Under the new system, rental income and expenses need to be recorded digitally as they arise. You then send HMRC four quarterly updates before completing a final declaration at the end of the year, bringing together reliefs, adjustments and your other taxable income. The amount of tax you pay does not change because of MTD. What changes is how often you report your figures and how those records are maintained.
The income threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Multiple properties, jointly owned property and former furnished holiday lets all sit within the framework, although the mechanics differ depending on how the property is owned and where the income comes from. Furnished holiday letting income has been treated as standard property income since 6 April 2025, following the abolition of the FHL regime under Finance Act 2024.
Key Takeaways
- MTD for Income Tax has applied since April 2026 to landlords with £50,000 or more of gross property and self-employment income, with the threshold falling to £30,000 in April 2027 and £20,000 in April 2028.
- The threshold is based on gross receipts before expenses. So if you receive £55,000 in rent and have £20,000 of allowable costs, you are still above the threshold.
- Instead of relying on one annual Self Assessment return, landlords in scope submit four quarterly updates and a year-end final declaration. The deadlines are covered below.
- HMRC is not applying late-submission penalty points to quarterly updates during the first year of mandation, 2026-27. Digital records and the final declaration are still required.
What Is Making Tax Digital and Why It Matters for Landlords
Making Tax Digital for Income Tax does not change how rental profit itself is taxed. The practical difference comes down to timing: landlords above the relevant threshold report information as the year goes on, rather than dealing with everything in one annual exercise at the end.
For many landlords, the bigger adjustment will be record keeping.
Paper receipts on their own no longer meet the requirement. Income and expenses need to form part of a digital record as you go, which means getting the bookkeeping process right becomes much more important than it was under a once-a-year filing routine.
The rollout follows the approach already used for MTD for VAT, which became compulsory for all VAT-registered businesses regardless of turnover from April 2022. Each stage of MTD for Income Tax brings smaller landlords into scope.
Do You Need to Register for Making Tax Digital?
The starting point is your gross rental income, not your profit. Costs are not deducted before HMRC tests whether you are over the threshold.
The Income Threshold That Triggers MTD
Property income and self-employment income are added together when determining whether MTD applies.
If you receive £35,000 in rent and another £20,000 from freelance work, your combined qualifying income is £55,000. That puts you above the £50,000 threshold.
HMRC looks at the tax year two years before the year in which you become mandated. For April 2026, that means using the qualifying income reported on your 2024-25 tax return.
Gross income also means the amount before letting-agent commission is deducted. If an agent collects £2,000 a month and passes £1,800 to you after taking a 10% commission, the figure used for the threshold is still £24,000 a year. The commission is dealt with separately as an expense.
The £1,000 property allowance works in a similar way. It may reduce taxable profit, but it does not reduce the gross-income figure used to decide whether you fall within MTD.
Who Is Exempt From Making Tax Digital?
Landlords who hold property through a limited company are outside MTD for Income Tax because the company pays Corporation Tax instead.
For individuals, the routes outside MTD are much narrower. You may remain below the relevant income threshold, or you may qualify for a specific exemption from HMRC. Incorporating a property business is another possibility in principle, but it brings its own tax consequences and is rarely something we would suggest doing purely to avoid MTD.
HMRC can grant an exemption where using digital tools is genuinely not practical because of age, disability, location or religious belief. Certain other categories are also exempt, including some non-resident trustees and people without a National Insurance number.
Applications are made directly to HMRC. Until HMRC confirms the exemption, your MTD obligations continue.
How to Register and Get Started
Being registered for Self Assessment does not automatically put you into Making Tax Digital. You still need to complete the MTD sign-up process.
Before you begin:
- Check that you already have a Self Assessment record and have filed a return within the previous two years.
- Have your National Insurance number, Unique Taxpayer Reference, Government Gateway user ID and photo identification ready.
- Verify your identity through GOV.UK One Login.
- Choose HMRC-recognised software, as MTD submissions cannot be filed without compatible software.
- Sign up before your first quarterly deadline, which falls on the 7th of the month after the end of your first quarter.
An accountant can handle the registration and filing process through their Agent Services Account, HMRC's online service for authorised agents. If you would rather not deal with the software setup and submission process yourself, that is often the simpler route.
Qualifying income includes UK and overseas property income, Rent a Room receipts and lease premiums. PAYE employment income, pensions, dividends and capital gains are excluded from the threshold calculation.
Tenancy deposits are also excluded while you are simply holding them. They only become income if you retain some or all of the deposit at the end of the tenancy.
Record Keeping Requirements
This is where Making Tax Digital is likely to change landlords' working habits most noticeably.
Records need to originate digitally. Writing rental income in a notebook and then entering the figures into software three months later does not meet the requirement, even if the final totals happen to be correct.
That does not necessarily mean abandoning spreadsheets.
Bridging software allows landlords who already keep reliable spreadsheets to continue using them while creating the required digital link between their records and HMRC. The figures pass from the spreadsheet into the submission process without being manually retyped.
Records should be kept for five years after the 31 January submission deadline for the relevant tax year.
