Received an HMRC Letter About Making Tax Digital? Here’s What It Means for Landlords

If you’ve received an HMRC letter about Making Tax Digital (MTD), don’t worry. This is just HMRC alerting you that, from 6 April 2026, you must submit your tax returns digitally if your income from property and/or self-employment exceeds £50,000.

But that’s not enough, is it. So, let us walk you section by section through the letter, explain what it really means and give you practical steps to ensure you stay compliant without stress or confusion.

What You’ll Get to Know:

What the letter says and what it means

Whether MTD applies to you

What qualifying income means

What quarterly updates and Final Declaration mean

New penalty rules

Exemptions and exclusions

What to do right now

What Is HMRC’s MTD Letter?

HMRC letters can feel intimidating. The language is formal, confusing and full of dates and deadlines. Let’s take it apart and make it easy to understand.

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Exact Wording from the HMRC Letter:

You will need to change the way you report your income and expenses to HMRC.

You'll need to use Making Tax Digital for Income Tax from 6 April 2026 as your total

 income was over £50,000 from self-employment and property in your 2024 to 2025

 tax return. This is your qualifying income which is worked out before expenses or taxes are

 deducted.

What This Means?

HMRC is telling you that the way you report your income and expenses is changing. From 6 April 2026, you can no longer submit your tax returns through the current HMRC Self Assessment online portal or on paper. You’ll also not be reporting your taxes just once a year, as you’ll be within the scope of Making Tax Digital for Income Tax (MTD ITSA), not the traditional Self Assessment Tax Return process. Further, you will need to use HMRC-recognised software like RentalBux to submit your tax returns.

We’ll expand more on all this in later sections but what you need to understand right now is that you received this letter because your total income from property and/or self-employment in the 2024–2025 tax year was above £50,000. That figure, which HMRC calls your ‘qualifying income,’ is calculated before you deduct any expenses or tax allowances.

Key Point:

This is not a tax demand. You are not being told you owe money. This is a notice that the way you submit your tax information is changing. There is nothing to panic about, but you do need to take some actions before 6 April 2026. These actions are: Quarterly Updates - Instead of filing a single tax return at the end of the year, you’ll report income and expenses four times per year. Digital Record-Keeping - HMRC requires your records to be kept digitally. Using MTD-compatible software like RentalBux ensures compliance. Accuracy Counts - Errors in your quarterly updates can affect your tax bill, so staying organised is critical.

What Is Making Tax Digital (MTD) for Income Tax?

Making Tax Digital for Income Tax, or MTD for ITSA, is the UK government’s ambitious plan to modernise how landlords and sole traders report their income and expenses to HMRC. Think of it as moving from annual catch-up accounting to real-time, organised financial reporting by keeping everything digital, up-to-date and in the hands of HMRC before your tax return is even due.

If you’re a landlord used to filing once a year, this represents a big shift. But don’t worry, it’s manageable with the right tools and preparation.

Under the Current System	Under MTD for Income Tax from 6 April 2026
You submit one Self Assessment Tax Return per year (by 31 January)	You must use HMRC-recognised software
You can submit your return either via the HMRC online portal or on paper forms	You must keep digital records of your income and expenses
You can file all your records at once at the end of the year	You must send four quarterly updates to HMRC each year
	Despite quarterly updates, a Final Declaration is still required by 31 January following the end of the tax year

 

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Exact Wording from the HMRC Letter:

Making Tax Digital for Income Tax is a new way for sole traders and landlords to

 report income and expenses to HMRC. You, or your agent if you have one, will need

 to use software that works with Making Tax Digital for Income Tax to:

•   create, store and correct digital records of your self-employment and property

    income and expenses

•   send your quarterly updates to HMRC

•   submit your tax return by 31 January the following year.

What Is ‘Qualifying Income’ for MTD?

This is one of the most common points of confusion. Your qualifying income is not your profit. It is your total gross income from property and/or self-employment before any deductions.

What Counts as Qualifying Income	What Does Not Count as Qualifying Income
Rental income from Buy-to-Let properties	Your PAYE salary or employment income
Rental income from holiday lets	Pension income
Income from Airbnb or short-term lets	Dividend income
Income from self-employment (sole trader)	Savings interest
Income from furnished holiday lettings	Capital gains from property sales

Lets Learn With Example

If you earn £42,000 in rental income and £12,000 as a self-employed contractor, your qualifying income is £54,000, which is above the £50,000 threshold, even if your taxable profit after expenses is much lower.

What Are Quarterly Updates?

Under Making Tax Digital for Income Tax, landlords must submit four quarterly updates each tax year. These updates give HMRC a running view of your income and expenses.

Each quarterly update is a summary of your income and expenses, and it works like this:

• Cumulative Reporting - Each update includes income and expenses for the current quarter plus all previous quarters in the tax year. This ensures HMRC sees your total financial picture as the year progresses.

• Not a Tax Payment - You do not pay tax every quarter. The updates are just a way to track and report figures before submitting your Final Declaration.

• Final Tax Return Still Required – You must submit a Final Declaration, analogous to the present Self Assessment Tax Return by 31 January following the end of the tax year.

