Making Tax Digital for Landlords 2026: What You Need to Know

What is Making Tax Digital for Income Tax Self Assessment?

Making Tax Digital (MTD) is HMRC's long-running programme to move the UK tax system from annual paper and PDF-based returns to digital, quarterly reporting. It started with VAT-registered businesses in 2019 and is now being extended to Income Tax Self Assessment (ITSA), which is the system that most landlords and sole traders use to report their earnings.

MTD for ITSA means that instead of filing a single Self Assessment tax return once a year, affected landlords will need to keep digital records of their property income and expenses and submit quarterly updates to HMRC through MTD-compatible software. At the end of the tax year, a final declaration replaces the traditional tax return.

The programme has been delayed several times since it was first announced, but the dates are now confirmed. The first group of landlords and self-employed individuals will come into scope from 6 April 2026.

Who needs to comply and when?

MTD for ITSA is being introduced in two phases, determined by the level of qualifying income. Qualifying income means your combined gross income from self-employment and property, before deducting expenses. It does not include employment income, dividends, or savings interest.

• From 6 April 2026: Landlords and sole traders with qualifying income above £50,000 per year must comply with MTD for ITSA. Their first quarterly update will be due by 7 August 2026, covering the period 6 April to 5 July 2026.
• From 6 April 2027: The threshold drops to £30,000. Landlords and sole traders with qualifying income between £30,000 and £50,000 will also need to comply from this date.
• Below £30,000: HMRC has indicated it will consult on extending MTD to those with income below £30,000, but no date has been confirmed. For now, landlords under this threshold are not required to use MTD-compatible software.

If you have both rental income and self-employment income, the two are added together to determine whether you cross the threshold. For example, a landlord earning £35,000 from property and £20,000 from a side business has qualifying income of £55,000 and would be in the first group from April 2026.

General partnerships where all partners are individuals will also come into scope, though the timelines for partnerships have seen the most changes and landlords operating through partnerships should confirm the latest position with HMRC or an accountant.

What quarterly reporting means in practice

Under MTD for ITSA, the tax year is divided into four quarterly periods. For each period, you must submit a summary of your income and expenses to HMRC through MTD-compatible software. These are not full tax returns. They are cumulative updates that give HMRC a running picture of your income position throughout the year.

After the fourth quarterly update, you submit a final declaration by 31 January of the following year, just as you would with a traditional Self Assessment return. The final declaration is where you confirm the figures, claim any reliefs or allowances, and finalise your tax position for the year.

The quarterly updates themselves are relatively simple. For property income, each update will typically include total rent received and a breakdown of allowable expenses such as repairs, insurance, letting agent fees, and mortgage interest (subject to the finance cost restriction rules). The key change is that this information needs to be compiled and submitted four times a year rather than once.

HMRC has confirmed that landlords can use calendar quarters (e.g. April to June, July to September) rather than the standard tax year quarters if their software supports it. This may simplify things for landlords whose accounting periods already run on calendar quarter boundaries.

How this affects landlords with multiple properties

For a landlord with a single buy-to-let, the quarterly reporting overhead is manageable. The rent amount is predictable, the expenses are relatively few, and it is straightforward to pull the numbers together every three months.

For landlords with larger portfolios, the picture is more demanding. Rental income may vary from month to month due to voids, late payments, or tenancy changeovers. Expenses are spread across multiple properties with different maintenance schedules, insurance renewal dates, and agent fee structures.

• Tracking rental income per property, including partial months during tenancy changes and void periods where no rent is received.
• Categorising expenses correctly across properties — distinguishing between repairs (allowable) and improvements (capital expenditure).
• Reconciling mortgage interest payments, which may be on different schedules for different properties.
• Keeping records of letting agent fees, service charges, ground rent, and other recurring costs that differ between properties.
• Managing timing differences where an expense is incurred in one quarter but paid in another.

