Making Tax Digital for Landlords: Your Essential Guide for MTD for Income Tax

Making Tax Digital is being introduced in stages between April 2026 and April 2028.  

Landlords with a gross annual income from property or self-employment of £50,000 or more in the 2024-2025 tax year, will be required to use Making Tax Digital for Income Tax from April 2026.  

This then reduces to a gross annual income from property or self-employment of £30,000 or more in the 2025-2026 tax year, for mandatory use of Making Tax Digital starting April 2027.  

It then reduces further to a gross annual income from property or self-employment of £20,000 or more in the 2026-2027 tax year, for mandatory reporting using Making Tax Digital beginning April 2028. 

Our guide below outlines what it is, if you are affected and when, and how to comply with the new rules. 

Watch: Making Tax Digital explained

New to MTD? Our short guide walks you through what's changing, who's affected, and what to do next.

Key takeaways of Making Tax Digital for Landlords

• Making Tax Digital will eventually impact all unincorporated landlords with income of £20,000 or more. 

• Landlords will need to sign up for MTD on the HMRC website and complete the relevant registration. 

• Landlords will be required to submit quarterly income/expenditure summaries alongside a Final Declaration. 

What is Making Tax Digital (MTD) and why is it important?

Making Tax Digital is a Government initiative to modernise the tax system, by requiring businesses to keep and submit records of their property income and allowable expenses digitally.  

If you fall under the remit of the scheme you will need to use special Government-approved software to file your tax return digitally.  

How will landlords be affected by Making Tax Digital for Income Tax?

Making Tax Digital will require you to submit quarterly updates instead of submitting an annual return. These quarterly updates will need to be submitted by the 7th of August, November, February and May each year.  

An additional final declaration, similar to the current Self-Assessment return, will need to be submitted by 31 January each year to confirm the accuracy of your submissions, and to allow you to claim any allowances or reliefs.   

​This end of year declaration must also be sent to HM Revenue and Customs (HMRC) via the new software with submission by any other means banned.  

Landlords with annual turnover from either self-employment and/or property below the VAT registration threshold can apply a three-line accounts approach.  

What are three-line accounts

Instead of specifying the type of income or expense, three-line accounts allow digital records to be tagged in your chosen MTD software as either just “income” or “expense”.  

The one exception is where a landlord incurs residential property finance costs, such as mortgage interest, which must always be categorised separately.  

Joint property owners can make use of the three-line accounts approach if eligible. 

There are a number of different exemptions for Making Tax Digital, and we have listed the most common exemptions below. The exemptions list is also subject to change by HMRC.  

If you would like to know more about exemptions for Making Tax Digital, please check our exemptions guide here, or visit HMRC’s website.  

The primary temporary exemption is landlords with an annual turnover below the Making Tax Digital threshold for each stage of implementation. From April 2026, the threshold for mandatory MTD use is an annual gross income from property or self-employment of £50,000 or more in the 2024-25 tax year. 

Limited company landlords are not affected by Making Tax Digital and will continue to pay corporation tax.   

The Government has confirmed it will bring forward legislation to finalise exemptions by April next year. These will be offered to taxpayer groups ‘who would face disproportionate barriers in operating Making Tax Digital’.   

According to the guidance, you're automatically exempt and cannot sign up for Making Tax Digital for Income Tax if you are a:   

• Trustee, including a charitable trustee or a trustee of non-registered pension schemes  

• Person that does not have a National Insurance number — this only applies for a tax year where you do not have a National Insurance number on 31 January before the start of that tax year  

• Personal representative of someone who has died  

• Lloyd’s member, in relation to your underwriting business  

• Non-resident company  

You will also be able to apply for an exemption from using Making Tax Digital for Income Tax when the applications process opens if:   

• It’s not practical for you to use software to keep digital records or submit them — this may be due to your age, disability, location or another reason. 

• You are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records 

HMRC will determine applications for exemption on a case-by-case basis.  

If HMRC has also previously confirmed you're exempt from sending online returns for Making Tax Digital for VAT, you should contact them when the application process opens. HMRC will perform some checks, and if your circumstances have not changed, they will confirm you're exempt from Making Tax Digital for Income Tax.  

You can read more about MTD exemptions on our dedicated Making Tax Digital for Income Tax Exemptions Guide 

1. Determine you are eligible for Making Tax Digital 

If your gross income from property or self-employment was £50,000+ in the 2024/2025 tax year, you will normally need to comply with MTD.  

You can also comply voluntarily if your income does not meet the threshold. 

2. Register for Making Tax Digital 

If you need to, sign up for MTD on the HMRC website and complete the relevant registration. 

