A Complete Guide on Making Tax Digital for Income Tax for Landlords

Making Tax Digital (MTD) represents one of the most significant reforms to the UK tax system in recent decades. It is a government initiative designed to make tax administration more efficient, more transparent, and less prone to error. For landlords, this means the way you record, manage, and report rental income will soon change permanently. Paper-based records and manual tax returns will gradually be replaced by digital record-keeping and quarterly submissions through HMRC-recognised software.

The purpose of MTD is to create a simpler, more accurate, and up-to-date tax reporting environment. Landlords will be able to see their estimated tax position throughout the year rather than waiting until the annual Self-Assessment deadline. According to HMRC estimates, over 563 thousand landlords in the UK will eventually need to comply with MTD for Income Tax by April 2028, depending on their income thresholds and type of property business.

This guide explains everything landlords need to know about MTD for Income Tax, from eligibility thresholds and digital record-keeping requirements to the software you’ll need, deadlines, and how to stay compliant.

Key Highlights & Summary

• MTD for Income Tax requires landlords to keep digital records and submit quarterly updates through HMRC-compatible software.
• 2,493,000 landlords in the UK, with 563,000 required to comply with MTD by 2028.
• Applies to landlords earning qualifying income of £50,000+ (from April 2026), £30,000+ (from April 2027), or £20,000+ (from April 2028).
• Qualifying income includes rental income from UK or overseas properties but excludes dividends, interest, and pensions.
• MTD registration is required via HMRC, after which landlords receive a unique MTD reference number.
• Digital record-keeping includes rent received, property expenses, mortgage interest, and other deductible costs.
• Penalties apply for late submissions or failure to maintain digital records, based on a points-based penalty system.

1.What is Making Tax Digital for Landlords?

Making Tax Digital is not a new tax but a new way of managing your existing tax obligations. It replaces traditional manual record-keeping and the annual Self-Assessment return with a digital system that requires landlords to record property income and expenses electronically and send quarterly updates to HMRC through recognised software.

Under this system, landlords will be required to maintain digital records of every rental transaction, including income received and expenses incurred, such as mortgage interest, repairs, and insurance. Instead of waiting until the end of the tax year to submit one long return, you will now provide quarterly summaries that reflect the most recent financial position of your property business.

This new system also introduces real-time visibility into your estimated tax position. Each update recalculates your expected tax liability, enabling landlords to plan for future payments rather than facing a large, uncertain bill annually. Errors are reduced because data is recorded in real time rather than reconstructed months later. It also enables HMRC to monitor compliance more effectively, while giving landlords the convenience of automation and integration between accounting systems, banks, and tax submissions.

2. Does MTD for Income Tax Apply to Landlords?

Yes. MTD applies to individual landlords whose annual property income exceeds the set thresholds. These thresholds are being phased in gradually to give landlords sufficient time to prepare and adjust.

From April 2026, landlords earning £50,000 or more from property income must comply. The threshold lowers to £30,000 in April 2027, and by April 2028, landlords earning £20,000 or more are expected to be included.

The rules cover all types of landlords, including: • UK residential property landlords (single lets, HMOs, or portfolios). • Overseas landlords earning rental income from UK properties. • Mixed landlords — those with both UK and overseas property income streams.

Even if you only own one rental property, you’ll still fall under MTD if your income exceeds the qualifying level. Landlords earning below £20,000 are currently exempt, though the government has indicated it may review this in later years.

This staged introduction allows landlords to adopt digital systems early, test their software, and avoid last-minute compliance challenges.

3. What Counts as Qualifying Income for Landlords under MTD?

HMRC defines qualifying income as the gross rental income received from property before any expenses or deductions. It includes all receipts from UK and overseas properties, whether they arise from residential tenancies, commercial lets, or furnished holiday lettings.

Included in Qualifying Income:

• Rent received from tenants or subtenants.
• Payments for the use of property assets, such as furniture, parking spaces, or storage.
• Income from short-term or holiday lets (e.g., Airbnb).
• Overseas rental income, converted into GBP at the appropriate exchange rate.

Excluded from Qualifying Income:

• Dividends, interest on savings, and pension income.
• Capital gains from selling properties.
• Income from non-property-related businesses.

If you jointly own a property, only your share of the income counts toward your personal threshold. For instance, if a couple jointly earns £60,000, each person’s share (£30,000) determines whether they are required to comply from April 2027.

This approach ensures that landlords are assessed fairly based on their proportion of income, rather than the total performance of their property portfolio.

4.When Does MTD for Landlords Begin?

The rollout for landlords mirrors that for sole traders, based on income thresholds:

These dates mark the beginning of mandatory digital record-keeping and quarterly reporting for each income bracket. It is advisable to begin preparing well before your mandatory start date. Adopting digital record-keeping early allows you to get used to the system, test your software, and ensure your data is accurate and complete before you are required to make your first submission.

5. Are Landlords Exempt from MTD?

Some landlords may be exempt due to personal, technical, or situational reasons.

• Low Income: Annual property income is below £20,000.

• Age or Health: Physical or mental disabilities preventing digital access.

