MTD for Landlords
- MAZ
- Jun 13
- 15 min read
The Audio Summary of the Key Points of the Article:
MTD for Landlords in the UK: Your Essential Guide to Navigating the Digital Tax Revolution
So, you’re a landlord in the UK, juggling tenants, repairs, and now a big tax change called Making Tax Digital (MTD)? Don’t worry, I’ve got you covered. MTD for Income Tax Self Assessment (ITSA) is shaking up how landlords like you report income to HMRC, and it’s kicking off from April 2026 for those with property or business income over £50,000. This article is your go-to guide for understanding what MTD means, how it affects you, and how to stay ahead of the game without losing your cool. Let’s dive into the nitty-gritty, with practical tips, real-world examples, and a clear roadmap to keep you compliant and stress-free.
What Exactly Is Making Tax Digital for Landlords?
Now, let’s start with the basics: what’s MTD all about? Making Tax Digital is HMRC’s push to modernise the UK tax system by moving it online. For landlords, this means no more scribbling numbers on paper or cramming receipts into a shoebox until January. Instead, you’ll need to keep digital records of your rental income and expenses and submit quarterly updates to HMRC using MTD-compatible software. The goal? To reduce errors, make tax reporting more real-time, and help you stay on top of your finances. From April 2026, if your gross property income (before expenses) exceeds £50,000, you’re in the first wave of this digital shift. Those with income over £30,000 follow in April 2027, and by April 2028, even landlords earning over £20,000 will need to comply.
Who Needs to Worry About MTD?
Right, so who’s actually affected by this? If you’re a landlord with rental income from UK properties (or even overseas properties, if you’re UK tax resident), MTD applies based on your gross income. Here’s the breakdown:
From 6 April 2026: Landlords with gross property or self-employment income over £50,000.
From 6 April 2027: Those with income over £30,000.
From 6 April 2028: Those with income over £20,000.
If you’re a limited company landlord, you’re off the hook for MTD for ITSA, as you’ll stick with corporation tax rules. But if you co-own properties, your share of the income counts toward these thresholds. For example, if you and your partner split £60,000 in rental income equally, your £30,000 share won’t trigger MTD until 2027. HMRC uses your 2024/25 tax return (due by 31 January 2026) to check if you hit the £50,000 mark for 2026 compliance.
Why Is MTD Happening Now?
None of us love tax changes, but why is HMRC doing this? The idea is to close the “tax gap”—the difference between what’s owed and what’s paid—estimated at £36 billion in 2022/23. By digitising records, HMRC reckons it’ll catch errors early and make tax collection smoother. Plus, quarterly updates mean you get a clearer picture of your tax bill throughout the year, avoiding those nasty surprises at tax return time. For landlords, this could mean better cash flow planning, especially if you’re juggling multiple properties. But let’s be real: it’s also more work upfront, and that’s where preparation comes in.
What Do Landlords Need to Do Differently?
Okay, here’s where it gets practical. Under MTD, you’ll need to:
Keep Digital Records: Every penny of rental income and allowable expenses (like repairs, agent fees, or insurance) must be recorded digitally using MTD-compatible software. No more spreadsheets unless they integrate with HMRC’s system.
Submit Quarterly Updates: You’ll send HMRC a summary of income and expenses four times a year, with deadlines on 5 August, 5 November, 5 February, and 5 May. These can align with calendar quarters (e.g., 1 April to 30 June) for simplicity.
File a Year-End Declaration: After the tax year ends, you’ll submit a final declaration through your software, including non-property income like savings or dividends, replacing the traditional Self Assessment return.
Here’s a quick table to show what’s required:
Requirement | Details | Deadline |
Digital Record-Keeping | Use MTD-compatible software for all income and expenses. | Ongoing from April 2026 |
Quarterly Updates | Submit summaries of income and expenses. | 5 Aug, 5 Nov, 5 Feb, 5 May |
Year-End Declaration | Finalise your tax position, including non-property income. | 31 January following tax year |
This shift is a big deal, especially if you’re used to doing things manually. But HMRC’s data shows 67% of businesses using MTD-compatible software report fewer errors, and 80% find it easy to use once set up.
