Your tax return process has worked fine for years. Collect rental income records, tally expenses, file by January. Done.
HMRC wants to change all of that.
Making Tax Digital for landlords becomes mandatory from April 2026. Digital records. Quarterly updates. MTD-compatible software. New filing requirements your accountant is probably dreading.
The government calls it modernisation. You’re calling it one more administrative burden on an already complicated investment. But ignoring it isn’t an option. The penalties start immediately once you’re required to join.
This guide tells you everything you need to know: who must comply and when, what the quarterly reporting actually involves, which software options work for different portfolio sizes, and how to transition without disrupting your existing processes.
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is HMRC’s initiative to modernise the UK tax system through mandatory digital record-keeping and reporting. Instead of submitting one annual tax return, businesses and landlords now report income and expenses to HMRC throughout the year using approved software.
HMRC is launching MTD in phases.
- MTD for VAT came first in 2019, affecting VAT-registered businesses.
- MTD for Income Tax Self-Assessment (MTD ITSA) follows from April 2026, targeting self-employed individuals and landlords.
Making Tax Digital for Landlords
Making Tax Digital for landlords replaces the traditional annual Self Assessment tax return with quarterly digital updates sent directly to HMRC through approved software. Landlords must keep digital records of all rental income and expenses, then submit summary updates every three months throughout the tax year.
The government’s stated goal for making tax digital is reducing the tax gap. That’s the £36 billion annual difference between tax owed and tax collected. Real-time digital reporting theoretically catches errors earlier and makes tax evasion harder.
How MTD Differs from Traditional Self-Assessment for Landlords
Making Tax Digital fundamentally changes how landlords report rental income to HMRC. Ths shift is not just about using software, it’s a complete restructuring of the reporting timeline.
Traditional Self-Assessment Approach to Reporting Rental Income
Under the current Self-Assessment system, you gather all your income and expense records once a year. You complete one tax return by 31 January. HMRC gets a snapshot of your entire tax year in one submission.
Making Tax Digital for Landlords Approach to Reporting Rental Income
Making Tax Digital for Landlords replaces the annual tax reporting with continuous digital reporting throughout the year.
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You'll log income and expenses in approved software as they happen.
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Every three months, you'll send HMRC a summary of your business performance.
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At year's end, you'll still submit a final tax return.
The payment deadlines don’t change. You’ll still pay tax by 31 January following the end of the tax year. Only the reporting frequency changes.
One crucial difference: everything must happen digitally. No more shoebox of receipts sorted once a year. No manual data entry into HMRC’s online portal. Every transaction must be recorded in MTD-compatible software and submitted through digital links.
Who Needs to Comply with MTD & When?
Making Tax Digital rolled out in phases, starting with VAT-registered businesses and expanding to include self-employed individuals and landlords.
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April 2019: MTD for VAT Launches
VAT-registered businesses with turnover above £85,000 must maintain digital records and submit returns using MTD-compatible software.
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April 2021: Digital Links Become Mandatory
All VAT data transfers must be conducted electronically through digital links between software systems.
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April 2022: Universal VAT Compliance
All VAT-registered businesses must comply with MTD for VAT, regardless of turnover.
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April 2026: MTD for Income Tax Begins
Sole traders and landlords with qualifying income above £50,000 must comply with MTD for Income Tax Self-Assessment.
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April 2027: Threshold Drops to £30,000
MTD for Income Tax extends to sole traders and landlords with qualifying income above £30,000.
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April 2028: Threshold Drops to £20,000
MTD for Income Tax extends to sole traders and landlords with qualifying income above £20,000.
HMRC hasn’t announced plans for those with qualifying income below £20,000. The current focus remains on higher earners who collectively represent the bulk of self-employment and property income.
What is a Qualifying Income for MTD?
Qualifying income is the gross income from self-employment and property rental income. HMRC uses this figure from your most recent tax return to determine whether you must comply with MTD for Income Tax.
Income from employment, pensions, dividends, bank interest, and capital gains doesn’t count towards qualifying income for MTD purposes.
Which Landlords Are Exempt from MTD?
Several groups of landlords are excluded from MTD for Income Tax either permanently or temporarily, even if their rental income exceeds the qualifying thresholds.
Permanent Exclusions
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Trustees & Personal Representatives
Property held in trusts or estates is permanently exempt from MTD.
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Non-Resident Landlords (Until 2027)
If you submit residence or remittance basis pages (SA109), you're exempt until April 2027.