• Location or Connectivity: Limited or no internet access.

• Religious Grounds: Beliefs preventing the use of electronic systems.

To apply for an exemption:

1. Review your eligibility on HMRC’s MTD guidance page.
2. If you believe you qualify for an exemption, submit an exemption request directly to HMRC with your National Insurance number and supporting documents.
3. Continue maintaining manual or alternative records for inspection purposes if approved.

Exemptions are not automatic; each case is reviewed individually by HMRC.

6. What are the Compliance Requirements for Landlords under MTD

To comply with Making Tax Digital (MTD), landlords must meet several important requirements that ensure accurate digital record-keeping, timely submissions, and full transparency with HMRC. The new system changes the way tax is managed by replacing traditional paperwork and annual self-assessment with digital reporting throughout the year. Below is a detailed overview of the key compliance responsibilities every landlord must follow.

a. Using MTD-Compatible Software

Every landlord within the MTD regime must use software that is officially recognised by HMRC. This software acts as the central tool for managing property income, recording expenses, and communicating directly with HMRC.

The software must be able to:

• Digitally record income and expenses related to your property business, replacing manual spreadsheets or paper logs.
• Connect with your bank feeds, allowing automatic import of rental payments, mortgage interest, or maintenance costs to reduce manual entry errors.
• Submit quarterly updates and end-of-year declarations directly to HMRC through a secure digital link.
• Provide real-time estimates of tax liabilities based on the information entered, helping landlords budget and plan ahead for tax payments.
• Detect common errors or inconsistencies in data before submission, minimising the risk of rejected filings or penalties.

HMRC does not allow landlords to manually type figures into their online tax account under MTD. Every submission must come directly from compatible software through Application Programming Interfaces (APIs). This ensures data accuracy and security.

b. Digital Record-Keeping

MTD requires landlords to maintain complete and accurate digital records of all property-related transactions. This means that every financial movement connected to your property business, whether it is income or an expense, must be logged and stored digitally.

The following must be recorded in your MTD software:

• Rental Income: Rent payments received, deposits collected, service charges, and any other receipts connected with the property.
• Property Expenses: Mortgage interest, letting agent fees, repairs and maintenance, insurance premiums, council tax (where applicable), cleaning services, and utilities.
• Capital Items: Expenditure on improvements, refurbishments, or assets that may affect your capital gains calculation in the future.
• Supporting Documents: Digital copies of invoices, receipts, and statements must be retained as part of your records. These can be scanned or photographed using your phone, as long as the digital version is legible and stored safely.

HMRC does not require landlords to upload every document to their software, but they must be readily available in case of a compliance review or audit. The digital record should include key details for each transaction, such as the date, amount, and business purpose of the expense or income item.

Landlords are expected to maintain these records for at least five years after the submission deadline for each tax year. This digital trail ensures that both landlords and HMRC can trace every figure submitted on the tax return back to its original source.

c. Quarterly and Annual Submissions

One of the most significant changes under MTD is the shift from a single annual tax return to four quarterly updates followed by a final declaration.

• Landlords must send updates every three months showing income and expenses for the quarter.
• The purpose is to keep HMRC informed of ongoing financial performance and provide an up-to-date tax estimate throughout the year.
• Submissions are made directly from your MTD software, and the deadlines typically fall one month after the end of each quarter.

• After the year ends, landlords must file a final statement confirming the total figures for the year.
• The final declaration involves:Reviewing all quarterly data for completeness and accuracy.Making necessary adjustments (such as accruals, private use adjustments, or late expenses).Submitting the final total taxable income to HMRC through the MTD software.
• Reviewing all quarterly data for completeness and accuracy.
• Making necessary adjustments (such as accruals, private use adjustments, or late expenses).
• Submitting the final total taxable income to HMRC through the MTD software.
• Once submitted, the final declaration represents the landlord’s complete tax return for property income. HMRC will then calculate the final tax due, considering allowances and reliefs.

7. What Software Can Landlords Use for MTD Compliance?

MTD for landlords requires software that connects directly to HMRC’s system. It must be capable of both digital record-keeping and submission of quarterly and annual data.

When choosing software, landlords should prioritise tools that:

• Automate income and expense categorisation.

• Integrate seamlessly with multiple bank accounts.

• Offer property-by-property breakdowns.

• Support cloud-based access for agents or accountants.

• Include built-in HMRC submission and deadline reminders.

RentalBux is built specifically for landlords and small property businesses. It handles both UK and overseas property income, automatically reconciles bank transactions, and supports multiple properties. It also provides real-time income statements and tax forecasts.

8. What Should Landlords Do If They Qualify for MTD?

The MTD transition involves three main steps:

Register for MTD for Income Tax on the HMRC website. Once registered, you’ll receive an MTD reference number confirming enrolment. You must then link your HMRC account to your software.

Select an HMRC-approved software package such as RentalBux. Import all relevant property information, including past rental income, expenses, and supporting documentation.

Review each quarterly summary for accuracy and submit it digitally through your software. At the end of the year, complete your final declaration with any adjustments such as capital allowances or reliefs.