Getting Ready: A Step-by-Step Guide
Now, don’t panic—this is manageable with a plan. Here’s a step-by-step guide to get you MTD-ready:
Check Your Income: Review your 2024/25 tax return to see if your gross property or self-employment income exceeds £50,000. Use HMRC’s online tool to confirm your MTD start date.
Choose MTD-Compatible Software: Pick software that suits your needs—think FreeAgent for simple portfolios or QuickBooks for larger ones. Check HMRC’s list of approved providers, but beware: not all software handles the final year-end submission.
Sign Up for MTD: You or your accountant must register with HMRC’s online service using your Government Gateway ID. You can join early to test the system without penalties for missing quarterly deadlines during the pilot phase.
Start Digital Record-Keeping: Begin logging income and expenses in your chosen software now, even if MTD doesn’t apply yet. This builds good habits and avoids a last-minute scramble.
Plan for Quarterly Reporting: Set reminders for the quarterly deadlines and ensure your records are up to date. If you use an accountant, confirm they’re ready to handle MTD submissions.
Budget for Costs: Software subscriptions can cost £10-£30 per month, and accountancy fees may rise due to the extra reporting. Factor this into your budget.
Take Elowen, a landlord in Cornwall with two buy-to-let properties. Her gross rental income in 2024/25 was £52,000, so she’s in the first MTD wave. She started using FreeAgent in early 2025, spending 30 minutes a week logging rent and expenses. By the time April 2026 rolls around, she’s ready to submit her first quarterly update without breaking a sweat.
Costs and Considerations
Be careful! MTD isn’t free. HMRC estimates an initial setup cost of £320 per landlord, plus £110 annually for software and potential accountancy fees. If you’re a small-scale landlord with one property, this could dent your profits. On the flip side, digital tools can save time and reduce errors, which might save you from HMRC penalties down the line. For instance, Bronwyn, a landlord in Cardiff with £60,000 in rental income, found that switching to Xero streamlined her bookkeeping and cut her accountant’s fees by 10% because the data was already organised. Still, if you’re tech-averse, consider delegating to an accountant who’s MTD-ready.
Exemptions and Deferrals
Now, not everyone has to jump on the MTD bandwagon. You might be exempt if:
You’re digitally excluded due to age, disability, or location (e.g., rural areas with poor internet).
Your religious beliefs conflict with using digital tools.
Your gross income is below £20,000 (though this threshold may drop further).
You’ll need to apply for an exemption from October 2025, but HMRC hasn’t finalised the process yet. Certain groups, like non-UK resident entertainers or those with complex tax arrangements (e.g., SA109 schedule filers), get a deferral until at least 2027. If you think you qualify, check GOV.UK for updates.
Practical Tips for Landlords
Here’s the thing: MTD can feel overwhelming, but it’s also a chance to get your finances in order. Start by trialling software now—many offer free versions or trials. If you’ve got multiple properties, ensure your software can handle separate records for UK and overseas rentals, as they can’t be combined. And don’t forget to talk to your tenants about timely rent payments, as late payments could mess with your quarterly updates. For example, Idris, a landlord in Manchester, set up automated rent reminders through his software, ensuring his records stayed accurate.
Mastering MTD for Landlords: Practical Strategies and Real-World Insights
Right, you’ve got the basics of Making Tax Digital (MTD) for landlords under your belt, so let’s dig deeper into how you can make this work for you without losing your sanity. This part is all about navigating the MTD landscape with practical strategies, sidestepping pitfalls, and using real-world examples to show how other landlords are tackling it. We’ll look at choosing the right software, avoiding penalties, and handling tricky scenarios like mixed-use properties or overseas rentals. Plus, we’ll throw in some tax-saving tips tailored for UK landlords, all backed by the latest HMRC guidance as of June 2025.
Choosing the Right MTD Software
Now, picking the right software is like choosing a good tenant—it’s got to be reliable and fit your needs. With dozens of MTD-compatible options out there, from QuickBooks to FreeAgent to Xero, you need one that matches your portfolio size and tech comfort level. For a single-property landlord, something simple like GoSimpleTax (starting at £10/month) might do the trick. Got a bigger portfolio? Look at Xero or FreeAgent, which handle multiple properties and integrate with HMRC for both quarterly updates and year-end declarations. Here’s what to check:
HMRC Compatibility: Ensure it supports both quarterly submissions and the final declaration. HMRC’s list of approved software is updated regularly on GOV.UK.