Temporary Deferrals
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Property Partnerships & LLPs
Currently excluded with no timeline set for inclusion.
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Married Couple's or Blind Person's Allowance Recipients
Deferred until after the next general election.
Digital Exclusion Exemptions
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Age, disability, or health condition
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Remote location with limited internet access
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Religious beliefs preventing digital tool usage
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Power of Attorney arrangements (added Spring 2025)
Requirements of Making Tax Digital for Landlords
Making Tax Digital for landlords creates four core obligations that replace the traditional Self-Assessment process.
Digital Record Keeping
You must maintain digital records of all business income and expenses using MTD-compatible software. Paper records alone no longer satisfy HMRC’s requirements, even if you later transcribe them digitally.
Your digital records must capture three elements for every transaction:
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The amount
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The date
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The category
Here’s how your digital records look like:
The software you choose can be specialist accounting platforms, basic bookkeeping apps, or even spreadsheets. But spreadsheets come with a catch: you’ll need additional bridging software to connect them to HMRC’s systems for submission.
Simplified Record-Keeping for Landlords
HMRC offers several simplification options that reduce the detail you need to record throughout the year.
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Three Line Accounts
If your gross property income is below the VAT threshold (£90,000), you can record transactions simply as "income" or "expense" without detailed categorisation. You must still separately identify loan interest on residential properties.
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Joint Property Owners
For jointly owned properties, record income totals each quarter and expense totals once per year. Quarterly updates only need your share of income. Expenses can be submitted at year-end.
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Combined: Joint Property + Three Line Accounts
If you own joint properties and your total gross rent is below the VAT threshold, record one summary income figure per quarter and one total expense figure per year for jointly owned properties. Residential loan interest must still be separated.
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Mixed Expenses
For expenses with private use (like a car used partly for property business), record either just the business portion or the full amount with an adjustment to remove the personal element.
Quarterly Updates
Four times per year, you’ll submit summary updates of your income and expenses directly from your software to HMRC. These aren’t full tax returns but streamlined reports showing your business performance for that period.
You have two options for structuring your quarterly updates:
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Standard update periods align with the tax year (6 April to 5 April). This matches how Self-Assessment has always worked.
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Calendar update periods align with calendar months, ending on 30 June, 30 September, 31 December, and 31 March.
The submission deadlines remain identical regardless of which structure you choose.
Quarterly Submission Deadlines
To use calendar update periods, select this option in your software before submitting your first update of the tax year. Once selected, it applies for the entire year unless changed before the next year begins.
Quarterly updates are cumulative.
Each of your submissino includes all data from the start of the tax year upto the end of that quarter.
- Your first update covers April to July.
- Your second covers April to October.
- Your third covers April to January.
- Your fourth covers the full tax year April to April.
If you discover an error in a previous quarter, you don’t resubmit that quarter. You simply correct it in your next quarterly update. The cumulative structure allows for ongoing adjustments without complex amendment procedures.
Final Declaration
After submitting your fourth quarterly update, you’ll file a final declaration by 31 January following the tax year. This is your complete tax return for the year, similar to the current Self-Assessment return.
Your final declaration pulls together everything from your quarterly updates, plus income sources HMRC already holds: employment income, pensions, CIS deductions, and Capital Gains Tax residential property disposals. HMRC adds these automatically.
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Accounting adjustments that disallow private use elements or capital expenditure
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Tax adjustments such as capital allowances and loss reliefs
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Non-business income sources HMRC doesn't have, like savings interest, dividends, and foreign income
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Tax relief claims for pension contributions and charitable donations
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Any other taxable income or gains not automatically included
How to Submit Your Final Declaration
Before submission, review everything in your software, both what you’ve added and what HMRC has pre-populated. Your information only becomes final once you submit.
- Confirm in your software that you’re ready to submit
- Review the tax calculation showing your total tax due
- Check the calculation is correct
- Declare that the information provided is correct and complete to the best of your knowledge
- Submit through your software
You’ll see a confirmation message once your tax return has been successfully submitted.
Once submitted, your final declaration generates your Self-Assessment tax bill for that tax year. MTD doesn’t change payment dates. You’ll still pay tax by 31 January (and 31 July if you’re in payments on account).
If you need to correct something after submission, you can amend your return through your software. Late submission triggers penalty points. Late payment incurs separate penalties regardless of whether your return was filed on time.
Making Tax Digital for Landlords: Step-by-Step Implementation Guide
Here’s a simple 7-step route to Making Tax Digital for landlords. Follow these steps to transition smoothly from traditional Self-Assessment to quarterly digital reporting.