Landlords can authorise accountants or agents to manage these submissions on their behalf.

9. How much does it cost Landlords for compliance?

The costs of MTD compliance depend on your portfolio size, software choice, and whether you use an accountant.

• Free options or entry-level plans (e.g., RentalBux).

• Premium tools: £10–£30/month for enhanced features and automation.

• Accountant support: £100–£300 per hour, or fixed annual fees for MTD management.

• Time investment to learn new systems.

• Adjusting to digital workflows.

• Quarterly review time.

• Average one-off transition cost: £350.

• Average ongoing annual cost: £110–£115.

Despite these costs, automation, accuracy, and reduced penalties often result in long-term savings for most landlords.

10. What are the Penalties for Non-Compliance

HMRC has introduced a points-based penalty system to encourage consistent compliance under Making Tax Digital (MTD). This new system is designed to be fairer and more proportionate than traditional penalties, allowing occasional mistakes without immediate fines but applying stricter measures for repeated non-compliance.

How the Points System Works Each missed or late submission earns one penalty point. Once a landlord reaches a set threshold of points, a financial penalty will be charged. The threshold varies depending on the type of submission, including quarterly updates, annual declarations, and other MTD reports.

• For example, landlords who miss four quarterly submissions may reach the threshold and trigger a fine.
• After penalties are applied, points continue to accumulate for future missed deadlines unless corrected.

Penalty points are not permanent. If you remain fully compliant for 24 months, your points will automatically expire, giving you a clean slate. This encourages landlords to improve their compliance habits without fear of long-term punishment.

• Late or missed quarterly updates, often due to poor tracking of deadlines.
• Failure to maintain digital records, especially when relying on manual systems or spreadsheets without bridging software.
• Inaccurate or incomplete data submissions, which can arise from software errors or incomplete entries.

• Keep records updated in real time. Enter income and expenses as they occur rather than at the end of each quarter.
• Use HMRC-approved software. Compatible software automatically alerts you to missing data or upcoming deadlines.
• Review before submission. Always double-check figures and attachments before sending updates to HMRC.
• Set reminders or automate submissions. Most MTD software can notify you when a submission is due or send automatic updates once it is approved.

By adopting digital tools and staying consistent with updates, landlords can maintain a strong compliance record and avoid unnecessary penalties. Regular record-keeping not only reduces the risk of errors but also gives landlords a clearer view of their tax position throughout the year.

11. Are there any Support and Resources for MTD for landlords?

Yes. HMRC and several approved software providers offer dedicated support to help landlords transition smoothly into MTD for Income Tax. Accessing reliable guidance is essential to avoid confusion during setup and ensure you stay compliant as new updates are introduced.

• HMRC MTD Hub: The central hub on gov.uk/making-tax-digital provides detailed instructions, eligibility criteria, and registration steps for landlords.
• HMRC Helpline: You can contact 0300 200 3700 for support on registration, exemptions, or filing issues.
• Webinars and Tutorials: HMRC frequently runs free online sessions to explain MTD requirements and demonstrate how to submit quarterly updates.

• RentalBux MTD Essential Kit: Offers step-by-step guides, FAQs, and more designed specifically for landlords managing property income digitally.
• Accountancy Firms and Tax Advisors: Many professional advisors, like UK property accountants have created dedicated MTD resources for landlords, including setup checklists and filing timelines.

These support channels provide clarity, practical tips, and reassurance for landlords like you adapting to the digital reporting process. Using these resources early will help you resolve issues before they become compliance risks.

12. How RentalBux Helps Landlords Stay Compliant

RentalBux is an HMRC-recognised platform created to make MTD compliance effortless for landlords. It is designed to automate every stage of the tax reporting cycle from digital record-keeping to final submission.

• Automatic Categorisation of Income and Expenses: The software intelligently identifies rent, mortgage interest, insurance, and other common property costs, ensuring they’re recorded under the correct categories.
• Bank Integration: It connects directly to your bank accounts to import transactions automatically, saving time and reducing data entry errors.
• Quarterly Submission Automation: Once your income and expenses are up to date, RentalBux generates your quarterly report and prepares it for submission directly to HMRC.
• Multi-Property Management: Ideal for landlords with multiple properties, whether UK-based or overseas, providing one unified dashboard to monitor performance and compliance across the portfolio.
• Detailed Reports and Insights: Generate real-time income statements, tax estimates, and audit-ready summaries at any point in the year.

For landlords managing a single property, RentalBux offers a complimentary plan until April 2028, enabling you to stay fully compliant without incurring additional software costs. This makes it an ideal option for small landlords transitioning into MTD for the first time.

By centralising all tax records, automating submissions, and ensuring digital accuracy, RentalBux simplifies MTD reporting giving landlords more time to focus on their properties and tenants.

13. Conclusion

Whether you use RentalBux or another HMRC-recognised platform, the goal remains the same: to make your property tax management efficient, accurate, and stress-free. By embracing MTD early, landlords can not only avoid penalties but also gain valuable real-time insight into their property business, enabling better financial planning year-round.

14. Frequently Asked Questions