What is Making Tax Digital for Landlords?
Making tax digital for landlords effects the way in which landlords declare their rental and any other income to HMRC.
From April 2026 landlords with income above £50,000 will need to comply with MTD for ITSA rules. Landlords with income of above £30,000 will automatically qualify for MTD from April 2027.
ITSA stands for income tax for self assessment and it’s purpose is to change how accounting records are kept and how income is declared to HMRC.
Both rental and other business income qualifies for MTD income threshold purposes which means you need to combine all rental and business income to calculate your income for MTD for ITSA.
If you co own a property the MTD for ITSA income threshold applies per person and not per property.
Our MTD for landlords guide explores timelines and practical considerations that property owners need to understand as they prepare for this digital transition.
What does making tax digital for landlords mean?
MTD for landlords requires digital accounting records to be kept and the reporting of income and expenses information more frequently.
The annual self assessment tax return is replaced by the following:
- Income and expenses figures reported quarterly.
- An end of period statement.
- A final declaration.
Which landlords does MTD for ITSA apply to?
HMRC are using a staggered approach which aims to give smaller-scale landlords additional time to adapt to the new requirements while allowing HMRC to manage the transition more effectively.
- All landlords with an income of £50,000 or more are required to comply from April 2026 including non resident landlords based outside the UK.
- Any landlords with an income of more than £30,000 start ITSA submissions from April 2027.
- From April 2028 the third implementation threshold begins for income from £20,000.
It’s worth noting that these implementation dates represent legal deadlines, not aspirational targets.
Landlords who fail to comply by their respective deadline may face penalties under the new points-based penalty system.
Understanding the MTD for landlords thresholds and their application
Unlike some tax regulations that apply based on current year income, MTD eligibility is determined by looking backwards at previous tax years’ figures.
For landlords potentially entering the MTD system in April 2026, HMRC will assess their gross income from the 2024/25 tax year.
This means that the income reported on tax returns due by 31 January 2026 will determine whether a landlord falls within the initial £50,000 threshold.
This retrospective assessment approach requires forward planning, as current income levels will influence future MTD obligations.
When calculating these thresholds, HMRC considers the combined gross income from both property rentals and any self-employment activities.
This aggregation is significant for landlords who also operate businesses or work as sole traders.
For instance, a landlord with £25,000 in rental income and £30,000 from self-employment would exceed the £50,000 threshold and be required to comply with MTD from April 2026.
Importantly, certain income streams are excluded from these calculations. Employment income (PAYE), partnership income, and dividend income do not count toward the MTD thresholds.
This distinction benefits landlords whose primary income comes from employment while property rental represents a secondary income source.
Another crucial aspect is the persistence rule within the MTD framework. Once a landlord enters the MTD system, they must continue to comply with its requirements for a minimum of three tax years, even if their income subsequently drops below the relevant threshold.
This means that a landlord who qualifies for MTD in 2026/27 based on their 2024/25 income would need to maintain MTD compliance until at least 2029/30, regardless of income fluctuations during that period.
For landlords with multiple properties, it’s important to understand that the threshold applies to the cumulative rental income across all properties, not to each property individually.
This comprehensive approach means that even landlords with several lower-yielding properties may find themselves subject to MTD requirements if their total rental income exceeds the relevant threshold.
Landlord MTD digital record keeping
MTD for landlords means that your accounting records must be kept digitally using MTD compatible software.
The software used must be approved for use by HMRC for making tax digital to avoid ITSA penalties.
If you currently keep your accounting records electronically you need to ensure that the software is MTD for ITSA ready before submitting your quarterly reports, end of your statement and final declaration.
For example if you use an excel spreadsheet you will normally need to pay for bridging software which makes sure your excel accounting records are submitted to HMRC in the right format.
Digital record-keeping extends beyond simply recording transactions in software. Landlords must maintain digital links throughout their record-keeping process, meaning that data cannot be manually transferred between different systems or manipulated outside of MTD-compliant software.
This requirement aims to reduce errors and create an unbroken digital audit trail from initial record to tax submission.
What do I need to submit to HMRC under MTD for ITSA?
You will need the same income and expenses information as before MTD for ITSA however it needs to be reported more frequently and in a different format.
The annual self assessment tax return is replaced by more regular online updates which give HMRC a more up to date record of your income and outgoings.
