Will MTD for income tax affect buy-to-let landlords?

If you’re a buy-to-let landlord, you’ve probably seen Making Tax Digital mentioned more and more – and wondered whether it actually applies to you. So let’s get straight to it.

Will MTD for income tax affect buy-to-let landlords?
In a nutshell, yes – if your rental income meets HMRC’s criteria. Here’s what property owners need to know.

Why buy-to-let landlords are in scope for MTD

MTD for income tax applies based on qualifying income, not business type.

For buy-to-let landlords, qualifying income includes property income, measured as gross rental income, not profit. That means rental income before expenses such as agent fees, maintenance costs, or mortgage interest. Gross income refers to the total rental and self-employment income before expenses, while total income includes all relevant income sources.

The income level for MTD is based on the individual’s total gross income from all rental and self-employment sources, including sole trade income, employment income, self employed income, self employment income, sole trader income, and other sole trader income. Other income such as PAYE salary, pensions, or dividends is not included in the MTD threshold calculation, but relevant income like rental income from lodgers is. The MTD income threshold applies to the individual’s total income, not per property or portfolio. Income from overseas properties must also be included in the MTD calculations if the landlord is domiciled in the UK.

Landlords with total gross income from rental sources exceeding £50,000 in a tax year must comply with MTD for Income Tax starting from April 2026. The threshold will drop to £30,000 in April 2027 and to £20,000 in April 2028. Landlords will need to register for MTD before the start of the tax year in which they exceed the income threshold.

If your gross rental income exceeds the MTD income threshold, MTD for income tax applies – even if your taxable income is much lower once deductions are made. This applies whether you own one rental property or multiple rental properties.

What counts towards qualifying income?

Qualifying income includes:

• UK property income
• Gross rental income from buy-to-let
• Foreign income from overseas rental properties
• Combined property income across all properties

For jointly owned properties, each landlord’s share of the income is assessed individually for Making Tax Digital (MTD) purposes. Whether a landlord owns properties outright or jointly, all relevant income is included in the calculation for MTD obligations. Properties owned through a limited company are treated differently for tax purposes, but personally owned and jointly owned properties are subject to MTD if the individual’s qualifying income exceeds the threshold. A property business, including furnished holiday lets, is considered a separate business for MTD reporting. Non-resident landlords and those with total gross income below £10,000 are currently exempt from MTD requirements until April 2027.

It does not include PAYE income, pension contributions, or bank interest – although these are still declared later through the final tax return. Joint property owners are assessed individually, based on their share of the rental income.

How income tax reporting will change

For landlords within scope, MTD changes how income tax is reported. Instead of relying solely on a self assessment tax return at the end of the tax year, landlords must:

• Maintain digital records
• Submit quarterly submissions (quarterly updates) using MTD-compatible software
• Complete a final tax return (final declaration) after the tax year ends.

Quarterly submissions are summaries of transactions and must be submitted by August 7, November 7, February 7, and May 7 each year, so many landlords are turning to dedicated MTD for Income Tax software for quarterly submissions or broader MTD for Income Tax solutions for landlords to simplify the process. The final declaration will replace the current self-assessment tax return and will include all transactions reported in the quarterly submissions. Landlords must keep digital records and submit quarterly updates to HMRC if their qualifying income exceeds the MTD thresholds. Landlords need to maintain separate digital records for property income and self-employment income. MTD-compliant software must be capable of filing the end-of-year declaration and other sources of income. Quarterly updates provide a more accurate, real-time view of tax liabilities, which may affect cash flow management for leveraged landlords. This process replaces the traditional assessment system and current self assessment system, which relied on a single annual tax return.

Does this apply to limited company landlords?

No. If your buy-to-let properties are held within a limited company, income is subject to corporation tax, not income tax, and these properties owned by the company are not within the scope of MTD for Income Tax. Many landlords choose to own properties through a limited company for tax reasons, but this changes their reporting obligations, as they must follow corporation tax and company accounts reporting instead of MTD for Income Tax.