3. Select Making Tax Digital Compatible Software 

Use Making Tax Digital compatible software to keep digital records and submit returns - our Portfolio software is MTD-compatible, and you can start digitising your records for free with your NRLA membership

4. Maintain Digital Records 

Use the MTD software to digitally record all business income and expenses. 

5. Submit Quarterly Updates 

Provide income and expenditure summaries from their chosen system to HMRC within one month of every quarter-end date. HMRC will use this data to estimate your tax liability. You'll also need to keep these digital records for 5 years. 

You may also want to consider which accounting method you'll use for your record keeping. This will either be:  

• Cash basis accounting – the default method for unincorporated trading or property businesses. You will record income or expenses when you receive money or pay a bill. You won’t need to pay Income Tax on money you have not received. You can use this method up to a total turnover of £300,000 – above that, and you’ll need to use traditional accounting. 

• Traditional accounting – You will record income and expenses by the date you invoiced or were billed. Traditional accounting is usually used for complex businesses, or if a financial institution requires it prior to a loan. You will need to keep more records compared to cash basis accounting. 

If you're not sure, you will be able to create digital records during the tax year and then confirm your accounting method when you submit your tax return.  

Initially, only landlords with an annual income of £50,000 from property or self-employment are affected, but over time this will extend to most landlords.  
 
By 2028, all unincorporated landlords who earn more than £20,000 a year (from both properties and self-employment combined) and pay tax via Self-Assessment will be affected, with the compliance dates depending on that income.  

Key compliance dates for landlords

• From 2026: Landlords with annual gross income of £50,000 or more from property or self-employment in the 2024-2025 tax year must comply  

• From 2027: This is extended to landlords earning £30,000 or more in gross annual income from property or self-employment in the 2025-2026 tax year. 

• From 2028: The new rules apply to landlords with income of £20,000 or more in gross annual income from property or self-employment in the 2026-2027 tax year. 

This means that if you earned £50,000 from property or self-employment in the 24/25 financial year, you will need to start using Making Tax Digital for Income Tax from April 2026.  

Only self-employed income and rental income is included in the above figures. Employment (PAYE) and pensions are not included. Records for self-employment income will need to be kept separate. 

You can read more about key dates and timeframes on our dedicated Making Tax Digital Key dates guide

HMRC is increasing penalties for late submissions and payments, emphasising the importance of submitting returns properly and on time. 

From April 2026, this will take the form of a points threshold system. One penalty point will be applied for each missed deadline. If you reach the points threshold of four points, a financial penalty of £200 will be imposed.  

Late payment penalties will also become proportionate with rates based on when the outstanding amount is paid. This is currently 3% of the tax outstanding 15 days after the due date, with a further penalty of an additional 3% if payment is not made by day 30. Both penalties will increase to 4% from April 2027. There is also a further penalty of 10% per year for every day the tax is unpaid after day 30. These penalties are charged on top of interest.  

The current late payment penalty rules continue to apply to late payment of self-assessment liabilities for earlier tax years (ie, outside of MTD income tax). The increased late payment penalty rules will apply to all income tax self-assessment taxpayers from 6 April 2027. 

If a property is jointly owned, gross income will be determined by the share of income from the property (this will usually be based on ownership share). For married or civil partners, this defaults to 50/50 unless declared otherwise in the Declare beneficial interests in joint property and income form (Form 17) to HMRC. 

Joint property owners can make use of the three-line accounts approach if eligible.  

For example, a property has a gross rental income of £100,000. The income is split 30/70 between Partner 1 and Partner 2. Partner 1 (gross income of £30,000) will be required to use an MTD software from 2027, whilst Partner 2 (gross income of £70,000) will be required to use an MTD software from 2026. 

You should be able to handle Making Tax Digital for Income Tax, provided you have familiarised yourself with relevant guidance and signed up to a Making Tax Digital reporting software. 

You are encouraged to familiarise yourself with Making Tax Digital requirements ahead of time. Our partners, RITA, have also developed a useful MTD for income tax guide outlining the new rules. 

The Government has produced a  Making Tax Digital (MTD) for Income Tax toolkit  to help landlords and letting agents prepare for changes up ahead. The toolkit, produced by HMRC includes:   

• An overview of the changes, who is affected and how to prepare   

• Links to detailed guidance   

• FAQs and answers   

• Communications resources such as an agent checklist, videos and printable posters  

You should also make sure your software is compatible with the system, so you are ready. Broadly speaking the software will need to allow you to:  

• Maintain business records as required by the regulations  

• Finalise your taxable business income and submit your declaration at the end of the tax year  

• Communicate with HMRC digitally through their API (application programming interface) platform.  

