MTD for UK Landlords with UK Property Income – Complete Guide
Making Tax Digital (MTD) marks one of the biggest changes to the way UK landlords report their property income to HMRC. For many landlords, tax compliance has traditionally meant keeping basic records and submitting an annual Self Assessment return. Under MTD, that approach is changing. Landlords with UK property income are now expected to keep digital records and submit regular updates to HMRC throughout the tax year, rather than dealing with everything at the end.
For landlords who own one rental property or manage a large portfolio, MTD is not just a technical update; it represents a shift in how property income is tracked, reported, and reviewed. Understanding who the rules apply to, what information must be submitted, and how often reporting is required is essential to staying compliant and avoiding penalties. This complete guide explains how to prepare your records and systems with confidence.
What is MTD?
Making Tax Digital, or MTD, is a UK government initiative designed to modernise the tax system by moving it fully into the digital age. The goal is to make it easier for individuals and businesses to keep accurate records, reduce errors, and submit tax information to HMRC digitally, rather than relying on manual paperwork.
For landlords with UK property income, MTD means that instead of submitting one annual Self Assessment tax return, you need to keep digital records of your rental income and expenses and send updates to HMRC at least quarterly using compatible software. This doesn’t change the amount of tax you pay, it’s about how and when HMRC receives your information.
In simple terms: MTD is HMRC’s way of ensuring tax reporting is digital, more frequent, and more accurate, helping landlords stay on top of their property finances while avoiding last-minute surprises at tax time.
Who MTD Applies To
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is being introduced in stages for individual landlords and self-employed individuals with UK property income. It does not currently apply to limited companies, which remain subject to Corporation Tax rules.
Qualifying income for MTD is the total gross rental income and/or self-employment income declared on your Self Assessment, before expenses. Other income types, such as employment (PAYE), pensions, dividends, or investment income, are not included when assessing MTD thresholds.
Phased Income Thresholds and Dates
HMRC has set a tiered rollout based on gross qualifying income in specific tax years:
- 6 April 2026: Landlords with £50,000 or more in gross rental and/or self-employment income in the 2024/25 tax year must comply from the 2026/27 tax year onward.
- 6 April 2027: Landlords with £30,000 or more gross qualifying income in 2025/26 must comply from 2027/28.
- 6 April 2028: Landlords with £20,000 or more gross qualifying income in 2026/27 must comply from 2028/29.
Once liable for MTD, compliance is mandatory, even if income later falls below the threshold. Early adoption is optional for those below the thresholds, but it can simplify record-keeping and improve financial oversight.
Eligibility and Exemptions
Who is in scope:
- Individual landlords receiving UK rental income via Self Assessment.
- Landlords who are also self-employed, where both income streams count toward thresholds.
- Landlords who choose to voluntarily adopt MTD early, even if below the thresholds.
Who is not in scope (for now):
- Limited company landlords, taxed under Corporation Tax.
- Partnerships (including LLPs)
- Landlords whose gross qualifying income remains below the threshold and who do not opt in voluntarily.
MTD Compliance for UK Landlords: Step-by-Step Guide
Check if You’re Affected
First, confirm your total UK property income. Add up all
rental income from your properties before expenses. If it’s over £50,000 in the
tax year 2024/25, you must comply with MTD for 6 April 2026. Landlords below this
threshold are not required to comply with MTD at this time, but maintaining
digital records is still recommended.
Set Up Digital Record-Keeping
MTD requires digital records of all property income and expenses. Record every rental payment received and all allowable expenses such as repairs, insurance, and letting agent fees. It’s important to maintain a running total rather than calculating everything only at the end of the year. Paper records or unconnected spreadsheets won’t meet MTD requirements.
Choose Compatible Software
You must use HMRC-recognized software to submit your records. Always verify that the software is officially compatible with MTD to avoid errors or rejected submissions.
Start Quarterly Reporting
Under MTD, you report your property income and expenses every three months, not just at year-end. Each submission updates HMRC on your cumulative income for the tax year. At the year-end, a final submission reconciles total income and expenses to calculate the tax owed.
Keeping Supporting Documents
Even with digital records, HMRC may request proof of transactions. Keep receipts, invoices, contracts, and bank statements digitally or scanned, and organise them by property and expense type. This ensures you can quickly provide evidence if asked.
Review and Reconcile Regularly
Regularly check that your records are accurate. Ensure all income and expenses match your bank statements, all properties are included, and any corrections are made promptly before submitting quarterly updates. Accurate records help avoid mistakes and reduce the risk of HMRC enquiries.
File Your Final Submission and Pay Tax
At the end of the tax year, submit your final MTD return, confirm your tax calculation, and pay any tax due. Remember that even with MTD, you must meet standard deadlines to avoid interest or penalties.
Benefits of MTD for UK Landlords
Better organisation and record-keeping
One of the key benefits of MTD is that it requires landlords to maintain accurate digital records throughout the year. Instead of scrambling at tax time to find receipts, bank statements, and invoices, everything is already stored and organised in your MTD-compatible software. This makes managing your property finances simpler and less stressful.
