On 6 April 2026 — in just a matter of weeks — the way landlords report their rental income to HMRC is changing forever.
It’s called Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), and if your gross rental income is over £50,000 per year, you’ll be required to:
- Keep digital records of all your rental income and expenses
- Submit quarterly updates to HMRC (not just one annual tax return)
- Use MTD-compatible software (spreadsheets and paper records won’t be enough)
This is the biggest shake-up to the Self Assessment system since it was introduced in 1997. And if you’re not ready, you could face penalty points, fines, and a lot of stress.
HMRC has already started sending warning letters to affected landlords — but whether you’ve received one or not, if your income is over the threshold, it’s your responsibility to comply.
This guide explains exactly what Making Tax Digital is, who it affects, when it starts, what you need to do, and how to prepare before the deadline.
What is Making Tax Digital (MTD)?
Making Tax Digital is a government initiative to modernise the UK tax system by requiring businesses and individuals to:
- Keep digital records of their income and expenses
- Submit regular updates to HMRC using compatible software
- Move away from paper records and manual tax returns
MTD has already been introduced for VAT-registered businesses (since 2019), and now it’s being rolled out to Self Assessment taxpayers — starting with landlords and self-employed individuals.
Why is HMRC introducing MTD?
The Government says MTD will:
- Reduce errors in tax returns (by using software instead of manual calculations)
- Make tax administration simpler for businesses and individuals
- Close the tax gap (HMRC estimates that 60% of the £39.8 billion annual tax gap comes from Self Assessment taxpayers, including landlords)
In practice, MTD means more frequent reporting and a shift to digital-only record-keeping.
Who Does MTD Apply To?
MTD for Income Tax Self Assessment is being rolled out in three phases based on your qualifying income.
Phase 1: April 2026 (starting in weeks)
Who’s affected: Landlords and self-employed individuals with qualifying income over £50,000
When: From 6 April 2026 (the start of the 2026/27 tax year)
How many people: Approximately 780,000 individuals across the UK
Phase 2: April 2027
Who’s affected: Landlords and self-employed individuals with qualifying income over £30,000
When: From 6 April 2027 (the start of the 2027/28 tax year)
How many people: An additional 970,000 individuals
Phase 3: April 2028
Who’s affected: Landlords and self-employed individuals with qualifying income over £20,000
When: From 6 April 2028 (the start of the 2028/29 tax year)
The Government has confirmed this third phase will happen before the end of the current parliament, though the exact date hasn’t been finalised yet.
What is “qualifying income”?
Qualifying income means your gross income (before expenses) from:
- UK property rental (residential and commercial)
- Self-employment (if you’re a sole trader or in a partnership)
The key word is gross — you don’t deduct expenses when calculating whether you’re over the threshold.
Example 1: Landlord only
You own three rental properties and receive £55,000 in total rent per year.
You have £18,000 in allowable expenses (letting agent fees, insurance, repairs, etc.).
Your net rental profit is £37,000 — but your qualifying income is £55,000.
✅ You’re over the £50,000 threshold, so you must use MTD from April 2026.
Example 2: Landlord + self-employed
You earn £35,000 in rental income and £20,000 from self-employment.
Your total qualifying income is £55,000.
✅ You’re over the £50,000 threshold, so you must use MTD from April 2026.
Example 3: Jointly owned property
You and your spouse jointly own a rental property that generates £70,000 in rent per year.
Each of you reports £35,000 as your share.
❌ Neither of you is over the £50,000 threshold individually (unless you have other income), so you don’t need to use MTD in April 2026.
But you’ll need to use MTD from April 2027 when the threshold drops to £30,000.
What Income is NOT Included?
The following types of income are not part of your qualifying income for MTD:
❌ Employment income (PAYE salary)
❌ Dividends from UK companies
❌ Interest from savings accounts
❌ Pensions
❌ Capital gains (when you sell a property)
❌ Income from properties owned by limited companies (limited companies file Corporation Tax returns, not Self Assessment)
These income sources are still taxable — they’re just not counted when working out if you need to use MTD.
What Does MTD Actually Mean in Practice?
If you’re affected by MTD, here’s what changes:
1. You must keep digital records
You can no longer rely on:
- Paper receipts kept in a shoebox
- Manual spreadsheets (unless they’re linked to MTD-compatible software)
- Handwritten notes
Instead, you must keep digital records of:
- All rental income received (rent, deposits kept, utility charges passed to tenants)
- All allowable expenses (repairs, insurance, letting agent fees, etc.)
- Dates and amounts for every transaction
You must use MTD-compatible software to store these records.
2. You must submit quarterly updates
Instead of filing one annual Self Assessment tax return in January, you’ll submit four quarterly updates throughout the year.
These updates are summaries of your income and expenses for each quarter.
