Making tax digital for landlords: Complete guide

What landlords need to know now

The UK tax system is undergoing its most significant change in a generation. Annual paper returns are being replaced with a fully digital system that will affect every landlord earning rental income.

For landlords, Making Tax Digital (MTD for Income Tax Self-Assessment) means adapting to a new way of managing records and reporting income. Instead of one annual tax return, MTD introduces quarterly submissions and digital record-keeping, enforced by HMRC to improve accuracy and close the tax gap. According to HMRC’s latest guidance, the move aims to reduce avoidable errors, simplify compliance, and create a fairer, more transparent tax system.

At Hamptons, we help landlords stay ahead of these compliance changes, so they can focus on growing their property portfolios with confidence rather than worrying about administrative deadlines.

Key insights

• MTD for landlords becomes mandatory from April 2026, starting with those earning over £50,000 in gross income.
• Gross income, not profit, determines eligibility - landlords with high turnover but low margins will still need to comply.
• HMRC-recognised software is compulsory, meaning spreadsheets or paper records alone are no longer accepted.
• Quarterly updates and a final declaration replace the traditional annual Self Assessment.
• A points-based penalty system will penalise repeated non-compliance but allow leniency for occasional mistakes.
• Early adoption brings advantages, including smoother onboarding, reduced stress, and better real-time financial visibility.

What is making tax digital for landlords?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is HMRC’s new system for recording and reporting rental income and expenses digitally. It replaces the traditional single annual Self Assessment return with a structured, quarterly reporting process using approved software. The goal is simple - to make tax reporting more accurate, more efficient, and less dependent on manual paperwork.

In plain English, MTD means landlords must:

1. Keep digital records of all property income and expenses using compatible software.
2. Submit quarterly summaries to HMRC showing total income and outgoings.
3. File one final declaration each year to confirm the full year’s figures and any other taxable income.

This digital-first approach aims to reduce avoidable errors and help HMRC close the UK’s tax gap, which was estimated at nearly £40 billion in 2023 due to underpayments and mistakes in returns (HMRC data).

For landlords, the change encourages a more disciplined, year-round approach to record keeping. Instead of a last-minute January rush, income and expenses will be logged continuously, making it easier to track profits, plan tax payments, and maintain compliance.

MTD is more than a software update: it represents a cultural shift in property finance management. Landlords who embrace digital tools early are likely to find the process simpler and more transparent in the long run.

To stay informed on related regulations and responsibilities, explore Hamptons’ landlords guides for up-to-date compliance advice and insights.

The making tax digital timeline – key deadlines 

HMRC has delayed the rollout of Making Tax Digital for landlords several times to give individuals and software providers time to prepare. However, the current schedule is now firmly set, with a phased introduction based on income levels.

From April 2026, landlords and self-employed individuals with gross income over £50,000 will be the first group required to comply. Those earning between £30,000 and £50,000 will follow one year later, in April 2027. A further expansion to include those earning above £20,000 is currently planned for April 2028, although HMRC will confirm this closer to the time.

This rollout is based on the reference year, meaning that the income reported for the 2024–25 tax year will determine whether a landlord falls into the 2026 start group.

Making tax digital deadline checklist

Landlords should note that gross income, not profit, determines when they join the system. Even those with modest net earnings but high rental turnover will need to prepare.

To avoid last-minute stress, it’s worth confirming your likely inclusion year now and beginning the switch to compliant software early. This ensures smoother onboarding, especially as HMRC’s pilot expands in 2025.

Who needs to comply - landlord eligibility explained

Making Tax Digital applies to landlords based on gross income, not profit, which means even those with slim margins may fall within scope. HMRC combines income from all rental properties and any self-employment work to determine eligibility.

If your total gross income exceeds £50,000, you’ll need to comply with MTD from April 2026. From April 2027, the threshold lowers to £30,000, bringing thousands more landlords into the system.

It’s worth remembering that MTD focuses solely on income reported through Self Assessment. Other earnings such as PAYE salaries, pensions, dividends, or savings interest are excluded from the calculation, but they still need to be included in your final declaration at the end of the tax year.

Key points to check your MTD status

• Add together all rental and self-employed income to determine your gross income total.
• Check whether you’ll exceed the £50,000 or £30,000 threshold in the relevant tax year.
• Remember: the reference year (for example, 2024–25) determines when you join the system.