1. Check Your MTD Obligations
Confirm whether MTD applies to your property income. If your qualifying income from rental properties exceeds the threshold for your start date (£50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028), you must comply. Landlords below these thresholds can join MTD voluntarily but aren’t legally required to participate.
2. Sign Up for MTD
Register for MTD for Income Tax Self Assessment through HMRC’s online service. You’ll need your Government Gateway credentials to complete the sign-up process. Registration opens before your mandatory start date, giving you time to prepare your systems. Voluntary participants can register early to familiarise themselves with the requirements.
3. Choose MTD-Compatible Software
Select software that meets HMRC’s MTD requirements. Your software must maintain digital records, submit quarterly updates directly to HMRC, and handle the end-of-year final declaration. Not all software offers complete functionality, so verify it supports both quarterly submissions and year-end returns before committing. Compare features, pricing, and ease of use across different providers.
4. Set Up Your Digital Records
Migrate your rental property records into your chosen software. Input all properties, set up income and expense categories that match Self-Assessment boxes, and establish your chart of accounts. If you’re switching from paper records or spreadsheets, this initial setup requires the most effort. Ensure all opening balances are accurate before your MTD start date.
5. Record Income and Expenses Throughout the Year
Log every rental transaction in your software as it occurs. Record rent received, letting agent fees, repairs, mortgage interest, insurance premiums, and all other property expenses. Each entry needs the date, amount, and category. Maintaining current records prevents a last-minute scramble before quarterly deadlines.
6. Submit Quarterly Updates
Every three months, submit a summary update to HMRC through your software. Check your figures before submission, then confirm and send. HMRC will provide an estimated tax liability after each update, helping you plan for payment dates. Remember that updates are cumulative, meaning each quarter includes all data from the start of the tax year to that point.
7. Complete Your Final Declaration
After your fourth quarterly update, prepare your final declaration by 31 January. Review all automatically populated information from HMRC, add any non-property income sources and tax relief claims, make accounting adjustments, and submit through your software. This final return calculates your actual tax bill for the year. Once submitted, pay any tax due by the 31 January deadline.
Special Scenarios for Landlords
Not all landlords fit the standard single-property model. Joint ownership, multiple properties, commercial premises, overseas portfolios, and limited company structures each create unique MTD obligations. Here’s how MTD applies to your specific situation.
Joint Property Ownership
When multiple people own a rental property together, HMRC applies specific rules for income attribution that affect MTD obligations.
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Default Income Split
HMRC assumes joint owners split rental income equally unless you specify otherwise. This means two siblings owning a rental property together would each be attributed 50% of the gross rental income for threshold calculations.
Here’s how this works in practice:
If a property generates £80,000 in gross rent annually, each sibling is attributed £40,000. When combined with their other income, one sibling might exceed the MTD threshold whilst the other doesn’t. This creates separate MTD obligations for each owner based on their individual circumstances, not on the property itself.
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Alternative Income Splits for Couples
Married couples and civil partners have additional flexibility. They can split income differently from the default 50/50 split by filing Form 17 with HMRC. This allows them to reflect actual beneficial ownership, for instance, a 30/70 split based on their respective capital contributions to the property purchase. Importantly, this declaration affects both income attribution and expense deductions, so your share of allowable expenses will also follow the same split you've declared for income.
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Simplified quarterly reporting for joint owners:
Joint property owners have two options for quarterly updates:
Option 1: Report full income and expense categories (same as sole owners)
Option 2: Report only your share of income categories each quarter:
- Total rent (your share)
- Other income from property (your share)
- Premiums for lease grants (your share)
- Reverse premiums and inducements (your share)
With Option 2, you report expenses once per year at the final declaration instead of quarterly. This significantly reduces your quarterly workload.
Multiple Property Portfolios
HMRC treats different property types as separate businesses, each requiring its own quarterly updates:
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UK property Aggregation
All UK properties aggregate into a single "UK property business." If you own five buy-to-let properties across different cities, you submit one quarterly update with combined income and expenses. Individual property records are maintained in your digital records for reference. Commercial property (offices, shops, industrial units) also aggregates with UK residential property into this single business.
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Overseas Properties
Foreign property creates a separate business requiring its own quarterly updates. Each overseas property business must be reported distinctly from your UK property activities.
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Furnished Holiday Lets
Furnished holiday lets constitute a separate business for tax purposes and require separate quarterly updates. Even though they're UK properties, FHLs can't be aggregated with your standard UK residential portfolio.