However, individual landlords – including self employed landlords and sole traders with property income – are within scope if their total income, including both self-employment and rental income, exceeds the MTD threshold, making it important to understand wider tax tips for buy-to-let landlords when planning how to structure and manage properties.

What about jointly owned buy-to-let properties?

Joint ownership doesn’t change the rules, but it does affect reporting.

For jointly owned properties, each owner must report their share of the rental income separately for MTD compliance, and maintain digital records for their portion. This ensures that income splitting and reporting deadlines are handled correctly, and highlights the importance of understanding ownership structures for accurate compliance. This applies whether the property is owned as joint tenants or tenants in common.

If ownership changes – for example, one owner sells their share – reporting responsibilities must be updated accordingly.

Are any buy-to-let landlords exempt?

Some landlords may be automatically exempt, including those who:

• Fall below the MTD threshold
• Are digitally excluded due to limited internet access
• Meet specific automatic exemptions recognised by HM Revenue & Customs.

If a landlord’s income drops below the threshold, they must remain in the MTD system for three consecutive tax years before they can apply for exemption. The exemption is only available after three consecutive tax years of qualifying income below the threshold, as the rules require income to remain under the limit for consecutive tax years before switching back from MTD to traditional filing methods.

Furnished holiday lettings, foster carers, and landlords in the testing phase may also have different treatment, depending on circumstances.

What happens if landlords don’t comply?

Failing to meet MTD obligations can result in a financial penalty. Under the new points-based system, you will receive a penalty point for each missed quarterly submission. Accumulating enough penalty points can lead to further financial penalties for ongoing non-compliance. HMRC is introducing a new penalty regime from April 2026, where late payment penalties will be more proportionate and charged at different rates depending on when the outstanding amount is paid. Over time, repeated failures can affect your wider tax affairs.

MTD is designed to reduce the tax gap, but it also places clearer expectations on landlords to stay compliant, which is where using fully MTD-compatible accounting software can help automate submissions and reduce errors.

What software do buy-to-let landlords need?

Landlords within scope must use MTD-approved software, like Capium. Management software can help landlords organise tenants, maintain records, and handle financial transactions, and integration with MTD-compatible software is essential. Landlords must use MTD-compatible software to submit their quarterly updates and final declaration to HMRC, and solutions such as Capium’s HMRC-recognised MTD software are designed specifically to support this. This could be accounting software or income tax compatible software that can:

• Keep digital records
• Submit quarterly updates
• Support the final declaration.

Landlords can use general accounting software but these may require customisation to be MTD-compliant, whereas platforms like Capium 365 for small businesses and landlords and other Making Tax Digital software for small businesses are built with MTD requirements in mind from the outset. Some software products specifically designed for landlords, such as Hammock, are MTD-approved, and many also include dedicated MTD for VAT software and other HMRC-recognised MTD for VAT solutions for landlords who run VAT-registered property businesses. Digital software is expected to reduce human error in tax submissions and streamline the process of managing property financials.

Spreadsheets may still be used if connected via bridging software, but digital record keeping must be maintained throughout, and many landlords rely on their accountants’ MTD management platforms to keep submissions on track, often supported by dedicated MTD software for accountants. Choosing the right MTD approved software early helps avoid rushed decisions later.

So, will MTD affect buy-to-let landlords?

If you receive rental income and your gross rental income exceeds the MTD income threshold, then yes – MTD for income tax will affect you.

It doesn’t change income tax rules, capital gains treatment, or how much tax you owe. But it does change how often information is reported and how records are kept. Preparing early makes the transition far easier.

Supporting buy-to-let landlords with MTD

Making Tax Digital doesn’t need to complicate buy-to-let ownership. With the right accounting software and clear digital records, landlords can meet MTD requirements while keeping control of their tax position, especially when they use purpose-built MTD software solutions and structured MTD readiness resources and checklists alongside wider Making Tax Digital support guides.

Capium’s MTD-compatible software supports landlords with digital record keeping, quarterly updates, and final declarations – helping buy-to-let landlords stay compliant and avoid unnecessary penalties.