Joint ownership rules

In cases of joint ownership, each landlord is assessed individually on their share of the rental income. For example, if two landlords receive £40,000 each from a property that earns £80,000 in total, neither would qualify for MTD in 2026 unless they earn additional income from elsewhere.

New landlords

If you’ve only recently started letting property, MTD won’t apply straight away. You’ll join the scheme from the first tax year after you’ve submitted your initial Self Assessment return. This gives new landlords time to build proper financial records before switching to quarterly submissions.

For practical advice on getting started, see Hamptons’ guide to becoming a landlord.

Falling below the threshold

Once enrolled in MTD, you’ll remain in the system unless your gross income stays below the threshold for three consecutive tax years. After that period, you can request to opt out, though you must formally notify HMRC to confirm.

Partnerships and limited companies

• Partnerships are currently excluded from MTD for Income Tax, but HMRC plans to extend the system to them once individual landlords are fully integrated.
• Limited company landlords follow Corporation Tax rules instead and therefore are not affected by MTD for Income Tax.

Landlord obligations under MTD - what changes in practice

Once Making Tax Digital becomes mandatory, landlords will need to make several practical changes to how they record, manage, and report their finances. The transition isn’t just about using software: it’s about shifting from annual paperwork to real-time digital management.

Keeping digital records

Under MTD, landlords must record all rental income and property-related expenses digitally. Each entry should include the date, amount, and category (for example, repairs, insurance, letting fees, or mortgage interest).

Paper receipts or standalone spreadsheets will no longer be compliant unless linked to HMRC via bridging software. Storing everything digitally reduces errors and helps keep records consistent between submissions.

Choosing compatible software

All MTD submissions must be made using HMRC-approved software. Landlords have three main options:

1. All-in-one accounting systems such as Xero, QuickBooks, or Landlord Studio, which record income, expenses, and submit updates automatically.
2. Property-specific management platforms that integrate rent tracking and tax reporting.
3. Bridging software that connects Excel spreadsheets to HMRC’s systems - a practical choice for landlords confident in managing data manually.

When comparing options, consider cost, ease of use, and how well the system suits your property portfolio. Those managing multiple properties or agents may prefer integrated landlord platforms, while smaller landlords might find bridging tools more cost-effective.

Can you use Excel for Making Tax Digital?

Yes, but only if you use bridging software that connects your spreadsheet directly to HMRC’s systems. This is a popular option for landlords already tracking income and expenses manually who don’t want to switch to a full accounting platform.

To simplify record keeping and reduce the admin burden, many landlords choose Hamptons’ property and rental management service. As part of our support, we’ll be helping landlords prepare for Making Tax Digital by providing quarterly Excel statements aligned with Self Assessment deadlines, ensuring accurate reporting, timely submissions, and full compliance with HMRC’s latest standards.

Submitting quarterly updates

Instead of one annual return, landlords must send four digital updates each tax year, covering total income and allowable expenses. Each submission is due one month and seven days after the quarter ends.

HMRC has built in flexibility with a rolling correction system, allowing errors or omissions to be corrected in the next quarterly submission rather than through complex amendments.

The final declaration

At the end of each tax year, landlords will submit a final declaration confirming their total income, expenses, and any other taxable earnings, such as employment or dividends. This replaces the old “End of Period Statement,” streamlining the year-end process.

In short, MTD moves landlords toward a smoother, more transparent tax experience – one that improves visibility and reduces the risk of error.

For further guidance on professional property management, check out our guide explaining what letting agents do for landlords? for a broader look at how expert support can simplify your responsibilities.

Penalties, appeals and compliance risks

While Making Tax Digital aims to simplify reporting, HMRC has introduced a points-based penalty system to ensure landlords submit updates and payments on time. Understanding how these penalties work can help avoid costly mistakes once the new rules take effect.

Points-based penalty system

Instead of automatic fines for a single late submission, HMRC will issue penalty points for each missed deadline. Once you reach a certain threshold, a £200 fine applies.

Each missed submission adds a point. These points expire after a set period of compliance, so occasional errors won’t lead to permanent penalties. However, persistent late filing will increase the risk of fines and closer HMRC scrutiny.