For example, if you own three standard rentals and two qualifying FHLs, you must submit separate quarterly updates: one for the UK property business and another for the FHL business.
Portfolio Example: Sarah's Property Empire
Sarah owns a diverse property portfolio:
- 4 residential buy-to-lets in Manchester and Leeds
- 1 commercial shop unit in Birmingham
- 2 qualifying furnished holiday lets in Cornwall
- 1 apartment in Marbella, Spain
Digital Record Keeping
Sarah maintains separate digital records for each individual property, tracking income and expenses property-by-property.
Quarterly Updates (Four per year)
Sarah submits three separate quarterly updates:
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UK Property Business
Combined figures for her 4 residential properties + 1 commercial unit
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UK FHL Business
Combined figures for her 2 Cornwall holiday lets
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Overseas Property Business
Figures for her Spanish apartment
Each quarterly update is due by one calendar month after the quarter end.
Final Declaration (Once per year)
By 31 January following the tax year, Sarah submits a single Self Assessment tax return that consolidates all three property businesses, claims her annual allowances, and calculates her final tax liability. Any balancing payment is due by this date.
Non-Resident Landlords
Non-resident landlords face two compliance systems: the Non-Resident Landlord Scheme (NRLS) and MTD obligations if their UK property income exceeds thresholds.
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Non-Resident Landlord Scheme
Under NRLS, letting agents or tenants withhold basic rate tax from your rent before paying you, unless you have HMRC approval to receive rent gross. This withholding system continues unchanged under MTD. You can apply to receive rent gross if you expect no UK tax liability or if you've filed tax returns regularly. This approval eliminates the withholding complication, though you still owe tax under normal payment dates if liability arises.
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MTD Obligations for Non-Resident Landlords
Your UK property income counts toward MTD thresholds regardless of where you live. A landlord living in Dubai with £60,000 UK rental income must comply with MTD from April 2026. The quarterly update mechanism remains identical to UK-resident landlords. You maintain digital records, submit quarterly updates, and complete a final declaration by 31 January. Your residence status doesn't alter the technical MTD requirements. Tax withheld under NRLS gets credited in your final declaration. If agents withheld £12,000 during the year but your actual tax liability is £10,000, you receive a £2,000 refund. The final declaration reconciles NRLS withholding with your actual liability.
Limited Company Ownership
Limited company landlords are outside MTD for ITSA scope. Companies file Corporation Tax returns, not Self Assessment, so MTD for ITSA doesn’t apply to property income held within a company structure.
However, company directors often own properties both through their company and personally. Personal rental income remains within MTD scope if it exceeds thresholds.
Landlords considering incorporation specifically to avoid MTD should think carefully. While incorporation eliminates MTD for ITSA, it creates other complexities: Corporation Tax compliance, director’s loan account management, dividend extraction planning, and potential Capital Gains Tax on future property sales or company wind-up.
Landlords with Self-Employment Income
Landlords who also operate separate trades must combine their property income and self-employment income to determine MTD threshold compliance.
A landlord earning £35,000 from property and £20,000 from consultancy has combined gross income of £55,000, triggering MTD from April 2026. Both income sources count toward the threshold, even though they’re separate businesses for tax purposes.
Once within MTD, you submit separate quarterly updates for each business. Your property income generates one set of quarterly updates, your self-employment generates another set. A landlord with UK residential property, furnished holiday lets, and a separate trade submits three updates quarterly: one for UK property, one for FHLs, one for the trade.
Self-employment income includes all trading receipts before expenses. If you run multiple trades, aggregate them all. The combined threshold approach prevents splitting activity artificially to stay below thresholds.
What to Do If HMRC Has Written to You About Making Tax Digital
You may have received a letter as shown below from HMRC. If so, don’t panic. You’re one of thousands of landlords across the UK receiving these notifications as HMRC encourages early preparation for the upcoming MTD requirements.
What Is This HMRC Nudge Letter?
This is a proactive notification. HMRC has identified you as a landlord likely to meet the income threshold for MTD for Income Tax based on your previous tax return data. Your gross qualifying income from property (and possibly self-employment) may exceed £50,000 for the 2024/25 tax year.
The letter explains that you may need to use Making Tax Digital from 6 April 2026, which requires MTD-compatible software to keep digital records and submit quarterly updates. HMRC is giving you early notice so you have sufficient time to prepare before the rules become mandatory.