The shift from annual to quarterly reporting means that record keeping needs to be more consistent throughout the year. Landlords who currently gather their records in January for their Self Assessment deadline will need to adopt a more regular approach. Every quarter becomes a mini reporting cycle, and the data needs to be in a fit state to submit each time.

For portfolio landlords, the main risk is not complexity — it is inconsistency. If income and expenses are recorded in different places, or if some properties are tracked more carefully than others, the quarterly submission becomes a reconciliation exercise rather than a straightforward export. That is where the admin burden grows.

"For portfolio landlords, the main risk is not complexity — it is inconsistency. When income and expenses live in different places, the quarterly submission becomes a reconciliation exercise rather than a straightforward export."

What software and records you need

HMRC requires that records are kept digitally and that quarterly updates are submitted using MTD-compatible software. This is not optional — you cannot submit quarterly updates through the HMRC website or through the existing Self Assessment online portal. The software must connect to HMRC's systems via their API to submit the updates directly.

HMRC publishes a list of MTD-compatible software on GOV.UK, and the range of products is growing as the April 2026 deadline approaches. Options range from standalone accounting tools to specialist property accounting software and broader practice management platforms used by accountants.

• Digital record keeping: All income and expense records must be maintained digitally. This means the source data — rent received, invoices, receipts — needs to be entered into or captured by software, not just stored as paper files.
• MTD-compatible submission: The software must be able to submit quarterly updates and the final declaration to HMRC via the MTD API. Not all accounting software supports this yet, so landlords should verify compatibility before committing.
• Spreadsheets with bridging software: HMRC does allow the use of spreadsheets for record keeping, but only if the data is submitted to HMRC through a compatible bridging application. The spreadsheet itself cannot submit directly. This means spreadsheet users will need an additional tool to handle the API connection.
• Record retention: Digital records must be kept for at least five years after the 31 January submission deadline for the relevant tax year, consistent with existing Self Assessment rules.

For landlords who currently manage their property finances in a spreadsheet, the transition is not as dramatic as it might sound. The spreadsheet can continue to serve as the working record, but a bridging tool will be needed to format and submit the data. However, many landlords are likely to find that switching to purpose-built software is simpler than maintaining a spreadsheet plus a separate bridging tool, especially as the number of properties increases.

Understanding the penalty regime

HMRC is introducing a points-based penalty system for MTD for ITSA, replacing the previous fixed penalty model. This is the same system that already applies to MTD for VAT and is designed to be more proportionate for occasional late submissions while escalating for persistent non-compliance.

• Late submission penalties: Each late quarterly update or final declaration earns one penalty point. Once you reach the penalty threshold (four points for quarterly obligations), a £200 penalty is charged for that submission and for each subsequent late submission until the points are reset.
• Resetting points: Points expire automatically after a period of compliance (24 months of meeting all deadlines for quarterly obligations). You can also reset by meeting all obligations within the previous 24 months.
• Late payment penalties: Separate penalties apply for late tax payments. If tax is paid more than 15 days late, a first penalty is charged at 2% of the outstanding amount. After 30 days, an additional 2% is charged. Interest also accrues on late payments from the due date.
• First year leniency: HMRC has indicated a lighter-touch approach during the first year of MTD for ITSA. Penalties for late quarterly updates will not be charged in the first year (2026/27 tax year) for those in the first mandation group. However, this leniency does not extend to late payment penalties or the final declaration.

The first-year grace period is helpful, but it should not encourage complacency. Landlords who do not establish a quarterly reporting rhythm from the start will find it harder to catch up once penalties begin to apply in full from the second year onwards.

Practical steps to prepare before April 2026

With the first mandation date now imminent, landlords who have not yet started preparing should focus on the following steps. Even if your qualifying income is between £30,000 and £50,000 and you do not come into scope until April 2027, starting early gives you a full year of practice before it becomes compulsory.