Late payment penalties

Late payment rules are also changing. If your tax isn’t paid on time:

• From Day 1, interest will start accruing.
• At Day 15, a surcharge is added unless you’ve arranged a payment plan.
• By Day 30, a second surcharge applies, increasing the overall amount owed.

Keeping digital records up to date and submitting quarterly summaries early can help you plan ahead for payments and avoid late fees.

Appeals and reasonable excuses

Landlords who receive a penalty can appeal within 30 days of the notice. HMRC will consider whether a “reasonable excuse” applies, such as serious illness, bereavement, or verified IT failure. Evidence should always be supplied to support the appeal.

For most landlords, avoiding penalties will come down to preparation: choosing compliant software, setting reminders, and reviewing each quarterly report before submission.

Preparing for MTD - practical checklist 

Getting ready for Making Tax Digital doesn’t have to be overwhelming. With a clear timeline and the right tools in place, landlords can move smoothly from annual returns to quarterly submissions. The key is to start preparing early and spread the work over several months.

Step-by-step preparation timeline

1. 12–18 months before your start date

• Confirm your eligibility based on your gross income.
• Assess your current record-keeping system and identify where changes are needed.
• Research HMRC-approved software or bridging tools suited to your needs.
• Join HMRC’s pilot scheme (if available) to familiarise yourself with digital submissions.

2. 6 months before

• Subscribe to your chosen MTD-compatible software or set up bridging software for Excel.
• Begin recording income and expenses digitally to get used to the new process.
• Review any existing property management systems and ensure data can be exported digitally.

3. 3 months before

• Formally register for MTD through your Government Gateway account.
• Test your first digital submission to ensure it uploads correctly.
• Ask your letting agent or accountant to verify your quarterly record format.

4. By your start date

• You should now be ready to submit your first quarterly update.
• Review your entries for accuracy and ensure supporting records are stored securely.

Benefits of preparing early

Starting early has several practical benefits:

• Reduces last-minute stress when the system becomes mandatory.
• Helps you identify and fix record-keeping issues before they cause penalties.
• Provides better visibility of rental income, expenses, and upcoming tax liabilities.
• Makes it easier to forecast cash flow and plan for maintenance or investment costs.

Challenges to be aware of

• Initial setup costs for software subscriptions.
• A short learning curve for those unfamiliar with digital tools.
• Adjusting to regular quarterly reporting instead of one annual submission.

For wider support and resources on landlord compliance, valuations, and tenant management, explore Hamptons’ lettings hub, where you’ll find expert advice and access to our landlord services, tools and content.

Can you get an exemption from MTD?

While Making Tax Digital will become mandatory for most landlords, HMRC recognises that not everyone can meet the digital requirements. In certain cases, you can apply for an exemption, but it must be justified with clear evidence.

Who can qualify for an exemption

You may be eligible for exemption from MTD if:

• You’re digitally excluded due to age, disability, or location (for example, if you live in an area with poor internet access).
• You have religious objections to using computers or digital systems.
• You act as a trustee, personal representative, or foster carer, as these roles are automatically excluded under current MTD regulations.

HMRC reviews each case individually and may request supporting documentation such as medical certificates, proof of residence, or statements explaining why digital submission isn’t practical.

How to apply for an exemption

Applications can be made online through your Government Gateway account or by contacting HMRC directly by post. You’ll need to outline your reasons and provide any relevant evidence. If approved, HMRC will confirm your exemption in writing.

If your circumstances change, for example, you move to an area with reliable internet access, HMRC may reassess your eligibility.

For a broader look at landlord legal responsibilities, including recent legislation changes, you can read Hamptons’ tenant fee ban guide, which explains another key update affecting landlords across the UK.

Conclusion

Making Tax Digital is reshaping how landlords manage their finances, moving from annual returns to regular digital updates. Preparing early helps avoid penalties, reduce admin stress, and improve financial visibility.

Hamptons supports landlords through every stage of the transition, offering expert guidance on compliance, reporting, and portfolio management. Our goal is to make digital tax simple, so you can focus on running your properties with confidence.

To speak to a local expert or get help managing your rental portfolio, contact Hamptons or find your nearest branch.