How to Prepare for Making Tax Digital as a Landlord

The UK government is committed to digitalising its tax system and at the heart of this project is Making Tax Digital (MTD). HMRC is launching this initiative to help landlords and other business owners streamline their tax filing processes and improve accuracy. Adopting MTD allows landlords to meet the strict compliance standards and benefit from a more efficient and transparent tax filing experience.

For landlords, this new system means a shift from manual record-keeping to compatible software. If you earn property income above the set threshold, you must maintain digital records of all your rental earnings and expenses.

Who is Affected & When

Making Tax Digital for income tax is a major transformation in the UK tax system, mandating a shift from the annual paper-based Self-Assessment tax returns to a more frequent, digital filing. Making Tax Digital for Income Tax launches in phases based on the total gross income (before expenses) from self-employment and property:

• From 6 April 2026 – Applies to individuals with £50,000+ qualifying income
• From 6 April 2027 – Extends to those earning £30,000-£50,000
• From 6 April 2028 – Down to those earning £20,000+

Under MTD:

• You must keep digital records of all your income and expenses from self-employment and/or property portfolios
• You will submit quarterly updates of digital summary of income and outgoings to HMRC
• At the end of the tax year, you will make a final declaration, replacing the traditional Self Assessment Tax Return

HMRC identifies eligible taxpayers using the most recent tax return and will send notification letters ahead of implementation. However, if you exceed a threshold and don’t receive a letter, it is still your responsibility to comply. Not receiving a letter is no excuse to avoiding your legal responsibilities, and that excuse will not act in your favour if caught.

Exemptions & Special Situations

Although the switch to Making Tax Digital is mandatory, some exemptions may apply based on individual circumstances:

• Digital Exclusion applies if age, disability, or lack of interest access means you cannot comply, you may apply for an exemption
• Landlords using limited companies are not included under the scheme
• Capital Gains (CGT) and REIT income are not covered by quarterly submissions but reported annually via the final statement

How to Prepare: A Step-by-Step Checklist

• Step 1: Calculate Your Qualifying Income

Use GOV.UK’s tool or consult your agent to determine if you are above the threshold.

• Step 2: Sign Up Early, Optionally

You can voluntarily join Making Tax Digital for Income Tax for 2025-26, to familiarise yourself with the process before it becomes mandatory.

• Step 3: Adopt HMRC-Compatible Software

The software should have the features of invoicing, expenses automation, quarterly reporting, integrations.

• Step 4: Digitalise Existing Records

Scan or import historical paperwork: rent statements, bills, receipts, invoices. From April 2026, all records must be held digitally and traceable.

• Step 5: Familiarise Yourself with Deadlines

Set reminders for the quarterly deadlines and the final declaration (31 January). Late submissions can trigger penalty points, eventually leading to fines.

• Step 6: Run Test Submissions

If you sign up early, you should try out the software reporting to check if data flows correctly and ensure that errors are caught and resolved before April 2026.

• Step 7: Keep Communication Lines Open with HMRC

Register or update your online services, appoint agents/bookkeepers where relevant, and assess whether the exemption relief is needed.

Tougher Penalties for Late Payments

The Spring Statement brought stricter late payment penalties for Making Tax Digital participants:

Days Late	2025 Scheme (Old)	2026 Scheme (New)
Over 15 days	2%	3%
Over 30 days	4%	6%
Over 31 days	—-	+10% annualised

Benefits of Embracing MTD Ahead of Time

While Making Tax Digital (MTD) for Income Tax does not become mandatory for most landlords until April 2026, there are quite a few compelling reasons to prepare early. Embracing MTD before the deadline can help you avoid last-minute stress, improve financial management and even save money.

Here are some of the key benefits:

• Avoid Penalties & Compliance Stress

By understanding the Making Tax Digital system early and getting used to digital submissions. You will be able to reduce the risk of missing deadlines and incurring penalties. With the new points-based system and stricter late payment charges, early compliance gives you breathing space to get things right without pressure.

• Better Financial Visibility & Control

Quarterly updates give you a much clearer view of your property business’s financial health throughout the year. You will know:

1. How much income you have earned
2. Where are your expenses going
3. What your likely tax bill will be months in advance

• Less End-of-Year Panic

One of the biggest benefits of early adoption of Making Tax Digital is reduced administrative pressure at the end of the year. By maintaining digital records and submitting quarterly summaries, there is no last-minute scramble to find receipts or reconcile spreadsheets.

Conclusion

With quarterly reporting, digital record-keeping, and stricter penalties on the horizon, the days of paper receipts and once-a-year tax returns are coming to an end. By going digital ahead of time, you will not only avoid penalties but also gain better control over your finances, streamline your admin, and ultimately run your property business more efficiently. With HMRC’s pilot scheme already live and MTD-compatible software readily available, the tools to help you succeed are within reach.

---