Making Tax Digital for Landlords: What It Means, Who It Affects, and How to Prepare
If you’re a landlord and you haven’t heard of Making Tax Digital, or if you’ve been thinking ‘I know it’s coming, I’ll get round to reading up on it eventually’… well, here’s your friendly wake-up call…
Whether you’ve got a single buy-to-let or a large portfolio, the way you manage and report your rental income is changing… and for some landlords, that change is coming in less than a year!
But although it’s going to be a change to the status quo, there’s no need for pain or panic.
In today’s blog we break down what Making Tax Digital (MTD) means, what the timeline looks like for different landlords, and what you need to do to prepare – without the jargon!
What is Making Tax Digital (MTD)?
In a nutshell, Making Tax Digital is HMRC’s plan to digitise the UK’s tax system. The goal is to make tax reporting easier, more accurate, and (eventually) entirely paperless.
Instead of filing one big tax return at the end of the year, landlords and other self-assessment taxpayers will submit quarterly digital updates to HMRC using MTD-compatible software. You’ll also need to keep digital records of income and expenses, ideally using proper accounting software.
HMRC’s view is that small, regular reporting is better than one annual rush. For landlords, it means a shift from the old “one deadline, lots of receipts in a shoebox” model to something more proactive.
Who does MTD apply to?
OK, let’s get specific – because not everyone is going to be affected, and for those that are, not everyone is affected right away.
For a start, this is really a change for Sole Trader landlords, rather than those who are letting out as limited companies.
For those sole trader landlords, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is the part that you need to pay attention to.
It will affect UK landlords of residential or commercial property, or furnished holiday lets. Of those, here's who will be affected by MTD:
- Landlords Earning over £50,000 in gross income (not profit!) per year will be required to follow MTD rules from April 2026.
- For those whose gross income is between £30,000 and £50,000, the start date is April 2027.
- For those whose gross income is over £20,000 but less than £30,000 (most sole trader Landlords), the start date is April 2028.
- Earning less than £20,000? You’re off the hook for now, but HMRC is still consulting on when (or if) these smaller landlords will be included in future phases.
📌 Important to note: If you earn income from multiple sources (e.g., self-employment and property), those figures are combined when calculating your total income for MTD thresholds.
📌 But Remember: income is assessed individually, so landlords who co-own a rental property will only declare their share of the gross income (i.e. if they own 50% of the property, they earn (and declare) 50% of the rent amount as their gross income – and hence most will fall into the lower threshold bracket, and many currently under).
What does MTD mean for landlords in practice?
Here’s the bottom line: once MTD kicks in for you, you’ll need to do your tax reporting digitally, four times a year – i.e. once a quarter, within a month of the quarter end, as well as a final annual declaration.
That means:
- Keeping digital records of all rental income and expenses
- Using MTD-compatible software (Excel with a bridging tool can work, but accounting software is better – and especially for any landlord with more than one or two rental properties)
- Submitting quarterly updates to HMRC
- Filing an annual final declaration (like your current tax return, but with most of the heavy lifting already done)
The tax itself you will still pay tax annually, as normal; it is just bringing in more regular reporting throughout the year.
What qualifies as MTD-compatible software?
HMRC doesn’t mandate a specific brand, but your chosen software must be able to:
- Record income and expenditure digitally
- Link directly to HMRC to submit your updates
- Maintain digital records in line with MTD rules
Popular options include:
For those letting out property, a Landlord specific MTD reporting tool to consider is ‘Hammock’, which is being recommended by some well known figures in the industry.
As mentioned, for smaller landlords with simpler setups, Excel can still be used, but you’ll need special bridging software to make it compliant.
What about my letting agent? Can they manage MTD on my behalf?
If you work with a letting agent who offers property management, they may already use accounting software and can manage digital record-keeping on your behalf. Here at Your Home Managed for example, we use Focus Micro Systems Rent + to record-keep for our South London Landlords.
However, even if your agent record keeps, and however they do it for you, you will still be personally responsible for submitting returns unless you've authorised an accountant or bookkeeper to act on your behalf with HMRC. It’s worth having a conversation with your agent or accountant now to clarify who’s doing what.
What are the benefits of MTD for landlords?
We get it; new systems and more admin never sounds encouraging. But once you’re set up and have got yourself through that learning stage, there are real advantages:
- Better financial visibility – Quarterly reporting encourages you to stay on top of your finances, not just once a year.
- Fewer mistakes – Automation reduces human error and missed deductions.
- Less stress at tax return time – Most of the work is done throughout the year.
- More sustainable and modern – A fully digital system is more future-proof and better for the environment than piles of paper and printer ink.
What if I don’t comply?
After whatever date MTD becomes mandatory for you, depending on your threshold, failing to comply could result in:
- Penalties for late submissions
- Fines for failing to keep proper digital records
- In some cases, additional scrutiny or investigations
It’s not optional once you meet the income threshold, and therefore getting familiar early can save a lot of stress later.
How can landlords prepare now?
Even though MTD for landlords doesn’t start until at least next April, the time to prepare is now. Here’s what to do:
- Check your income: Is your total gross income over £20,000, £30,000 or £50,000? Get it worked out to work out your MTD start date (remembering that other self-employed income will contribute to it).
- Start using digital records: Even if you’re not required to yet, it’s a good idea to get into practise. Transition from paper to software if still using paper record keeping.
- Choose your software: Look into tools that suit your portfolio size and complexity. As mentioned, Hammock seems particularly good, set up as it is specifically for landlords.
- Speak to your agent or accountant: Ask what support they offer for MTD and clarify who’s doing what.
- Keep personal and property finances separate: Having a dedicated bank account for your rental income and expenses will make MTD compliance (and life in general) much easier, especially as your software will link to your bank account.
- Stay informed: HMRC is still tweaking the rollout, so staying in the loop will help you adapt quickly.
Final thoughts: It’s not as scary as it sounds
Change is never fun, especially when it comes to anything with an acronym! And more especially still, when deadline, tax and HMRC is involved.
But MTD doesn’t have to be overwhelming.
In fact, it’s a chance for landlords to modernise how they manage their properties. With the right tools and advice, most landlords will find it’s actually simpler and more efficient than the old system.
And the best part? By getting ahead of the game now, you can avoid the last-minute scramble, save yourself time and stress, and maybe even boost your bottom line.
Need help navigating MTD?
Whether you’re a hands-on landlord or prefer a fully managed service, it’s worth speaking to your letting agent or accountant now to get a plan in place.
Making Tax Digital is coming. But with the right preparation, it could become the easiest change of all, and one that works in your favour long term, saving you time and accountant expenses.
| 📌 TL;DR: Making Tax Digital for Landlords (MTD)
• MTD for landlords begins in April 2026 for those earning over £50,000 in gross income. • Quarterly digital submissions will replace annual paper returns. • Software like Xero, QuickBooks, FreeAgent, Sage, and Hammock is required. • Limited companies are excluded—MTD applies to sole trader landlords. • Start preparing now: get digital, choose your software, and clarify roles with your accountant or agent. • Penalties apply for non-compliance once MTD is mandatory. |