• Prepare and send quarterly updates and statements to HMRC from your tax records  

You can check your software and find out more about compatible systems here on HMRC’s website.  

Finally, you can also consider undergoing some training to really familiarise yourself with the requirements of Making Tax Digital for Landlords. The NRLA offer a training course which you can find out more about by clicking the button below 

You can sign up to Making Tax Digital for Income Tax here 

You’ll need to use the same user ID and password you got when you registered for Self Assessment. You might also be asked to provide further proof of your identity to use this service. You can do this by: 

• Using an app on your mobile phone to match a photo of your face to your passport or driving licence. 
• Answering questions about information we already hold about your identity for example, passport, credit reference, driving licence, Self Assessment, latest P60, or a recent payslip. 

You will need to select a Making Tax Digital reporting software to create, store and correct digital records of property income and expenses, send quarterly reports and submit a final declaration.  

The NRLA has developed an exciting feature within its Portfolio property management software that will help you stay compliant with Making Tax Digital. Find out more about NRLA Portfolio and how it can help you prepare for Making Tax Digital.

With your NRLA membership, you can login to organise and categorise your transactions for free to store them in compliance with Making Tax Digital. You can also upgrade to automate categorisation, and handle quarterly updates and the final declaration by their respective deadlines.

You can start preparing now by signing into Portfolio, uploading your properties and connecting your bank accounts using the Open-Banking technology.

Do new landlords need to use Making Tax Digital?

If you have become a landlord for the first time, such as by inheriting a property, you won’t need to use Making Tax Digital for Income Tax until after you’ve submitted your first Self-Assessment tax return for the rental income. 

Is Making Tax Digital compulsory?

Yes. Making Tax Digital for Income Tax will be compulsory for landlords and sole traders whose combined gross income from property and self-employment meets or exceeds the relevant threshold. From April 2026 the first group must comply, with all eligible landlords required to join by April 2028 as the thresholds reduce.

Why is Making Tax Digital being introduced?

MTD is a Government initiative to modernise the tax system. The aim is to improve accuracy, reduce errors and bring tax reporting closer to real-time by requiring digital record keeping and regular electronic submission of data to HMRC. This builds on the earlier MTD rules for VAT.

What is an unincorporated landlord?

An unincorporated landlord is an individual who earns income from property that is not owned by a limited company. The property is likely held in your name, or if jointly-owned, you and someone else's name. You might also see this described as being a "sole trader landlord" or an "individual/independent landlord" (even if the property is jointly-owned). 

Will I need to use MTD if I have a Limited Company?

You will not be eligible for Making Tax Digital for Income Tax if your property income is earned through a limited company. You will continue to pay tax in the usual manner for limited companies. 

How is tax changing for landlords in 2026?

From April 2026 unincorporated landlords whose rental income exceeds £50,000 in the 2024-25 tax year will need to:

• Keep digital records,

• Use HMRC-approved software,

• Submit quarterly income and expense updates to HMRC, and complete an annual digital declaration that replaces the traditional Self Assessment return.

The income threshold then reduces in stages falling to £20,000 by 2028.

How do I make tax digital?

To comply with MTD for Income Tax you must:

1. Check if you are eligible based on your income.

2. Sign up for MTD for Income Tax on the HMRC website.

3. Choose HMRC-compatible software that can keep digital records and submit quarterly updates.

4. Record all income and expenses digitally throughout the year.

5. Send quarterly income and expenditure updates to HMRC by the quarterly deadlines.

6. Submit a final declaration at the end of the tax year through your software.

What type of income is included for Making Tax Digital for Income Tax?

For the purposes of MTD for Income Tax qualifying income includes:

• Rental income from property,

• Income from self-employment (where applicable),

• Combined gross income from these sources before expenses. GOV.UK+1

Income that does not count towards the MTD threshold includes employment income (PAYE), pensions, dividends, and most investment income.

Does Making Tax Digital for Income Tax apply to rental income from flats/apartments?

Yes. Rental income from residential properties, including flats and apartments, counts as property income and is included in your MTD qualifying income.

If I sell or dispose of a property, does the income count towards Making Tax Digital for Income Tax?

No. Capital gains from selling or disposing of property do not count towards the Making Tax Digital income thresholds. This type of income is subject to Capital Gains Tax and reported separately to HMRC.

Is a tenancy deposit included in my Making Tax Digital for Income Tax calculations?

No. A tenancy deposit that you hold as security is usually not treated as rental income unless you keep it when a tenant leaves (for example to cover unpaid rent or damages). Only actual rental income or other property receipts count towards your gross income for MTD. HMRC guidance focuses on actual rent and property receipts when calculating qualifying income for MTD obligations.