Fewer mistakes and errors
Manual calculations and last-minute Self Assessment submissions can lead to errors, which could trigger HMRC enquiries or penalties. With MTD, your software automatically records and totals income and expenses, reducing mistakes and ensuring your submissions are accurate.
Easier tax planning
Because MTD requires quarterly updates, landlords can see how much tax they owe as the year progresses. This makes it easier to budget for tax payments, avoid year-end surprises, and plan property-related expenses more effectively.
Improved transparency with HMRC
Regular submissions give HMRC a clear and up-to-date picture of your property income, which can reduce the likelihood of audits or enquiries. Staying transparent and organised helps landlords maintain a smooth relationship with HMRC.
Long-term time savings
Although MTD may feel like extra work at first, keeping digital records and submitting quarterly updates ultimately saves time compared with the traditional year-end preparation process. It also makes future compliance, whether for additional properties or new tax rules, much easier.
Simplified record-sharing with accountants
If you use an accountant, MTD makes collaboration seamless. Your digital records can be shared instantly, reducing back-and-forth emails and manual data entry. This ensures your accountant has everything they need to file your taxes efficiently.
Common Mistakes Landlords Make Under MTD
Assuming MTD doesn’t apply
Some landlords mistakenly think MTD only affects large property owners. If your UK property income exceeds £50,000, MTD is mandatory, even if you only own one or two properties. Ignoring this can lead to penalties and late filing issues.
Using incompatible software or spreadsheets
MTD requires HMRC-recognised software. Many landlords use Excel spreadsheets or manual spreadsheets that aren’t connected to HMRC. While these help organise data, they cannot submit quarterly updates digitally, which is the core requirement of MTD.
Missing quarterly deadlines
Because MTD requires quarterly submissions, some landlords fall behind or forget to report on time. Even one missed submission can trigger HMRC reminders or penalties. Setting reminders and scheduling submissions is crucial.
Failing to keep supporting documentation
Digital submissions are not the same as proof. HMRC can request evidence for expenses or income claims. Landlords sometimes fail to store receipts, invoices, or contracts digitally, which can create problems during an enquiry.
Incorrectly recording income or expenses
Not all expenses are allowable under MTD rules, and mistakes in categorisation can affect your tax calculation. For example, personal expenses or repairs not related to the rental property should not be included. Regular reconciliation helps prevent these errors.
Waiting until year-end to start MTD
Some landlords only start organising digital records at the last minute. MTD is designed for continuous, up-to-date record-keeping, so starting early in the tax year ensures smoother submissions and less stress.
Expenses You Can Include in MTD Records
Repairs and maintenance costs
Landlords can record the cost of routine repairs and maintenance needed to keep the property in a rentable condition. This includes fixing boilers, repainting, replacing broken fixtures, and general upkeep. These costs should be recorded as they arise and supported with invoices or receipts.
Letting agent and management fees
Any fees paid to letting agents or property managers are allowable expenses under MTD. This includes tenant-finding fees, ongoing management charges, and renewal fees. Recording these digitally each quarter ensures they are not overlooked at year-end.
Insurance premiums
Landlord-related insurance costs can be included in your MTD records. This typically covers buildings insurance, contents insurance (if applicable), and landlord liability insurance. These are usually annual costs but should still be recorded digitally when paid.
Professional and legal fees
Fees paid to accountants, solicitors, or property professionals that relate directly to managing your rental property can be recorded under MTD. This includes tax advice, accountancy fees, and legal costs for tenancy agreements or disputes.
Mortgage interest and finance costs
For individual landlords, mortgage interest is recorded under finance costs. While it no longer directly reduces rental profits, it still needs to be clearly communicated throughout the year.
Other property-related running costs
This can include ground rent, service charges, tenant advertising, stationery, and phone calls specifically for managing your rental property. The key rule is that the expense must be wholly and exclusively for the property business.
Conclusion
Making Tax Digital represents a major shift in how UK landlords report and manage their property income. While the move to digital records and quarterly reporting may feel daunting at first, MTD is ultimately about creating a more organised, transparent, and efficient way to stay compliant with HMRC. For landlords with UK property income over £50,000, understanding the rules early and preparing in advance is key to avoiding unnecessary stress and penalties.
By setting up digital record-keeping, using HMRC-compatible software, and regularly reviewing income and expenses, landlords can turn MTD from a compliance burden into a practical tool for better tax planning. With the right systems in place, MTD can make managing rental income clearer, more predictable, and far less time-consuming over time. The earlier you adapt, the smoother the transition will be.
Sterling & Wells
We are Sterling & Wells — a UK-based team of accountants and tax advisors helping individuals and businesses stay fully HMRC compliant. From VAT and bookkeeping to self-assessments and tax planning, we’ve got your finances covered.