MTD for Income Tax: What Landlords Need to Know
A focused guide for property owners — your obligations, key deadlines, what records to keep, and how to get ready
If you receive rental income from a UK property, Making Tax Digital for Income Tax (MTD for IT) is coming for you — and sooner than many landlords realise. Whether you own one buy-to-let or a sizeable portfolio, the way you report your property income to HMRC is about to change fundamentally. This guide explains exactly what MTD means for landlords: who is affected, when, what you must do, and how to make the transition as smooth as possible.
What Is MTD for Income Tax — and Why Does It Affect Landlords?
Making Tax Digital for Income Tax is HMRC’s programme to modernise the UK tax system. Instead of filing a single Self Assessment tax return once a year, individuals with qualifying income will be required to keep digital records throughout the year and submit quarterly updates to HMRC using compatible software.
Landlords are specifically included in this regime because property income — rental receipts minus allowable expenses — counts as qualifying income for the purposes of MTD. If your gross rental income from UK property crosses the relevant threshold, you are in scope, regardless of whether letting property is your primary occupation or a secondary source of income alongside employment or a pension.
Important Distinction: MTD for Income Tax applies to gross rental income — that is, your total rent received before deducting any expenses. It is not based on your profit. A landlord receiving £52,000 in rent but making only £8,000 profit after mortgage interest, repairs and agent fees would still be in scope from April 2026.
Who Is Affected and When
HMRC is rolling out MTD for Income Tax in waves based on income thresholds. The rollout specifically applies to self-employed individuals and landlords — the two groups who currently report income through Self Assessment.
The thresholds apply to your combined qualifying income — meaning rental income plus any self-employment income added together. A landlord earning £25,000 in rent who also earns £30,000 as a freelancer has combined qualifying income of £55,000 and is therefore in scope from April 2026, even though neither income stream alone crosses the £50,000 threshold. This catches many landlords off guard.
What Exactly Must Landlords Do Under MTD?
1 Keep Digital Records of All Rental Income and Expenses
You must record every transaction relating to your property business digitally — in real time or near real time — using MTD-compatible software. For each transaction, the minimum required data fields are:
- The date of the transaction
- The category of income or expense (using HMRC’s specified headings)
- The amount received or spent
You do not need to scan and store digital copies of receipts or invoices as part of the digital record — though you must retain source documents for at least five years after the relevant submission deadline.
2 Submit Quarterly Updates to HMRC
Four times a year, you must submit a summary of your property income and expenses to HMRC using compatible software. These are not tax returns — they are simply updates of your running income and expenditure figures. The quarterly periods and submission deadlines are:
| Quarterly Period | Period Covers | Submission Deadline |
|---|---|---|
| Quarter 1 | 6 April – 5 July | 5 August |
| Quarter 2 | 6 July – 5 October | 5 November |
| Quarter 3 | 6 October – 5 January | 5 February |
| Quarter 4 | 6 January – 5 April | 5 May |
3 Submit an End of Period Statement (EOPS)
After the four quarterly updates, you must submit an End of Period Statement for each property business. This is where you make any adjustments, claim allowances (such as the property income allowance or furnished holiday lettings reliefs), and confirm that the information provided is correct. The EOPS effectively replaces the property pages of the current Self Assessment return.
4 Submit a Final Declaration
The Final Declaration replaces the annual Self Assessment tax return. It brings together all your income sources — property income, employment income, investment income, pension income and so on — and calculates your overall tax liability for the year. The deadline for the Final Declaration is 31 January, the same as the current Self Assessment filing deadline.
The MTD Journey: From Transaction to Tax Bill
Step 1
Record each rental receipt and expense digitally as it occurs
Step 2
Submit quarterly summary updates via MTD-compatible software
Step 3
Submit End of Period Statement with adjustments and allowances
Step 4
Submit Final Declaration to confirm total tax liability by 31 January
What Income and Expenses Must Be Recorded?
Rental Income
All gross rental income received must be recorded — including rent, any service charges passed through to tenants, and any other payments received in connection with the property. Deposit income is not rental income and should not be included until it is forfeited or applied to cover costs.
Allowable Expenses
Landlords can record and claim the following categories of allowable expenses under MTD, aligned to HMRC’s standard property income categories:
| Expense Category | What It Covers |
|---|---|
| Rent, rates and insurance | Ground rent, council tax (where you pay it), buildings and contents insurance |
| Repairs and maintenance | Like-for-like repairs, redecoration, general upkeep — not improvements |
| Finance costs | Mortgage interest (subject to the finance cost restriction for residential properties) |
| Legal and professional fees | Letting agent fees, accountancy fees, legal costs for tenancy renewals |
| Property management costs | Managing agent fees, advertising costs, tenant referencing fees |
| Other allowable property expenses | Cleaning, gardening, utility costs where landlord is responsible, travel to the property for management purposes |
Improvements to the property — such as adding an extension, converting a loft, or fitting a new kitchen where none existed before — are capital expenditure and cannot be claimed as a revenue expense. These must be treated separately and may qualify for capital allowances or reduce your capital gains tax liability on disposal. Incorrectly recording capital expenditure as repairs is one of the most common errors in landlord accounts and must be avoided in your MTD records.