Ease of Use: If you’re not tech-savvy, go for intuitive interfaces with good customer support. FreeAgent, for example, offers live chat and tutorials.
Cost: Prices range from £10 to £30 per month. Some, like QuickBooks, offer tiered plans based on features like multi-property tracking.
Integration: Check if it syncs with your bank or accounting apps to save time.
Take Morwenna, a Bristol landlord with three buy-to-lets. She switched to Xero in 2025 after trialling it for free. It auto-imports her bank transactions, categorises expenses, and flags allowable deductions like mortgage interest, saving her hours each month. Her tip? Start using the software early to iron out any kinks before your first quarterly deadline.
Avoiding Penalties and Staying Compliant
Be careful! HMRC isn’t messing around with MTD compliance. Miss a quarterly update, and you could face a £100 fine per submission, escalating to £300 for repeated failures. If your year-end declaration is late (due 31 January), penalties start at £100 and can climb to 5% of the tax owed. In 2023/24, HMRC issued £1.2 million in penalties for late Self Assessment returns, and MTD’s tighter deadlines could make this worse. To stay on the right side of HMRC:
Set Reminders: Use calendar alerts for the 5 August, 5 November, 5 February, and 5 May deadlines.
Double-Check Records: Ensure your software categorises expenses correctly—mixing up capital and revenue expenses (like a new boiler vs. a repair) can trigger HMRC scrutiny.
Keep Backups: Store digital copies of receipts and invoices in case HMRC requests them. Most software lets you upload photos directly.
For example, Dafydd, a landlord in Swansea, got stung with a £100 fine in 2024 for a late Self Assessment return. With MTD looming, he now uses QuickBooks’ mobile app to snap photos of receipts on the go, ensuring his records are always up to date.
Handling Tricky Scenarios
Now, let’s talk about the curveballs. Not every landlord’s situation is straightforward, and MTD can get complicated if you’ve got mixed-use properties, overseas rentals, or fluctuating income. Here’s how to tackle some common scenarios:
Mixed-Use Properties: If you rent out part of a property (e.g., a flat above your shop), you’ll need to apportion expenses like utilities between personal and business use. Software like FreeAgent lets you split costs by percentage, but you must justify your calculations to HMRC.
Overseas Properties: UK tax residents with overseas rentals must report these under MTD if they hit the income thresholds. You’ll need to convert foreign income to GBP using HMRC’s exchange rates and ensure your software handles multi-currency transactions.
Fluctuating Income: If your income dips below the MTD threshold (e.g., £50,000 in 2026), you can opt out but must rejoin if it rises again. Keep records consistent to avoid gaps.
Consider Lowri, a landlord with a holiday let in Wales and a flat in Spain. Her combined gross income hit £55,000 in 2024/25, so she’s MTD-bound from 2026. She uses Xero to track both UK and overseas income, converting euros to pounds monthly to stay compliant. Her accountant reviews her quarterly submissions to avoid errors, especially with foreign tax credits.
Tax-Saving Tips for MTD Landlords
So, the question is: how can MTD help you save on tax? The real-time nature of quarterly reporting gives you a clearer picture of your profits, letting you plan deductions more effectively. Here’s a table of common allowable expenses for landlords, updated for the 2025/26 tax year:
Expense Type | Details | Tax-Saving Tip |
Mortgage Interest | Interest on loans for rental properties (not capital repayments). | Use software to track interest payments monthly. |
Repairs and Maintenance | Fixing leaks, repainting, etc., but not improvements like extensions. | Log repairs immediately to avoid missing claims. |
Agent Fees | Letting agent or management fees. | Check if your software flags these automatically. |
Insurance | Landlord insurance premiums. | Compare policies annually for cost savings. |
Legal and Professional Fees | Accountant or legal fees for rental business (not property purchase). | Budget for MTD-related accountancy cost increases. |
By logging expenses as you go, you can spot deductions you might’ve missed in a once-a-year tax return. For instance, Gwilym, a landlord in Leeds with £70,000 in rental income, used GoSimpleTax to track small expenses like travel to his properties. In 2024/25, he claimed an extra £2,000 in deductions, cutting his tax bill by £800.
