Making Tax Digital for landlords: who needs it and when

Making Tax Digital (MTD) for Income Tax changes how many landlords deal with HMRC. Instead of one Self Assessment return a year, you keep digital records and send quarterly updates through compatible software, then finalise the year. It started on 6 April 2026 for people with qualifying income over £50,000, and the threshold falls in each of the next two years.

This guide covers individual landlords who file Self Assessment, not property held through a limited company.

When MTD applies to you

HMRC decides whether you’re eligible based on your qualifying income on an earlier Self Assessment return.

HMRC reviews your qualifying income each year from your return. If your 2025 to 2026 return shows qualifying income over £30,000, you’ll need to be ready by April 2027.

What counts as qualifying income

Qualifying income is your total self-employment and property income before expenses. That means gross rent, not profit.

Counted:

• Gross rental income from property.
• Gross self-employment income (turnover), if you also run a business as a sole trader.

Not counted:

• Salary or wages (PAYE employment).
• Pensions, including the State Pension.
• Dividends, including from your own company.
• Interest.
• Your share of profits as a partner in a partnership.

HMRC gives an example of £25,000 rental income plus £27,000 self-employment income: qualifying income of £52,000, so that person is in from April 2026.

Because it is measured on gross rent, a landlord with modest profits can still be caught. A portfolio bringing in £2,000 a month in rent is £24,000 a year gross, which is over the £20,000 threshold that applies from April 2028.

Jointly owned property

If you own a property with someone else, only your share of the gross rental income counts towards your threshold. HMRC’s example: two siblings own a property equally and it earns £50,000 a year. If neither has other qualifying income, each has qualifying income of £25,000.

Each joint owner who is over the threshold reports their own share. HMRC’s guidance allows joint owners to report income only in their quarterly updates and add their expenses after the end of the tax year, which can help where one owner or an agent handles the accounts.

What you have to do

1. Keep digital records of rental income and expenses, using MTD-compatible software.
2. Send quarterly updates to HMRC through that software. These are summaries of income and expenses, not tax returns.
3. Finalise the year and submit your tax return through the software by 31 January after the tax year ends.

Quarterly update deadlines

You can use standard periods (in line with the tax year) or calendar periods; the HMRC quarterly update guidance sets the same deadlines for both.

Each update is cumulative, covering the year so far, so corrections can be made in the next update.

Penalties

HMRC uses a points system for late quarterly updates. It has said it won’t apply penalty points for late quarterly updates in the 2026 to 2027 tax year, though they must still be sent before you file your return. After that, once you reach 4 points, you get a £200 penalty. Late payment penalties are separate.

Choosing software

HMRC publishes a list of software that works with MTD for Income Tax. Options range from full accounting packages to simpler apps built for landlords, and “bridging” software that links a spreadsheet to HMRC.

When choosing, think about:

• Number of properties. Can it track income and expenses per property?
• Joint ownership. Can it split figures by share?
• Agent access. Can your accountant or letting agent work in it?
• Bank feeds. Pulling in transactions automatically saves time.
• Cumulative updates. It should handle the year-to-date figures each update needs, so a correction in quarter 1 can be made in quarter 2.

Exemptions and deferrals

Some people are exempt automatically, with no need to apply. Examples HMRC gives include people without a National Insurance number before the tax year starts, and people with a power of attorney or legal deputy acting for them because they can’t manage their own affairs. Some situations are only temporarily exempt until April 2027.

You can also apply for an exemption if you’re digitally excluded, meaning it isn’t reasonable for you to use software because of your age, a health condition, a disability or a similar reason. HMRC says being unfamiliar with software, or having always filed on paper, is not enough on its own.

If you think you might be exempt, check HMRC’s exemption guidance before your first quarterly deadline of 7 August rather than assuming.

Property income tax rates from April 2027

Separately from MTD, the government has announced new property income tax rates from 6 April 2027:

Finance cost relief (for mortgage interest) will be given at the property basic rate of 22%.

These rates apply in England and Northern Ireland, and in Wales unless the Welsh Government uses new powers to set its own. Scotland will set its own approach. The rates are set by policy paper ahead of the Finance Act, so the detail may still change before April 2027.

Practical steps now

• Work out your qualifying income from your last return. Add gross rent and any gross self-employment income.
• Check which April you join: 2026, 2027 or 2028.
• Pick software early and run a few months of records through it before your first 7 August update.
• Separate your rental finances, for example a dedicated bank account, to make records easier.
• Talk to an accountant if you have joint property, overseas property or several sources of income.

For your other landlord duties, see how to become a landlord and the landlord compliance checklist.

This guide is general information, not tax advice. Speak to an accountant or tax adviser about your own circumstances.

Estimate your tax

Use the landlord tax calculator to see how the 22% property rate from 6 April 2027 and the mortgage interest restriction change your bill, and the rental yield calculator to check the numbers on a property before you buy.