The Finance Cost Restriction: A Key Complication for Landlords
Since April 2020, residential landlords have been unable to deduct mortgage interest as a direct expense. Instead, mortgage interest on residential lettings is treated as a basic rate tax credit — meaning you record the full rental income, then receive a 20% tax credit on the interest paid, rather than deducting the interest before calculating your profit.
Under MTD, you will still record your mortgage interest payments in your digital records, but they must be categorised correctly as a finance cost subject to restriction rather than a straightforward expense. This distinction matters because your quarterly submissions will show a higher apparent profit than your actual tax position — which can cause confusion if not properly understood.
A landlord receives £18,000 in rent and pays £8,000 in mortgage interest, with £3,000 in other allowable expenses. The digital records show income of £18,000 and expenses of £11,000. However, the taxable profit is £15,000 (rent minus non-finance costs only), with a 20% tax credit of £1,600 applied against the tax bill. The quarterly submissions will report £18,000 income and £3,000 expenses — a profit figure of £15,000 — with the finance cost noted separately. A landlord who does not understand this may be alarmed to see a higher profit figure than expected.
Portfolio Landlords: Recording at Portfolio vs Property Level
If you own multiple properties, you have a choice — at least for now — about how you structure your digital records.
HMRC currently allows landlords to record income and expenses at portfolio level — meaning you combine all rental income and all allowable expenses across your entire property portfolio into a single set of digital records, rather than tracking each property individually. For landlords with a large number of properties, this can significantly simplify record-keeping.
A Word of Caution: While portfolio-level recording is permitted today, HMRC may revisit this position as MTD matures. Property-level tracking also makes practical sense — it enables you to identify which properties are profitable, plan maintenance budgets, and model the impact of a sale or new acquisition with far greater precision. We recommend landlords with more than two or three properties adopt property-level recording from the outset.
Furnished Holiday Lettings: Important Changes from April 2025
Landlords with Furnished Holiday Lettings (FHL) properties should note that the FHL regime was abolished from April 2025. Properties that previously qualified as FHLs are now treated as ordinary residential lettings for tax purposes. This means:
- FHL income no longer qualifies as trading income for pension contribution purposes
- Capital allowances on furniture and equipment are no longer available (replaced by replacement of domestic items relief where applicable)
- Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is no longer available on disposal
- The favourable mortgage interest rules that previously applied to FHLs no longer apply
Under MTD, former FHL income will be reported as UK property income in exactly the same way as standard residential lettings. If you previously kept separate FHL records, these will need to be consolidated into your main property income records for MTD purposes.
Jointly Owned Properties
Many landlords own property jointly — with a spouse, civil partner, business partner, or other co-owner. Under MTD, each co-owner who is in scope must keep their own digital records and submit their own quarterly updates for their share of the property income.
A married couple own a rental property jointly and split the income 50/50. Both have other income that takes them above the £50,000 threshold. Both must maintain separate digital records for their 50% share of the rental income and expenses, and both must submit their own quarterly updates and Final Declaration to HMRC. They cannot file a single joint submission.
It is possible for one co-owner to be in scope for MTD while the other is not — if their respective total qualifying incomes fall on different sides of the threshold. In this situation, the in-scope co-owner must comply with MTD while the other continues to file a standard Self Assessment return. This requires careful management, particularly where both individuals use the same accountant.
Non-Resident Landlords
Landlords who are non-UK resident but receive rental income from UK property are generally already required to file UK Self Assessment returns. HMRC has confirmed that non-resident landlords will be brought within MTD for Income Tax on the same timetable as UK residents, where their UK qualifying income meets the relevant threshold. Non-resident landlords should seek specialist advice, as their obligations interact with non-resident landlord scheme rules and any applicable double tax treaties.
What Software Do Landlords Need?
You must use software that is recognised by HMRC as MTD-compatible. The main options available to landlords are:
✓ Full Cloud Accounting Software
Products such as QuickBooks, Xero, FreeAgent, and Sage offer full MTD for Income Tax functionality, including bank feeds, automated categorisation, quarterly submission directly to HMRC, and reporting dashboards. These are the most capable solutions but also carry a monthly subscription cost. For landlords with multiple properties, significant transaction volumes, or both property and self-employment income, full accounting software is the recommended route.
✓ Dedicated Landlord Software
A number of specialist landlord platforms — such as Landlord Studio, Hammock, and Arthur Online — are developing or have already launched MTD-compatible functionality tailored to property management. These tools often integrate rent collection, maintenance tracking, and compliance reporting alongside the tax record-keeping required for MTD.
✓ Spreadsheets with Bridging Software
If you currently use a spreadsheet to track your rental income and expenses and are comfortable doing so, you can continue — provided you use an HMRC-recognised bridging software tool to submit your quarterly updates. The spreadsheet data must be transferred to the bridging tool digitally (not manually retyped), and the bridging software must handle the submission to HMRC. This is the lowest-cost route but requires discipline to maintain correctly.