Real-World Case Study: MTD in Action
Now, consider this: If you’re wondering how MTD plays out in practice, let’s look at Sioned, a landlord in Liverpool with four properties earning £65,000 gross in 2024/25. She was nervous about MTD’s quarterly deadlines, so she hired an accountant familiar with FreeAgent in early 2025. They set up her accounts to auto-sync with her bank, and she spends 20 minutes a week uploading receipts. Her first quarterly update in August 2026 went smoothly, and she used the real-time data to adjust her tenant rents mid-year, boosting her cash flow. Her accountant also flagged that she could claim £1,500 in overlooked maintenance costs, saving her £600 in tax.
Planning for Cash Flow and Tax Bills
Here’s a heads-up: MTD’s quarterly updates don’t mean quarterly tax payments (yet), but they do give you a running estimate of your tax liability. This is a game-changer for budgeting. HMRC’s software shows your projected tax bill after each update, so you can set aside cash monthly instead of scrambling in January. For example, if your rental profit is £40,000 in 2025/26, your Income Tax (at 20% basic rate) would be £8,000, plus National Insurance contributions. By saving £700 monthly, you avoid a cash crunch. Use HMRC’s budgeting tool to estimate your liability based on quarterly data.
Preparing for the Unexpected
None of us like surprises, especially tax-related ones. MTD’s digital system flags discrepancies early, but you still need to watch for issues like incorrect expense claims or unreported income. HMRC’s 2023/24 data shows 12% of landlords faced audits due to errors in rental income reporting. To stay safe, keep a digital audit trail—most software stores records for the six years HMRC requires. And if a tenant stops paying rent, log it as a “bad debt” expense, but only after you’ve taken reasonable steps to recover it, per HMRC rules.
Note: Some of the above values are ONLY projected values
MTD for Landlords: Key Takeaways to Stay Ahead of the Curve
Now, you’ve got a solid grip on Making Tax Digital (MTD) for landlords, from the basics to practical strategies. This final part boils it all down to the most critical points you need to know to stay compliant and make MTD work for you. These are the must-know takeaways, distilled into clear, actionable insights for UK landlords. Each point is a single sentence, designed to keep you focused and ready for the digital tax revolution starting April 2026.
Summary of the Most Important Points
MTD for Income Tax Self Assessment requires landlords with gross property or self-employment income over £50,000 to keep digital records and submit quarterly updates to HMRC starting 6 April 2026, with thresholds dropping to £30,000 in 2027 and £20,000 in 2028.
You must use MTD-compatible software, like FreeAgent or QuickBooks, to record all rental income and allowable expenses, ensuring it integrates with HMRC for both quarterly updates and year-end declarations.
Quarterly updates are due on 5 August, 5 November, 5 February, and 5 May, summarising your income and expenses, followed by a final year-end declaration by 31 January to replace the traditional Self Assessment return.
Missing quarterly deadlines or submitting incorrect data can lead to penalties starting at £100 per submission, with late year-end declarations facing fines up to 5% of the tax owed.
Start preparing now by trialling software, signing up for MTD via your Government Gateway ID, and logging expenses digitally to avoid a last-minute rush and reduce errors.
Budget for MTD costs, including software subscriptions (£10-£30/month) and potential increases in accountancy fees, with HMRC estimating a £320 setup cost and £110 annually per landlord.
Landlords with mixed-use properties or overseas rentals must carefully apportion expenses or convert foreign income to GBP using HMRC’s exchange rates, ensuring software supports these complexities.
MTD’s real-time tax estimates help you plan cash flow by setting aside funds monthly, avoiding surprises when your final tax bill is due on 31 January.
Exemptions from MTD are available for digitally excluded landlords or those with income below £20,000, but you must apply to HMRC, with the process opening in October 2025.
Use MTD’s quarterly reporting to maximise tax deductions, such as mortgage interest, repairs, or agent fees, by logging expenses promptly and reviewing them regularly to spot missed claims.
FAQs
Q1. **Can you use MTD for Income Tax if you’re a non-UK resident landlord?**
A. Yes, non-UK resident landlords with UK property income must comply with MTD for Income Tax if their gross income exceeds the thresholds (£50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028), but they should ensure their software handles overseas income reporting separately.