• Check your qualifying income: Add your gross property income and any self-employment income. If the total exceeds £50,000, you are in the first group. If it is between £30,000 and £50,000, you have until April 2027 but should still prepare now.
• Sign up for MTD for ITSA: You will need to register with HMRC for MTD for ITSA through your Government Gateway account. HMRC recommends signing up before the start of the tax year in which you are first required to comply.
• Choose MTD-compatible software: Review the options on GOV.UK's published list. Consider whether you want standalone accounting software, a bridging tool to work with your existing spreadsheet, or a broader property management platform that feeds into accounting.
• Start keeping digital records now: Even before April 2026, begin recording income and expenses digitally in your chosen software. This lets you test the process, identify gaps in your record keeping, and build the habit of quarterly review.
• Talk to your accountant: If you use an accountant for Self Assessment, discuss how MTD will change the workflow. Some accountants will handle quarterly submissions on your behalf; others will expect you to submit the updates yourself and only assist with the final declaration.
• Review your expense categories: Make sure you understand which expenses are allowable revenue deductions and which are capital. Getting this right from the start avoids corrections in later quarters.
• Understand the finance cost restriction: Mortgage interest relief for residential landlords is restricted to a basic rate tax reduction. Your software should handle this correctly when preparing the final declaration, but it is worth understanding how it works so the quarterly figures make sense to you.

How property management software fits into MTD compliance

MTD for ITSA is fundamentally about having accurate, up-to-date income and expense data in a digital format. For landlords who already use property management software, a significant part of that data already exists in their system.

Good property management software records rent payments as they come in, tracks maintenance costs against specific properties, logs void periods, and maintains a history of tenancy-level financial transactions. This is exactly the kind of data that feeds into MTD quarterly updates.

• Rental income tracking: If your software records when rent is received (and when it is not), you already have the income side of the quarterly update covered. No need to cross-reference bank statements manually.
• Expense recording: Maintenance costs, contractor invoices, insurance premiums, and other property expenses logged in the system can be categorised and totalled for each quarter without re-entering them into separate accounting software.
• Void period visibility: Knowing exactly when a property was empty and when it was generating income is important for accurate quarterly reporting. Property management software that tracks tenancy dates provides this automatically.
• Property-level detail: While MTD quarterly updates report total property income and expenses (not per-property breakdowns), having the data organised by property makes it easier to verify the totals and spot errors before submission.
• Audit trail: If HMRC queries a quarterly update or the final declaration, having a clear trail from individual transactions to the submitted totals is essential. Property management software with transaction-level records provides that traceability.

The key point is that MTD compliance is easier when the underlying data is already well-organised. Landlords who adopt property management software are not just solving an operational problem — they are building the data foundation that makes tax reporting less painful, whether that is quarterly MTD updates or year-end reconciliation with their accountant.

Even if your property management software does not directly submit to HMRC (most do not, since that requires specific MTD API integration), having clean, categorised income and expense data ready to export at the end of each quarter dramatically reduces the time spent preparing submissions in your accounting or bridging software.

The bigger picture: why this matters beyond compliance

MTD is often discussed as a compliance burden, and for many landlords the initial transition will involve extra work. But there is a longer-term benefit to having property income and expenses tracked quarterly rather than annually.

Quarterly reporting forces a regular review of how each property is performing. Landlords who only look at their finances once a year often miss trends — a property with rising maintenance costs, a void that lasted longer than expected, or an expense category that has crept up. When the data is compiled every three months, these patterns become visible sooner.

For landlords with growing portfolios, the discipline of quarterly financial review also makes it easier to make informed decisions about acquisitions, disposals, and capital expenditure. Knowing your current income and expense position with a lag of no more than three months is a meaningful improvement over the annual rear-view mirror that Self Assessment provides today.

MTD for ITSA is a significant change in how landlords report their income, and the transition requires preparation. But for landlords who embrace it as an opportunity to tighten their financial processes rather than just a box to tick, the ongoing benefits go well beyond staying on the right side of HMRC.