Quarterly deadlines (2026/27 tax year)
| Quarter | Period | Deadline |
| Quarter 1 | 6 April – 5 July 2026 | 5 August 2026 |
| Quarter 2 | 6 July – 5 October 2026 | 5 November 2026 |
| Quarter 3 | 6 October 2026 – 5 January 2027 | 5 February 2027 |
| Quarter 4 | 6 January – 5 April 2027 | 5 May 2027 |
Each update is due one month after the end of the quarter.
3. You must submit a final declaration
After your four quarterly updates, you still need to submit a final declaration by 31 January (the same deadline as the old Self Assessment).
This is where you:
- Confirm your final figures for the year
- Claim any tax reliefs (like the Property Allowance)
- Report other income sources (employment, dividends, interest, etc.)
- Make any final adjustments
The final declaration replaces your annual Self Assessment tax return.
4. You still pay tax on the same dates
Important: MTD doesn’t change when you pay your tax.
You still pay:
- 31 January: Any tax owed for the previous year, plus your first payment on account for the current year
- 31 July: Your second payment on account for the current year
The quarterly updates are reporting only — not payments.
What Software Do You Need?
To comply with MTD, you must use HMRC-recognised MTD-compatible software.
Spreadsheets alone are not enough (unless they’re linked to MTD software).
What MTD software does
MTD-compatible software:
- Stores your digital records
- Categorises income and expenses
- Submits quarterly updates directly to HMRC
- Submits your final declaration
Types of MTD software
There are two main types:
- Full software (handles both quarterly updates AND final declaration)
- Quarterly-only software (handles quarterly updates, but your accountant submits the final declaration)
If you use an accountant, check which type of software you need.
Free vs paid software
Some MTD software is free (especially for simple businesses), but most landlords with multiple properties or complex expenses will need paid software.
Typical costs: £10–£50 per month, depending on features.
Popular MTD software for landlords
- FreeAgent for Landlords (designed specifically for property income)
- QuickBooks (widely used, good for mixed income)
- Xero (popular with accountants)
- Landlord Studio (property management + MTD compliance)
- Sage (comprehensive accounting software)
- HMRC’s own free software (basic, limited features)
Action: Research software options now and set one up before April 2026.
Simplified Reporting: The “Three-Line Accounts” Option
If your turnover (gross income) is below £90,000, you can use simplified reporting — sometimes called “three-line accounts”.
This means you only need to report:
- Total income
- Total expenses
- Net profit
You don’t need to break expenses down into detailed categories (though you still need to keep records in case HMRC asks).
Example: Simplified reporting
Quarter 1 update:
- Total rental income: £15,000
- Total expenses: £4,500
- Net profit: £10,500
That’s it. No need to list every individual expense.
But — you still need to keep detailed digital records of every transaction in your software.
What if You Have Multiple Properties or Businesses?
If you have more than one income source (e.g., rental income + self-employment), you need to submit separate quarterly updates for each.
Example: Landlord + self-employed
You run a plumbing business (self-employment) and own two rental properties.
You need to submit:
- Four quarterly updates for your plumbing business
- Four quarterly updates for your rental properties
That’s eight updates per year, plus one final declaration.
Jointly owned properties
If you own properties jointly with a spouse or partner:
- Each person submits their own quarterly updates for their share of the income
- You can’t submit a joint update
The New Penalty System: Points-Based Late Submission Penalties
HMRC is introducing a points-based penalty system for MTD.
How it works
- Miss a quarterly update deadline → you get 1 penalty point
- Reach 4 penalty points → you get a £200 financial penalty
- Each additional late submission after that → another £200 penalty
Penalty points expire after 24 months (as long as you don’t get any more).
Grace period for 2026/27
If you join MTD in April 2026, there’s a 12-month grace period for late quarterly updates.
This means:
- You won’t get penalty points for late quarterly updates in 2026/27
- But you will get penalties for a late final declaration
From 2027/28 onwards, penalty points apply immediately.
Example: How penalties add up
You join MTD in April 2026.
- August 2026: You miss your Quarter 1 update → 0 points (grace period)
- November 2026: You miss your Quarter 2 update → 0 points (grace period)
- February 2027: You submit on time → no issue
- May 2027: You miss Quarter 4 → 0 points (grace period)
But from 2027/28 onwards, every late submission = 1 point.
Who is Exempt from MTD?
Very few landlords are exempt from MTD.
The only exemptions are for digital exclusion — meaning it’s not practical for you to use digital tools due to:
- Age
- Disability
- Location (e.g., no reliable internet access)
- Religious beliefs
You must apply to HMRC for an exemption — it’s not automatic.
Most landlords will not qualify for an exemption.
What About Properties Owned by Limited Companies?
If you own rental properties through a limited company, MTD for Income Tax Self Assessment does not apply to you.
Limited companies file Corporation Tax returns, not Self Assessment.
