Making Tax Digital for Landlords — What You Need to Know (April 2026)
Updated March 2026 · 8 min read
Making Tax Digital (MTD) is HMRC's programme to digitalise the UK tax system. For landlords, the key change is MTD for Income Tax Self Assessment (MTD ITSA) — which requires landlords and self-employed individuals to keep digital records and submit quarterly tax updates to HMRC rather than a single annual self assessment return. The first phase begins in April 2026.
What Is MTD ITSA?
MTD ITSA is a new way of reporting income to HMRC. Instead of completing one Self Assessment tax return per year (typically by 31 January), affected landlords will need to:
- Keep digital records of their rental income and expenses throughout the year
- Submit quarterly summaries of income and expenses to HMRC
- Submit a final end-of-year declaration (replacing the existing SA return) after the tax year ends
HMRC's stated aims are to reduce errors, improve cash flow forecasting for taxpayers, and modernise the tax system. For landlords, it means more frequent interaction with the tax system and the need to use compatible accounting software.
Who Is Affected and When?
MTD ITSA is being phased in by income level:
| Start Date | Who Is Affected |
|---|---|
| April 2026 | Landlords (and self-employed) with gross income above £50,000 per year |
| April 2027 | Landlords (and self-employed) with gross income above £30,000 per year |
| TBC | Landlords with income below £30,000 — date not yet confirmed by HMRC |
The income threshold refers to gross rental income (before any expenses are deducted), not profit. A landlord with three properties generating £20,000/year in rent each (£60,000 gross) would be in scope for April 2026 even if net profit after costs and mortgage interest is much lower.
Importantly, the threshold applies to the combined total of rental income and self-employment income. If you have a business with £35,000 self-employment income and rental income of £18,000, your total is £53,000 — above the April 2026 threshold.
What Quarterly Reporting Means in Practice
Under MTD ITSA, the tax year is divided into four quarters:
- Quarter 1: April – June (submission deadline: 5 August)
- Quarter 2: July – September (submission deadline: 5 November)
- Quarter 3: October – December (submission deadline: 5 February)
- Quarter 4: January – March (submission deadline: 5 May)
Each quarterly submission is a summary of income and expenses — not a full tax calculation. HMRC will not calculate your tax bill from quarterly submissions alone; the final declaration (submitted after the year end) confirms the full year position, claims reliefs, and settles any tax due.
Quarterly submissions must be made using MTD-compatible software — you cannot use HMRC's own online portal for MTD ITSA returns in the way you currently submit Self Assessment.
What Counts as a Qualifying Digital Record?
MTD requires you to keep digital records of every transaction. This means:
- Every rent payment received — date, amount, property
- Every expense paid — date, amount, category, supplier
- Digital copies of receipts and invoices (or a digital record of the key information from each)
Records must be kept in MTD-compatible software — a spreadsheet alone is generally not sufficient unless it connects to HMRC via a bridging tool. Bank statement downloads fed into compatible software count, as do scanned receipt apps that integrate with accounting platforms.
Software Options for Landlords
HMRC maintains a list of MTD ITSA compatible software. The main options currently available or in development for landlords include:
| Software | Type | Approx. Cost (pa) |
|---|---|---|
| QuickBooks | Full accounting | £120–£360 |
| Xero | Full accounting | £144–£420 |
| FreeAgent | Small business accounting | £180 (free with some banks) |
| Hammock (landlord-specific) | Landlord-focused | £120–£200 |
| Spreadsheet + bridging tool | Manual + bridging | £50–£150 |
For small portfolios (1–3 properties), a landlord-specific tool like Hammock or a basic spreadsheet with a bridging software connector may be sufficient. For larger portfolios or those with more complex affairs, full accounting software or working with an accountant who uses compatible software is more practical.
Penalties for Non-Compliance
HMRC is implementing a points-based penalty system for MTD ITSA. Each missed quarterly submission earns a penalty point. Once a threshold is reached — four points for quarterly filers — a £200 penalty is triggered. Further penalties apply for continued non-compliance.
Late payment penalties also apply — 2% of unpaid tax after 15 days, 4% after 30 days, and interest accruing thereafter. HMRC has indicated it will take a lenient approach in the first year of MTD ITSA to allow landlords time to adapt, but compliance expectations will be enforced from the second year onwards.
Steps to Take Before April 2026
If you are likely to be in scope for April 2026:
- Check whether your gross rental income (plus any self-employment income) exceeds £50,000
- Review the HMRC list of compatible software and choose a solution
- Start keeping digital records now if you are not already doing so
- Speak to your accountant about whether they will handle quarterly submissions on your behalf or whether you will do it yourself
- Consider whether separate digital records are needed per property or if a combined summary works for your situation
Key Takeaways
- MTD ITSA requires quarterly digital submissions to HMRC instead of one annual Self Assessment return
- Affects landlords with gross income above £50,000 from April 2026; above £30,000 from April 2027
- Income threshold is gross rental income (before expenses), combined with any self-employment income
- Compatible accounting software is required — a spreadsheet alone is not sufficient unless connected via a bridging tool
- Penalties accumulate per missed quarterly submission — plan early to avoid compliance issues