Common Mistakes Landlords Make When Preparing for MTD
The number of properties you own is irrelevant. What matters is the gross rental income received. A landlord with a single high-value property generating £55,000 a year in rent is fully in scope from April 2026. Equally, a landlord with four properties each generating £14,000 a year has combined rental income of £56,000 and is also in scope — even though no individual property crosses the threshold.
MTD-compatible software needs to be set up, configured, and tested before your first quarterly submission. Bank feeds need to be connected. Historic opening balances may need to be entered. If you wait until March 2026 to begin, you will be rushing a process that should take weeks, not hours. HMRC expects records to be maintained throughout the quarter — not reconstructed at the deadline.
If you also have self-employment income, your quarterly updates must cover both income streams separately. Many landlords who are also self-employed assume their accountant will handle everything as a single exercise — but under MTD, two separate sets of digital records and two sets of quarterly submissions may be required within the same software.
MTD’s quarterly rhythm is genuinely useful for property owners. Knowing your rental profit position four times a year — rather than discovering it in January when preparing your tax return — means you can plan ahead for tax bills, make informed decisions about reinvesting in your portfolio, and spot underperforming properties far sooner. Many landlords who have already adopted cloud bookkeeping report that the discipline of keeping up-to-date records has improved their financial decision-making significantly.
What Should Landlords Do Right Now?
Check Your Threshold
Calculate your gross rental income plus any self-employment income for the current and prior tax year
Review Your Records
Assess whether your current record-keeping system can be made MTD-compliant or needs replacing
Choose Your Software
Select an MTD-compatible solution suited to your portfolio size and technical comfort
Talk to Your Accountant
Agree a service plan that covers quarterly submissions, year-end adjustments, and your Final Declaration
How Your Accountant Can Help
MTD introduces a new rhythm to the landlord-accountant relationship. Rather than one annual meeting to review the previous year’s figures, you and your accountant will have four natural touchpoints throughout the year — each quarterly submission deadline is an opportunity to review your property portfolio’s performance, discuss any tax planning opportunities, and identify any issues before they become problems.
The best accountants will use the MTD framework to offer landlords proactive guidance — flagging when a property is no longer performing well, identifying allowances that are being missed, advising on the tax implications of refinancing or disposing of a property, and helping you structure your portfolio in the most tax-efficient way. Compliance is the floor, not the ceiling.
Landlord MTD Readiness Checklist
| Task | Done? | Notes |
|---|---|---|
| Calculate total gross rental income for the current and prior year | ☐ | Include all UK properties; remember combined income test if also self-employed |
| Confirm which MTD wave you fall into (2026, 2027, or 2028+) | ☐ | Based on prior year qualifying income |
| Identify all jointly owned properties and confirm co-owners’ position | ☐ | Each co-owner in scope must file separately |
| Select and set up MTD-compatible software | ☐ | Do this at least 3 months before your go-live date |
| Connect bank feeds for your rental bank account(s) | ☐ | Automates transaction import; reduces manual entry |
| Set up income and expense categories aligned to HMRC’s headings | ☐ | Including correct treatment of finance costs for residential lettings |
| Agree a quarterly review and submission process with your accountant | ☐ | Confirm who does what: bookkeeping, review, submission |
| Confirm treatment of any former FHL properties post-April 2025 | ☐ | Ensure records reflect the new ordinary residential lettings treatment |
| Plan for End of Period Statement and Final Declaration deadlines | ☐ | EOPS after year-end; Final Declaration by 31 January |
Ready to Get Your Rental Portfolio MTD-Ready?
MTD for Income Tax is one of the most significant changes to hit landlords in years — but with the right support, it is entirely manageable. Our team specialises in helping property owners understand their obligations, choose the right software, and build a record-keeping process that makes quarterly compliance straightforward while unlocking real financial insight into their portfolio.
Book Your Landlord MTD ConsultationReferences
1. HM Revenue & Customs. (2025). Making Tax Digital for Income Tax: Overview. Available at: https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax
2. HM Revenue & Customs. (2025). Property Income Manual: MTD for Income Tax. Available at: https://www.gov.uk/hmrc-internal-manuals/property-income-manual
3. HM Revenue & Customs. (2025). Expenses and Allowances: Landlords. Available at: https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income
4. HM Revenue & Customs. (2025). Furnished Holiday Lettings: Abolition of the FHL Regime. Available at: https://www.gov.uk/guidance/furnished-holiday-lettings
5. ICAEW. (2025). MTD for Income Tax: Guidance for Practitioners. Available at: https://www.icaew.com/technical/tax/making-tax-digital
6. ACCA Global. (2025). MTD for Income Tax: preparing your practice. Available at: https://www.accaglobal.com/uk/en/technical-activities/uk-tech/in-practice-ezine-archive
7. QX Accounting Services. (2026). MTD as a Long-Term Revenue Driver for Accounting Firms. Available at: https://qxaccounting.com/uk/blog/mtd-as-a-long-term-revenue-driver-for-accounting-firms/
8. FreeAgent. (2026). MTD for Income Tax: A Guide for Landlords. Available at: https://www.freeagent.com/accountants/resources/navigating-mtd-for-income-tax/