How to Deal with Your MTD Nudge Letter from HMRC?
MTD nudge letter from HMRC is an early warning to help you prepare for MTD. Here’s how you can respond to this:
1. Verify Your Income Status
Check your most recent Self Assessment tax return (SA302) to confirm your total property income. Remember, MTD thresholds are based on gross income, not profit. If you’re close to the £50,000 threshold or your income fluctuates, it’s safer to prepare for MTD compliance now.
2. Contact Your Accountant
If you work with an accountant or tax adviser, contact them about MTD preparation. Accounting firms across the UK are already helping landlord clients transition to MTD, and early engagement ensures you’re supported throughout the process.
3. Choose MTD-Compatible Software
You’ll need software that is HMRC-recognised for MTD for Income Tax. At Sterling & Wells, we use RentalBux, which is specifically designed for landlords and handles both MTD compliance and property management in one platform.
4. Consider Joining the Pilot Programme
HMRC currently operates a voluntary pilot programme for MTD for Income Tax. Joining early allows you to familiarize yourself with the system, test your software, and iron out any issues before the mandatory deadline. This removes last-minute stress and helps you build confidence with quarterly submissions.
5. Start Digital Record Keeping
Even if you’re not required to comply until 2026, transitioning to digital record keeping now offers immediate benefits. You’ll have better visibility of your rental income and expenses throughout the year, making tax time less stressful and financial management more straightforward.
What Happens If You Ignore the Letter?
Right now, MTD compliance is optional for most landlords. However, ignoring the change could lead to:
- Penalties for non-compliance once MTD becomes mandatory
- Last-minute scrambling to find software and get set up
- Missed quarterly deadlines and associated fines
- Increased stress during an already busy tax period
Getting ahead of MTD puts you in control and ensures a smooth transition when the time comes.
Let Sterling & Wells Handle Your MTD Transition
At Sterling & Wells, we help landlords respond to HMRC nudge letters and navigate the complete MTD transition with confidence. From verifying your compliance requirements to setting up RentalBux software, maintaining digital records, submitting quarterly updates, and filing your final declaration, we manage every aspect of MTD compliance so you can focus on your property business.
Making Tax Digital for Landlords Penalties
Non-compliance with Making Tax Digital for landlords incurs four separate types of penalties: late submission penalties for missing filing deadlines, late payment penalties for unpaid tax bills, interest charges on outstanding tax, and record keeping penalties.
Each operates independently, meaning you could face all three simultaneously if you miss both filing and payment deadlines.
Late Submission Penalties
MTD uses a points-based penalty system for missed filing deadlines. Each late submission earns you one penalty point. Once you reach a points threshold, you get a £200 fine.
During the voluntary testing phase (2024-26), penalty points only apply to your final declaration (the end-of-year tax return due 31 January). Quarterly updates don’t trigger penalty points because they’re voluntary during testing.
If you submit your final declaration late, you receive one penalty point. A second late final declaration brings you to two points, triggering a £200 fixed penalty. Every subsequent late final declaration costs another £200 until you reset your points.
After MTD becomes mandatory, the system expands to include quarterly updates. The penalty threshold increases to four points before HMRC charges £200. You can submit up to three returns late before facing a financial penalty. After reaching four points, every subsequent late submission, quarterly or annual, triggers another £200 charge.
Penalty points only apply to mandatory submissions. If you voluntarily submit quarterly updates when not required, late submissions don’t generate penalty points.
Resetting Your Penalty Points
Points reset to zero if you maintain a clean compliance record for:
- 24 months for annual-only filers (testing phase participants)
- 12 months for quarterly filers (post-mandate)
All previous late submissions must be filed before the reset period begins. Any late submission during the reset period restarts the clock from zero.
Penalty Points Example
You submit three quarterly updates late. This accumulates three penalty points. When you submit the fourth quarterly update late, you reach four points and receive a £200 penalty. The next late submission triggers another £200 penalty.
To reset to zero:
- File everything on time for 12 consecutive months with no missed deadlines.
- Make sure, all submissions that were due in the preceding 24 months have been received by HMRC.
Late Payment Penalties
Late payment penalties are separate from late submission penalties and apply when you fail to pay your tax bill by the deadline. These penalties are percentage-based rather than points-based and can accumulate rapidly if left unpaid.
Your Taxes are due on:
- 31 January following the tax year (for balancing payments)
- 31 July (for second payment on account, if applicable)
Here’s how the late payment penalties apply if you miss these deadlines.