However:
- You may already be subject to MTD for VAT (if your company is VAT-registered)
- You personally may need to file a Self Assessment (for your salary and dividends) — and if your total income exceeds £50,000, you’d need to use MTD
How to Prepare for MTD: A Step-by-Step Checklist
If you’re affected by MTD from April 2026, here’s what you need to do right now:
☐ Step 1: Calculate your qualifying income
Check your 2024/25 Self Assessment (the one you should have filed by 31 January 2026).
Add up:
- Your gross rental income (before expenses)
- Any self-employment income (gross)
If the total is over £50,000, you’re in scope for April 2026.
☐ Step 2: Stop using paper records immediately
Even if you’re not starting MTD until 2027 or 2028, start going digital now.
The transition is much easier if you’ve already built the habit of digital record-keeping.
☐ Step 3: Choose MTD-compatible software
Research your options and pick software that suits your needs.
Consider:
- Number of properties
- Complexity of expenses
- Whether you use an accountant
- Budget
Sign up for a free trial and test it out.
☐ Step 4: Set up your software
Once you’ve chosen software:
- Create your account
- Connect it to your bank account (if it has a bank feed feature)
- Enter your properties
- Set up your income and expense categories
☐ Step 5: Start recording income and expenses digitally
From now, record every:
- Rent payment received
- Expense paid (repairs, insurance, letting fees, etc.)
Get into the habit of logging transactions weekly (or even daily).
☐ Step 6: Sign up for MTD with HMRC
Before 1 April 2026, you need to register for MTD with HMRC.
You can do this through:
- HMRC’s online services (if you’re already registered for Self Assessment)
- Your software (many MTD programs will register you automatically)
☐ Step 7: Submit your first quarterly update (by 5 August 2026)
Your first MTD quarterly update covers 6 April – 5 July 2026 and is due by 5 August 2026.
Make sure you’re ready to submit on time.
☐ Step 8: Set reminders for all quarterly deadlines
Use calendar reminders, phone alerts, or your software’s notification features to make sure you never miss a deadline.
Common Mistakes to Avoid
1. Assuming HMRC will tell you if you’re in scope
HMRC is sending letters to some landlords — but not all.
It’s your responsibility to check if you’re over the threshold and to comply.
2. Waiting until the last minute
If you wait until March 2026 to choose software, set it up, and learn how to use it, you’ll be massively stressed.
Start now.
3. Thinking you can use spreadsheets
Unless your spreadsheet is linked to MTD-compatible software, it won’t be enough.
Standalone Excel or Google Sheets files do not comply with MTD.
4. Not keeping digital records from Day 1
You need digital records for the entire tax year — not just from the date you sign up for MTD.
If you start MTD in April 2026, you need records from 6 April 2026 onwards.
5. Confusing quarterly updates with tax payments
The quarterly updates are reporting only — they don’t trigger tax payments.
You still pay tax on 31 January and 31 July, just like before.
What if You Miss a Quarterly Deadline?
If you miss a quarterly update deadline:
- In 2026/27: No penalty points (grace period), but you still need to submit the update as soon as possible
- From 2027/28 onwards: You get 1 penalty point for each late submission
After 4 penalty points, you get a £200 fine — and another £200 for each additional late submission.
Should You Use an Accountant?
You don’t have to use an accountant for MTD — you can do it yourself using software.
But many landlords choose to use an accountant because:
- MTD adds significant admin burden (four quarterly updates + final declaration = 5 submissions per year)
- Accountants can handle the software and submissions for you
- They ensure you’re claiming all allowable expenses correctly
- They can advise on tax planning strategies
Typical accountant fees for MTD: £500–£1,500 per year, depending on complexity.
Final Thoughts
Making Tax Digital for landlords is coming — and if your gross rental income is over £50,000, you have just weeks to prepare.
Here’s the short version:
- MTD starts 6 April 2026 for landlords with income over £50,000
- You must keep digital records using MTD-compatible software
- You must submit four quarterly updates per year (plus a final declaration)
- Penalties apply for late submissions (from 2027/28 onwards)
- You need to register with HMRC and set up software before April 2026
This is the biggest change to Self Assessment in nearly 30 years. The sooner you prepare, the smoother the transition will be.
If you’re feeling overwhelmed, or if you’d rather have a professional handle the quarterly submissions and compliance, get in touch with us.
At Applegrow Financial Advisors, we help landlords with MTD compliance, quarterly reporting, Self Assessment, and tax planning. We’ll set up your software, handle your submissions, and make sure you never miss a deadline.
Get in touch and let us take MTD off your plate.
Need Help With Making Tax Digital?
Whether you’re starting MTD in April 2026 or planning ahead for 2027 or 2028, we can help you choose software, get set up, and stay compliant.
Contact us today to find out how we can help.
