How landlords can prepare for MTD without disrupting their tax affairs

Making Tax Digital (MTD) is a significant change to the UK tax system, but it doesn’t have to upend how landlords manage their tax affairs. The government’s aim with MTD is to modernise tax reporting and streamline the tax filing process, making it easier and more accurate for taxpayers. With the right preparation, many landlords can meet MTD for income tax requirements while keeping their existing processes largely intact.

Here’s how to get ready – without unnecessary stress.

Start by understanding whether MTD applies to you

Not all landlords fall within scope straight away.

Making Tax Digital for Income Tax (digital for income tax) applies where qualifying income exceeds the income tax threshold. For landlords, taxable income includes total gross income from rental property, furnished holiday lets, and sole trader income (self employed/sole traders). This means landlords must report property income, furnished holiday lets, and any sole trader income based on total gross income before allowable expenses are deducted. Validity for MTD is based on gross qualifying income from both rental and self-employment, not net income.

Landlords with qualifying income over the income tax threshold of £50,000 must comply with MTD for Income Tax from 6 April 2026. The threshold will drop to £30,000 in 2027 and £20,000 in 2028.

For jointly owned properties (property jointly), the share of rental income is split between owners, so each individual’s portion is used to determine if they exceed the threshold for MTD compliance. All types of rental property, including furnished holiday lets, are included in the qualifying income calculation.

If qualifying income falls below the threshold, you remain within income tax self assessment under the existing annual tax return process.

Review how you currently keep records

MTD does not change income tax rules or how your tax liability is calculated. What it changes is how income and expense records are kept and reported.

Many landlords already keep accurate financial records, but they may rely on manual data entry, paper records, or spreadsheets used only at year end.

Under MTD, landlords must keep digital records of their income and expenses using MTD-compatible accounting software or digital tools. Landlords are required to maintain records of all transactions digitally and submit quarterly updates to HMRC using MTD-compatible software. Digital record keeping is now mandatory, and using management software helps landlords organise property records, communicate with tenants, and meet digital filing requirements. Keeping accurate records is essential to prevent higher taxes, as digital records reduce manual errors. Landlords are encouraged to use apps to photograph and log receipts, which further reduces manual mistakes. To simplify digital tracking under MTD, it is recommended that landlords separate personal and business finances. Reviewing your current record keeping early helps avoid disruption later.

Separate property income from other income sources

Where possible, it helps to clearly separate:

• UK property income
• Other property income
• Employment income
• Self employment income or investment income.

This makes quarterly digital reporting simpler and reduces the risk of errors when submitting quarterly updates. Joint ownership arrangements should also be reviewed, as each owner must report income separately and maintain separate digital records. For jointly owned properties, each owner’s share of income is considered separately for Making Tax Digital (MTD) threshold purposes. If a property is held property jointly, each owner is responsible for maintaining their own digital records, and the income is split accordingly, which may affect whether an individual needs to comply with MTD requirements.

Choose MTD compatible software that fits your workflow

Landlords within scope must use appropriate software, such as HMRC-recognised Making Tax Digital software or tax software, that is compatible with HMRC requirements to submit quarterly submissions and the final declaration. You must use HMRC-recognised software to store digital records and submit updates, and the software must maintain a digital link to HMRC via API for compliance. If you prefer to keep records in spreadsheets, MTD for VAT bridging software can be used to connect your data to HMRC’s system. It is essential to select MTD for Income Tax software that can handle the size and complexity of your property portfolio, including management software for landlords with multiple properties. Reliable internet access is crucial for seamless use of cloud-based MTD software. Landlords should digitise their record-keeping immediately and regularly update their software records on the transaction date or as soon after as possible. Consider hiring a bookkeeper or accountant to assist with MTD compliance and software setup. Using separate bank accounts for rental income will make reconciliation in MTD software easier.

This doesn’t mean you need to overhaul your entire financial management process. The right digital tools can sit alongside existing bookkeeping habits and reduce manual effort. When choosing compatible software, look for the ability to:

• Maintain digital records for property income
• Record income and expenses accurately
• Submit quarterly updates and period statements
• Complete the final tax return.

Some landlords may continue using spreadsheets, provided they are digitally linked to compatible software.

Build quarterly reporting into your routine

Quarterly updates are often the biggest perceived change, but they don’t need to disrupt your tax affairs. Under the new rules, landlords must submit quarterly digital updates to HMRC using approved MTD software, replacing the traditional annual self-assessment tax return. These quarterly summaries must be submitted by the 7th of August, November, February, and May. The transition to Making Tax Digital (MTD) requires landlords to shift from annual to quarterly tax reporting, which may require more frequent bookkeeping and digital record-keeping. MTD also introduces a new points-based penalty system for late submissions: missing a quarterly or annual submission results in a penalty point, and once a points threshold is reached, a financial penalty will be imposed. However, in the first year of MTD, penalties for late submission of quarterly updates will be suspended.

Treat quarterly updates as regular check-ins rather than deadlines to fear, and consider using cloud-based MTD software for landlords and sole traders to make those check-ins quicker and more accurate. Building them into your routine early helps prevent rushed submissions and unpaid tax issues later in the tax year.

Keep the final declaration in focus

Even under MTD, landlords still submit a final declaration after the tax year ends.

This is where all income sources are confirmed, reliefs applied, and the final income tax position calculated. Capital gains, adjustments, and other declarations remain part of this final step.

Preparing for MTD is about improving accuracy throughout the year – not removing the annual tax return altogether.

A steady transition, not a sudden overhaul

Making Tax Digital is a government initiative aimed at improving accuracy and reducing the tax gap. For landlords, it represents a change in reporting frequency – not a fundamental rewrite of income tax self assessment.

According to the government website, HM Revenue estimates that 60% of the tax gap is from Self Assessment business taxpayers, which includes landlords. Landlords who do not comply with MTD may face penalties and increased scrutiny from HMRC. Official guidance, updates, and details about MTD requirements and penalties can be found on the government website. You can also voluntarily join HMRC’s beta pilot to test MTD systems before they become mandatory, ideally working through an MTD readiness checklist so nothing is overlooked. It is recommended that landlords aim to sign up for MTD before 6 April 2026 to familiarize themselves with the new process. Limited company landlords are currently not affected by MTD for Income Tax.

With early preparation, clear digital records, and support from an MTD hub for accountants managing landlord clients, many landlords can transition to MTD without disrupting their existing tax affairs or increasing financial penalties risk.

Supporting landlords through MTD

Preparing for MTD doesn’t have to mean complexity or confusion, especially when you have access to structured Making Tax Digital resources and guides. Capium’s MTD compatible software helps landlords maintain digital records, manage quarterly updates, and submit the final declaration with confidence – all while keeping existing processes intact.