It is also worth categorising expenses as they arise. Leaving it all to sort out at year end just creates more work later. Repairs, letting-agent fees, insurance, service charges and ground rent should be recorded in the appropriate categories, while mortgage interest and other finance costs need to be kept separately.
Finance cost relief has operated as a 20% basic-rate tax reduction since April 2020, regardless of your overall Income Tax rate.
Quarterly Updates and Reporting Deadlines
The standard quarterly periods are:
- 6 April to 5 July, with the update due 7 August.
- 6 July to 5 October, due 7 November.
- 6 October to 5 January, due 7 February.
- 6 January to 5 April, due 7 May.
Landlords can choose calendar quarters instead if that fits their bookkeeping routine better.
The final declaration is due by 31 January, which keeps the familiar Self Assessment year-end deadline.
Quarterly updates are cumulative. In other words, each submission shows the position for the year to date rather than reporting that quarter in isolation. If you spot an error from an earlier update, it can generally be corrected in a later one.
The quarterly submissions themselves are summaries. HMRC receives category totals for income and expenses, not a copy of every individual receipt, and treats those figures as provisional.
The final declaration goes further. It brings together the wider tax picture, including property income alongside employment income, pensions, dividends and savings interest.
You can also update more frequently than every quarter. Some landlords choose to keep everything up to date monthly when rents are received. That can make the year-end work considerably easier and spreads the administration more evenly across the year.
Penalties for Missing Deadlines
The MTD penalty system uses points for missed submission deadlines.
A missed submission creates one penalty point. For quarterly submissions, the penalty threshold is four points. Reaching that threshold results in a £200 fixed penalty, followed by a further £200 penalty for each additional missed deadline while the threshold continues to apply.
Penalty points can expire once you have maintained the required period of on-time submissions.
Late payment penalties are dealt with separately. From April 2025, the charge is 3% of tax unpaid at day 15, a further 3% at day 30, and then an annual rate of 10% accruing daily from day 31.
If you agree a Time to Pay arrangement with HMRC, those late-payment penalties stop escalating, although interest continues to run.
Poor record keeping can also carry its own consequences, with penalties of up to £3,000 for a tax year.
Software and Working With an Accountant
There is no HMRC web portal where landlords can simply type in their MTD figures.
Everyone within Making Tax Digital for Income Tax needs compatible third-party software from HMRC's recognised list because submissions are sent electronically through an application programming interface, or API.
The right software depends on how you already manage your property finances.
Landlord-focused platforms such as Hammock and Landlord Studio allow income and expenses to be tracked property by property, which can be useful for larger portfolios. General accounting packages such as QuickBooks and Xero may make more sense if you also run a business and want the bookkeeping in one system.
For landlords who already maintain a spreadsheet they trust, bridging software can be a straightforward way to keep that existing setup while still making compliant submissions.
At Brookwood, we normally start with the way you already work. We don't assume everyone needs the same package. The point is to choose a system you will actually keep up to date, because good software is not much help if the records only get touched once every three months.
An accountant can also register you for MTD and submit the quarterly updates on your behalf. The legal responsibility for the accuracy of the figures remains with you, even where an accountant handles the administration.
There is usually a trade-off between cost and involvement. Managing the software and submissions yourself can keep professional fees down but requires more of your time. Having an accountant handle more of the process costs more, but removes much of the ongoing administration.
Our team works with landlord clients on exactly this kind of question, helping people understand what the rules mean in practice and what needs to happen next.
Furnished Holiday Lets, Multiple Properties and Joint Ownership
The furnished holiday lettings regime ended on 6 April 2025. Former FHL income is now treated in the same way as other property income, so a cottage rented by the week and a flat let on an assured shorthold tenancy both sit within the same UK property business.
The more complicated area is often what came across from the old regime. Carried-forward losses and allowances can still affect the position, and this is one of those areas where getting the treatment right matters more than trying to make an educated guess.
HMRC generally treats all UK rental properties owned by the same person as one property business. That means a single set of quarterly updates covers the whole UK portfolio, regardless of how many properties you own.
Foreign property income is treated separately and requires its own updates.
Jointly owned property works differently again because each owner has their own Making Tax Digital obligations. Whether someone is in scope depends on their own share of the rental income, and each owner files separately even where there is only one property.
For married couples and civil partners, rental income is normally split 50/50 unless a Form 17 election has been made. Form 17 is the declaration used to tell HMRC that a jointly owned property is beneficially owned in different proportions.
Getting Your MTD Obligations Right
Making Tax Digital changes the rhythm of property bookkeeping far more than it changes the underlying tax. Landlords who are likely to find the transition easiest are those who sort out their digital record keeping before their mandation date. Trying to rebuild a year's records once the first deadline arrives is much harder.
At Brookwood, we are already helping landlord and property clients prepare for MTD, from working out whether and when the rules apply to choosing suitable software and dealing with quarterly updates and the final declaration.
If you are not sure whether you fall within Making Tax Digital for Income Tax, or you would rather have someone manage the reporting with you, speak to us and we can work through your position.
← Back to blog