If you can’t pay your tax bill by the deadline, contact HMRC within 15 days to arrange a Time to Pay plan. Agreeing to a payment arrangement within this 15-day window prevents all late payment penalties, provided you maintain the agreed payment schedule. Interest continues to accrue on the outstanding balance, but you avoid the 3% penalties and the daily 10% charge.
Interest on Unpaid Taxes
Interest applies to any unpaid tax from the day after the payment deadline. The rate is set at the Bank of England base rate plus 2.5%, which currently works out to approximately 7% per year.
Interest accumulates daily on your outstanding balance and continues until you’ve paid in full. Even with a Time to Pay arrangement in place, interest keeps accruing on the unpaid tax. However, the arrangement prevents late payment penalties, making it significantly less costly than ignoring the payment deadline.
Interest on Unpaid Taxes: A Worked Example
You owe £10,000 in tax due on 31 January. You arrange a Time to Pay plan with HMRC within 15 days and pay the full amount three months later (end of April).
Interest charges
- Daily interest rate: Approximately 0.019% per day (7% annual rate)
- Number of days: 90 days
- Total interest: £175
Because you arranged the Time to Pay plan within 15 days, you avoid all late payment penalties (which would have been £600). You only pay the £175 in interest charges.
Record Keeping Penalties
HMRC can impose penalties of up to £3,000 for failing to maintain digital records or for breaks in digital links between MTD-compatible software systems.
However, these penalties aren’t charged automatically. HMRC must manually assess each case and decide whether to apply the penalty, making record-keeping penalties relatively rare in practice compared to late submission or late payment penalties.
Your Right to Appeal
HMRC sends a penalty decision letter when any penalty is charged. You have the right to appeal against both financial penalties and penalty points.
For appeal, contact HMRC with your appeal explaining your circumstances, particularly if you believe you have a reasonable excuse for missing the deadline.
How Sterling & Wells Supports Your MTD Compliance
At Sterling & Wells, we manage every aspect of Making Tax Digital for landlords:
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HMRC Correspondence
We handle nudge letters and enquiries on your behalf, ensuring timely and accurate responses.
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Digital Record Keeping
We maintain compliant records using RentalBux, keeping your income and expenses organized year-round.
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Quarterly Updates
We prepare and submit your quarterly updates to HMRC, so you never miss a deadline.
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Final Declaration
We file your annual Self Assessment tax return, claim all available allowances, and calculate your final tax liability.
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Tax Planning
We identify tax-saving opportunities and structure your property business efficiently.
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HMRC Appeals
If you face penalties or charges, we handle appeals and correspondence with HMRC to protect your interests.
Ready to Make MTD Simple?
Let us handle your MTD compliance from start to finish. Contact Sterling & Wells today for expert support tailored to landlords.
Additional Resources
Conclusion
Making Tax Digital represents a significant change in how landlords report property income to HMRC. While the transition may seem daunting, understanding the requirements and preparing early ensures smooth compliance.
Whether you manage one rental or a complex portfolio, the right software and professional support make all the difference. If you’ve received an HMRC nudge letter or want to get ahead of the April 2026 deadline, now is the time to act.
At Sterling & Wells, we guide landlords through every step of MTD compliance. Contact us today to make your transition seamless.
Frequently Asked Questions
The date depends on your qualifying income (combined income from self-employment and property, measured before expenses). If your qualifying income exceeds £50,000, you must comply from April 2026. For income over £30,000, compliance starts April 2027. For income over £20,000, it begins April 2028.
Yes. MTD doesn’t replace Self Assessment. You’ll submit quarterly updates throughout the year, then complete a final declaration (end of year submission) which fulfills your Self Assessment obligation. This final declaration is due by 31 January following the tax year end.
You need HMRC-recognised software that can keep digital records, submit quarterly updates, and file your final declaration. The software must also support digital links for transferring data. Not all software handles every aspect of MTD, so choose one designed for landlords if you have property income.
Once you’re mandated into MTD, you generally remain in the system even if your income temporarily drops. You only become exempt if your qualifying income falls below the MTD threshold for three consecutive tax years, based on filed tax returns or quarterly updates. This means a single year of lower income won’t remove you from MTD obligations.
MTD introduces a points-based penalty system for late submissions. You accumulate one point for each late quarterly update. When you reach the penalty threshold (typically four points for quarterly filers), you receive a £200 penalty. Further late submissions trigger additional £200 penalties. Points reset to zero after 12 consecutive months of on-time filing.
