MTD for residential landlords: What, when and how to comply

Making Tax Digital (MTD) is a significant change to the UK tax system that will affect residential landlords and property business owners in various ways.

MTD for residential landlords will significantly change how many landlords report property income, including gross rental income, self-employment income and other forms of qualifying income.

In this blog, we examine how Making Tax Digital will impact landlords, the timing of the changes, and how to prepare and comply with the evolving legislation.

When does MTD for Income Tax Self Assessment (ITSA) start?

Making Tax Digital for Income Tax Self-Assessment (ITSA) is scheduled to be introduced in stages over three years.

The date when MTD for ITSA starts will depend on your total yearly income from self-employment and/or property rentals.

This reflects the fact that larger landlords will hit the relevant MTD threshold sooner as they have more means to adopt digital systems and it will give smaller landlords additional time to prepare.

Here are the key dates for MTD for ITSA compliance for self-employed individuals and landlords:

NOTE: Income limits apply to the combined income from all relevant sources, including rental property.

Landlords and sole traders with income below the thresholds can join MTD for ITSA voluntarily, allowing them to become accustomed to digital reporting before it becomes mandatory.

How Does Making Tax Digital Work for Landlords?

Making Tax Digital replaces current annual reporting and introduces a more regular process of digital record-keeping and quarterly reporting. Landlords and sole traders will be required to submit quarterly updates on rental income and expenses.

Accounting software & digital record keeping

You will need comprehensive accounting software to record and store electronic details of transactions, including business income, property income and expenses. You will be required to submit these digital records through MTD-compatible accounting software that links directly to HMRC.

Once you fall within the qualifying criteria for Making Tax Digital, you will no longer be able to submit Self-Assessment tax returns via the HMRC’s online portal or submit paper returns. All MTD reporting must be completed using MTD-compatible software.

Quarterly submissions

Quarterly reporting will need to be submitted four times a year. The quarterly reporting dates are:

A separate quarterly update will be required for each source of income. For example, you’ll need one for your UK property income and another for any other self-employment income.

UK properties form a single portfolio, and overseas properties form a separate portfolio. Each trading business forms a separate portfolio.

Each report will be cumulative, showing total income and expenses from the start of the tax year. Mistakes can be corrected in the following quarter without a separate amendment.

End of Period Statement (EOPS) and Final Declaration

At the end of the tax year, you’ll be required to submit an EOPS to finalise your business income for the tax year. A Final Declaration will then be necessary, which replaces the old Self Assessment tax return. The Final Declaration lists all income sources, including property income, self-employment income, non-business income (such as wages/PAYE income), pensions, and investment income.

The deadline for the Final Declaration is 31 January, following the end of the tax year.

Quarterly reporting will give landlords a clearer, up-to-date picture of their tax position throughout the year.

Does MTD for Income Tax apply to my limited company?

MTD for Income Tax is only applicable to sole traders and landlords, not to limited companies. Limited Companies do not file a Self-Assessment Income Tax return, so a limited company is therefore exempt from MTD for Income Tax.

Is Self-Assessment changing in 2026 for landlords?

From April 2026, the current Self Assessment system will begin to change for individuals with a gross income above the £50,000 threshold.

Instead of the once-a-year Self-Assessment being filed by 31 January each year, landlords and the self-employed who fall within the new income tax rules of MTD will begin the quarterly reporting and Final Declaration routine.

At the end of the tax year, landlords will need to combine their annual qualifying income, including property income, self-employment income, and any other sources of revenue. This is also the point at which you can claim any reliefs or exemptions that they may qualify for.

Self-Assessment tax returns continue for now for landlords under the MTD thresholds, unless they voluntarily opt to adopt the new Making Tax Digital for Income Tax regime.

NOTE: MTD does not change the principles of tax charged or owed. You’ll still need to declare rental income, other income, claim expenses and reliefs, and pay tax on your profits. MTD for Income Tax is simply a change to the way these things are reported to HMRC. It will not change your final tax bill in any way.

For those with multiple businesses, you’ll be required to report each business stream separately. For example, if you have three sole trader business streams and rental income, you’ll need to submit four quarterly updates.

Jointly owned properties will be treated on an individual basis, but income will be split according to ownership share when applying the new MTD thresholds.

Do landlords need to register for MTD for Income Tax Self-Assessment?

As with Self-Assessment, HMRC won’t automatically enrol landlords into MTD for Income Tax. Landlords will be required to sign up once they reach the threshold or voluntarily.

How does Making Tax Digital for Income Tax affect landlords’ reporting requirements?

Whilst MTD for Income Tax changes the regularity of reporting for landlords, it will also change how many landlords record and manage their finances on a day-to-day basis.

Instead of waiting until the end of the year to collate receipts, invoices and bank statements, landlords will now be required to keep accurate, up-to-date digital records throughout the year.

One benefit of this more regular reporting and keeping digital records is that landlords will be more aware of their tax liability throughout the year, rather than just at the end of a tax year, so it should eliminate any ’nasty surprises’.

What challenges does MTD create for landlords?

For landlords who have kept paper records or used simple spreadsheets in the past, transitioning to MTD-compatible software may cause stress, confusion, and additional costs.

Contact dns accountants today to help you through this transition and minimise the cost of accounting software. Many of our accounting packages include MTD compatible software in the monthly fee.

Landlords with complex property portfolios, multiple properties, or additional income streams will need to submit separate quarterly updates for each portfolio.

What counts as an individual portfolio?

• All your UK properties will be treated as a single property portfolio.
• All your overseas properties of UK residents will be treated as a separate property portfolio.
• Additional separate trades or businesses (for example, a restaurant or shop) will be treated as their own portfolio. (for example, a restaurant or shop) will be treated as their own portfolio.

This will mean more reporting if you have separate portfolios and businesses to report on.

Penalties

A new points-based penalty system is being introduced alongside MTD submissions. Each missed deadline earns a landlord one point. Accumulating points will trigger financial penalties. To avoid these penalties, landlords should hire an accountant and ensure reporting deadlines are not missed.

How can I prepare for MTD for Income Tax?

As with any legal or compliance change, preparation is key to ensuring you are well-prepared.

If you don’t already have it, choose and use HMRC-approved software to keep up-to-date and accurate records of everything.

Contact your accountant or speak to dns accountants about other ways you can prepare for Making Tax Digital.

DON’T WAIT UNTIL YOU HIT THE THRESHOLD. Early adoption could save you stress and pressure and may help you avoid incurring penalties.

How can dns accountants help?

Here at dns accountants, we are specialist accountants for landlords. Our property team specialise in advising on landlord property tax and can assist you with all your tax affairs, including new reporting requirements, quarterly submissions, compatible software, property finances, capital expenditure, Capital Gains Tax and claiming tax relief.

Contact dns on 03330603321 or email us at [email protected].

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.