly updates do not trigger tax payments. Payment dates remain unchanged. The updates are reporting obligations, not payment demands. HMRC is building a more accurate real-time picture of your tax position — not collecting tax four times a year.

Who Is Affected and When

MTD ITSA is being phased in by income threshold:

Qualifying income is gross — before expenses. This catches many landlords by surprise. If your rental receipts are £52,000 and your allowable expenses bring your taxable profit down to £25,000, you are still in scope from April 2026. HMRC uses gross receipts, not profit.

Combined income counts. Property income and self-employment income are added together. A landlord earning £30,000 in rent and £25,000 from self-employment is assessed at £55,000 in qualifying income — in scope from Phase 1.

Joint ownership: Each owner is assessed on their own share only, not the total rental income from the property. A jointly owned property generating £60,000 in rent means each owner has £30,000 in qualifying income — in scope from Phase 2, not Phase 1.

The Quarterly Reporting Deadlines

Once in scope, you must submit four quarterly updates per tax year. The standard quarterly periods and submission deadlines are:

Each update is a summary of income received and expenses incurred during the quarter. It does not need to be a full set of accounts — it's a structured summary submitted through your MTD software directly to HMRC's systems.

Soft landing for 2026/27: HMRC has confirmed a soft-landing period for the first year of MTD ITSA. Landlords who make genuine attempts to comply will not face penalties for minor errors during this transition. However, the obligation to file is not suspended — non-filing penalties still apply.

What You Need: MTD-Compatible Software

You cannot submit MTD ITSA updates through HMRC's online portal. You must use MTD-compatible software that connects directly to HMRC's systems. HMRC maintains a full list of approved software on GOV.UK.

Popular options for landlords include:

• QuickBooks — well-suited to landlords with multiple properties, strong categorisation
• Xero — popular with accountants, good for landlords who also have self-employment income
• FreeAgent — strong for sole traders and smaller portfolios
• Landlord-specific tools — platforms like Hammock and Landlord Studio are built for property income tracking and are MTD-compatible

Bridging software is available for landlords who prefer to continue using spreadsheets — this allows you to maintain records in Excel and use bridging software to format and submit to HMRC. It's a transitional solution and more friction than native MTD software, but it works.

Whatever software you choose, confirm it supports MTD ITSA for property income specifically — not just MTD for VAT, which is a different obligation.

What Records You Must Keep Digitally

MTD ITSA requires every transaction to be recorded digitally. Each record must capture:

• Date of the income or expense
• Amount
• Category (the prescribed income/expense categories HMRC uses)

Paper receipts, bank statements, and shoebox accounting are no longer compliant for landlords in scope. Every entry must be in your MTD software.

Allowable expense categories for landlords include:

• Letting agent fees and management charges
• Mortgage interest (subject to Section 24 restrictions for individuals)
• Maintenance and repairs
• Insurance premiums
• Ground rent and service charges
• Professional fees (accountancy, legal)
• Advertising costs

Expenses that cannot be deducted (capital expenditure on improvements, personal costs) must be correctly categorised — MTD software typically includes guidance on this.

Common Mistakes to Avoid

1. Confusing gross income with profit for the threshold The £50,000 threshold applies to gross rental receipts, not net profit. Many landlords who believe they're below the threshold are actually in scope once gross rents are calculated correctly.

2. Forgetting to combine income sources If you are self-employed as well as a landlord, both income streams count toward your threshold. Check your combined 2024/25 gross figures now.

3. Waiting to set up software MTD-compatible software should be set up and operational before the start of the tax year you're in scope for. Trying to reconstruct a full year's records retroactively in April or January is painful. If you're in Phase 1 (April 2026), your software should already be live.

4. Assuming your accountant is handling it automatically Your accountant cannot file MTD updates on your behalf without your digital records being in place. MTD is a record-keeping obligation on you, not just a filing obligation on your accountant. Speak to your accountant now if you haven't already.

5. Missing a quarterly deadline Each missed quarterly update carries a penalty point. Accumulate four penalty points and a £200 penalty is triggered. Points reset after a compliance period. Unlike the old Self Assessment regime, there is no single annual deadline to miss — there are now four per year.

Does MTD Affect Limited Company Landlords?

No. MTD ITSA applies to individual (sole trader) landlords filing under Self Assessment. Limited companies file Corporation Tax returns through a separate process, which is not subject to MTD ITSA.

This is one of the administrative advantages of the limited company SPV structure — the company files annual accounts and a Corporation Tax return through standard channels, not through the MTD regime.

If you're considering incorporation partly to avoid MTD, it's a secondary benefit at best. The tax efficiency arguments (Section 24) are more significant. But it is a genuine administrative advantage for landlords who find the quarterly reporting burden onerous.

What MTD Means for New BTL Investors

If you're planning to acquire your first or next buy-to-let property, factor MTD into your planning:

• If your gross rental income will exceed £50,000 across your portfolio, you'll be in the MTD system immediately or within the next phase
• Set up MTD-compatible software before your first purchase — building good record-keeping habits from the start is far easier than retrofitting them later
• Budget for accountancy costs — an accountant who understands MTD ITSA for property income is now a necessary business cost, not an optional extra

The administrative overhead of BTL has increased materially in 2026 — Renters' Rights Act compliance, MTD, EPC requirements. The investors who treat this as a business and invest in proper systems will be better positioned than those who try to manage it informally.

Your MTD Checklist

• Check your qualifying income for 2024/25 (gross property receipts + self-employment income)
• Confirm which phase applies to you (April 2026, 2027, or 2028)
• Select and set up MTD-compatible software
• Register for MTD ITSA on HMRC's website using your Government Gateway credentials
• Begin recording all income and expenses digitally from the start of your in-scope tax year
• Set reminders for the four quarterly submission deadlines
• Speak to your accountant — confirm they are set up for MTD ITSA property income

This article is for general information only and does not constitute tax advice. Qualifying income thresholds and deadlines are based on current HMRC guidance and may be subject to change. Always consult a qualified accountant for advice specific to your circumstances.

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