Landlords will be required to make quarterly submissions to report income and expenses on:
- 5th August.
- 5th November.
- 5th February.
- 5th May.
In addition a separate EOPS or end of period statement is mandatory for each source of business income.
To complete the online process a final declaration (which effectively replaces the SA100 annual tax return) is necessary before HMRC provides you with a final tax calculation for the year.
How do I submit my landlord tax return through ITSA?
Under MTD, landlords must submit updates to HMRC every three months, providing a summary of their income and expenses for that period.
The quarterly reporting cycle represents perhaps the most significant shift from the current annual self-assessment system.
These quarterly submissions must be made within one month following the end of each quarter.
The tax quarters typically align with the standard tax year, running from April to March, though there may be some flexibility for businesses with different accounting periods.
The quarterly submissions aren’t classed as tax returns in the traditional sense – they don’t require landlords to calculate their tax liability or make payments.
Instead, they provide HMRC with regular updates on financial activity, creating a more real-time picture of rental income and associated expenses.
The actual tax calculation and payment will still occur annually, following the submission of an end-of-year finalisation statement.
Making tax digital software for landlords
HMRC need to receive your MTD for ITSA submissions via third party software. You can find software that’s compatible with MTD for income tax and a bit about what each provider offers on .GOV.
The market offers numerous solutions designed specifically for property management and tax reporting, each with varying features, complexity levels, and price points.
It’s a good idea to do some research on MTD for ITSA software providers to find the best fit for your rental business.
For landlords managing multiple properties, the software must be capable of tracking income and expenses for each property separately while still enabling consolidated reporting.
It is possible to sign up for MTD for ITSA as a landlord before the ITSA introduction dates of April 2026 and April 2027.
HMRC can only sign up some volunteers to the MTD for ITSA platform due to system restrictions.
Before you apply you must ensure you have compatible software solutions in place and meet the other MTD volunteer criteria.
Making tax digital penalties for landlords
A new penalty system adopts a points-based approach for late submission of quarterly updates and annual declarations.
Under this model, landlords will accumulate penalty points for each missed deadline, with financial penalties applied once a specific threshold of points is reached.
This represents a departure from the immediate financial penalties under the current self-assessment system, providing some flexibility during the adjustment period.
For late payment of tax, the Spring Statement 2025 announced increased penalty rates compared to the current regime.
Landlords will face a 3% penalty on outstanding tax that remains unpaid 15 days after the due date, with an additional 3% applied after 30 days.
For tax that remains unpaid beyond 31 days, a further penalty of 10% per annum will be charged.
These escalating penalties emphasise the importance of not only timely submission but also prompt payment.
The government has introduced a mechanism for HMRC to cancel or reset late submission penalty points and associated financial penalties in certain circumstances.
This provision recognises that technological issues or genuine misunderstandings might occur during the transition period, allowing for some administrative discretion in the application of penalties.
For landlords managing multiple properties or business interests, it’s important to understand that the penalty system applies separately to each income stream.
This means that missing deadlines for property income reporting could accumulate points independently from other business activities, potentially resulting in multiple penalties if compliance issues affect several areas simultaneously.
MTD exemptions and special cases for landlords
Landlords who are genuinely digitally excluded are typically exempt from MTD obligations. This exemption applies to individuals for whom it’s not reasonably practicable to use digital tools due to factors such as age, disability, remoteness of location, or religious beliefs that are incompatible with using electronic communications.
HMRC has confirmed that property owners already exempt from MTD for VAT on digital exclusion grounds will automatically receive exemption from MTD for Income Tax without needing to reapply.
Other groups that are currently exempt from MTD for landlords include:
- ministers of religion.
- Lloyd’s Underwriters.
- individuals who receive the Married Couples’ Allowance.
- individuals who receive the Blind Persons’ Allowance.
- individuals who have a Power of Attorney.
- non-UK resident foreign entertainers and sportspeople who have no other income qualifying sources of UK income.
MTD for Landlords Accountants
Accountants have been well versed in making tax digital for ITSA with HMRC requirements at the forefront of their accountancy packages.
It’s worth considering using an accountant for any landlords that don’t already use one to help with the transition to MTD.
The right accountant can provide MTD record keeping software and file all quarterly reports, end of period statement and the final declaration on time to HMRC.