Q2. **What happens if you miss an MTD quarterly update deadline?**
A. Missing a quarterly update can result in a £100 penalty per late submission, with additional points-based penalties for repeated failures, though no penalties apply during the voluntary testing phase before April 2026.
Q3. **How does MTD affect landlords with furnished holiday lets (FHLs)?**
A. From April 2025, FHLs are no longer treated as a separate tax regime and are included in property income under MTD, requiring landlords with income over £50,000 to comply with digital record-keeping and quarterly updates from April 2026.
Q4. **Can you opt out of MTD if your income falls below the threshold?**
A. Yes, if your gross income drops below the MTD threshold (e.g., £50,000 in 2026), you can apply to opt out, but you must resume MTD if your income exceeds the threshold again in a future tax year.
Q5. **Do you need to submit quarterly updates for jointly owned properties under MTD?**
A. For jointly owned properties, you can choose to submit quarterly updates or report expenses annually, but your share of the income must be included in your MTD threshold calculations.
Q6. **Is there free MTD-compatible software available for landlords?**
A. HMRC does not provide free MTD software, but some providers offer free or low-cost options for landlords with simple affairs, such as those with a single property, expected to be available by April 2026.
Q7. **How does MTD handle tenancy deposits for landlords?**
A. Tenancy deposits held by landlords count toward the gross income threshold for MTD (e.g., £50,000 in 2026), but they are not taxable income unless retained for specific reasons like property damage.
Q8. **Can you use MTD if you’re a landlord without a UK National Insurance number?** A. Landlords without a UK National Insurance number by 31 January before the tax year are automatically exempt from MTD for that year, but they must comply if they later obtain one and meet the income threshold.
Q9. **What are the penalties for errors in MTD submissions?**
A. Errors in MTD submissions can lead to penalties based on the inaccuracy’s severity, starting at up to 30% of the tax due for careless errors, with higher penalties for deliberate mistakes.
Q10. **How does MTD affect landlords with income from real estate investment trusts (REITs)?**
A. Income from REIT shares is not included in the MTD threshold calculations, as it’s treated as investment income, not property income, and reported separately in your tax return.
Q11. **Can you use a spreadsheet for MTD record-keeping?**
A. Spreadsheets alone are not MTD-compliant unless they integrate with HMRC-approved software that can submit quarterly updates and year-end declarations directly to HMRC.
Q12. **What support does HMRC offer for landlords transitioning to MTD?**
A. HMRC provides a voluntary testing phase starting in 2025, dedicated MTD customer support, and online guidance, including an interactive tool to check when you need to comply.
Q13. **How does MTD impact landlords with income from multiple properties?**
A. All rental income from multiple properties counts toward the MTD threshold, and you must maintain separate digital records for each property in MTD-compliant software.
Q14. **Can you claim MTD software costs as a tax-deductible expense?**
A. Yes, MTD-compatible software subscription costs are allowable expenses for landlords, deductible against rental income, provided they’re used exclusively for property business.
Q15. **What happens if you sell a rental property during the MTD tax year?**
A. Selling a property doesn’t exempt you from MTD; you must continue submitting quarterly updates for any remaining rental income until the tax year ends, and report capital gains separately.
Q16. **Do you need to submit quarterly updates if you have no rental income in a quarter?**
A. Yes, you must submit a quarterly update even if you have no income or expenses in that period, reporting zero amounts to stay compliant with MTD requirements.
Q17. **How does MTD handle landlords using cash basis accounting?**
A. Landlords using cash basis accounting can continue under MTD, but they must ensure their software supports cash basis reporting and accurately tracks income and expenses as they’re received or paid.
Q18. **Can your letting agent handle MTD submissions for you?**
A. Letting agents can manage records, but you remain responsible for MTD compliance; you or an authorised accountant must submit quarterly updates and year-end declarations through MTD software.
Q19. **What are the MTD requirements for landlords with overseas bank accounts?**
A. You must record all rental income and expenses in GBP, converting overseas transactions using HMRC’s exchange rates, and ensure your MTD software supports multi-currency functionality.
Q20. **How does MTD affect landlords with income below £20,000 after April 2028?**
A. The government is reviewing whether landlords with income below £20,000 will need to join MTD after April 2028, but they can voluntarily sign up if they wish to digitise their records.
About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of My Tax Accountant and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
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