• Even “Nil” Quarters Count - If a quarter has no income or expenses, you still submit a “nil” update. This keeps your reporting up-to-date and avoids penalties for missing a quarter.

Quarterly Update Deadlines

1

6 April – 5 July

Submitted by 7 August

2

6 July – 5 October

Submitted by 7 November

3

6 October – 5 January

Submitted by 7 February

4

6 January – 5 April

Submitted by 7 May

What You Need to Know About the Penalty System?

HMRC has put in place a new penalty regime for missing quarterly updates and missing payments, as suggested by the letter.

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Exact Wording from the HMRC Letter:

Under the new late submission penalties, a penalty point is awarded where a quarterly

 update or tax return deadline is missed. Once a four-point threshold is reached, a

 financial penalty will be issued.

There are also new penalties for late payment of tax from the 2026 to 2027 tax year which are more proportionate to how long it takes you to pay what you owe..

Late Submission Penalties

• Each time you miss a quarterly update deadline or your final tax return (Final Declaration) deadline, you receive one penalty point

• Once you accumulate four penalty points, HMRC issues a financial penalty

• Keep filing on time for a while, and the points reset, so one slip-up isn’t the end of the world if you get back on track

Important for 2026–2027 (the First Year):

You will not receive a penalty point even if a quarterly update is submitted late during the first year (2026-2027 tax year) of MTD implementation. However, you must still submit all quarterly updates before you can submit your final tax return.

From the 2027–2028 tax year onwards, late quarterly updates will attract penalty points.

Late Payment Penalties

In addition to submission penalties, there are new late payment penalties that you need to be aware of. These are proportionate to how long you take to pay what you owe.

Do I Need to File My Self Assessment Tax Return If I’m Eligible for MTD?

Nothing changes for your 2025–2026 Self Assessment Tax Return. Submit it as you normally would by 31 January 2027. MTD only changes things from the 2026–2027 tax year onwards.

Making Tax Digital Exemptions

The HMRC letter mentions exemptions but does not go into much detail.

But, worry not, here is a clear breakdown of who may be exempt from Making Tax Digital.

Digitally Excluded

If HMRC has already confirmed you are digitally excluded (meaning you cannot use digital tools due to age, disability, location or religious beliefs), you do not need to comply with MTD requirements.

If you believe you qualify for digital exclusion but have not yet applied, you can apply to HMRC for an exemption. Approval may be permanent or reviewed periodically, depending on your circumstances.

Aside from digital exclusion, HMRC notes a few other scenarios where MTD might not apply immediately or at all.

• Your qualifying income drops below the stated MTD thresholds (£50,000 for 2026, £30,000 for 2027 and £20,000 for 2028) in later tax years

• You are in the final year of your self-employment or letting business

• If, on 31 January before a tax year starts, you do not have a National Insurance number, you are automatically exempt from MTD for Income Tax for that year

• Some trustees, personal representatives or other specific circumstances can also qualify for MTD exemptions

What You Need to Do Before 6 April 2026?

The HMRC letter is clear: if you want to avoid last-minute stress and stay compliant, you need to act before MTD hits you on 6 April 2026.

 Let’s break this down into simple steps that you, as a landlord, can follow.

Step 1: Choose MTD Compatible Software

From 6 April 2026, you will no longer be able to file tax returns using the HMRC online portal or paper returns. You must use software that is recognised by HMRC as MTD compatible.

That’s Why You Should Choose RentalBux for MTD for Landlords

RentalBux is an HMRC-recognised MTD-compatible software built specifically for UK landlords. It connects directly to HMRC, handles quarterly updates automatically and keeps your records organised throughout the year.

Plus, you get all these other property management features:

Try RentalBux for Free:

Step 2: Sign up for MTD for Income Tax

Selecting the right software is only the first step. You also need to formally register for MTD for Income Tax through HMRC. You can do this via GOV.UK. After registering, you’ll also need to authorise your software, i.e., RentalBux, to access the your HMRC account for the purpose of submitting MTD-compliant updates on your behalf.

If you have an accountant or tax agent, speak to them first. They may be able to manage the sign-up process on your behalf. If you do not have an accountant, UK Property Accountants specialises in helping landlords navigate exactly this transition.

Step 3: Get Your Records in Order

Start keeping digital records of your income and expenses right now. Do not wait for 6 April. The earlier you start, the easier the transition to MTD will be.

Here’s what to do:

Keep your income and expense records accurate and up-to-date

Log all allowable expenses; repairs, insurance, mortgage interest, agent fees, everything counts

Keep digital copies of all receipts and invoices; snap photos, scan documents or upload PDFs into your software

The more organised your records, the smoother your MTD experience will be and the less likely you are to make mistakes that could trigger penalties.

Key Dates at a Glance

Ready to Get MTD Compliant? Here’s How RentalBux Can Help

RentalBux is an HMRC-recognised MTD-compatible software designed specifically for UK landlords. It handles everything the letter asks you to do - digital record keeping, quarterly updates and final tax return submission – and it does so from one easy-to-use and intuitive platform.

And the best part is that it is free until March 2028 for landlords with a single property unit.