Making Tax Digital for Landlords: The Complete Guide (2026)

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for IT, sometimes written MTD ITSA) is HMRC's programme to modernise the way individuals and businesses report their income and pay tax. The core idea is simple: instead of completing one annual tax return at the end of the year, you keep digital records throughout the year and send brief updates to HMRC four times a year. The aim is to make the UK tax system more accurate, reduce errors, and help taxpayers understand their liability in near real time.

For landlords, this is a significant change. If you have been filing a Self Assessment return every January, you are used to gathering a year's worth of rent receipts, expenses, and bank statements once a year. Under MTD, that annual scramble is replaced by a quarterly routine. Each quarter you summarise your rental income and expenses for the preceding three months and submit a digital update. HMRC uses these updates to show you a running estimate of your tax liability — so there are fewer surprises come January.

MTD for Income Tax was originally scheduled to begin in April 2023. Following extensive consultation with landlords, accountants, and software developers, HMRC delayed the mandatory start date. The revised timetable is:

• 6 April 2026: Mandatory for individuals (including landlords) whose total qualifying income exceeds £50,000 per year.
• 6 April 2027: Mandatory for individuals with qualifying income above £30,000 per year.
• Future date TBC: HMRC has indicated a further extension to cover those with income above £20,000, but no legislation has confirmed this date as of April 2026.

"Qualifying income" for MTD purposes means your gross income from self-employment and UK property combined. If you earn £30,000 in rental income and £25,000 from a sole-trade business, your combined qualifying income is £55,000 — above the £50,000 threshold — and you must comply from April 2026 even if neither source individually crosses the line. HMRC's eligibility checker explains qualifying income in full.

The MTD programme does not change how much tax you pay. Your allowable expenses, reliefs, and tax rates are exactly the same as under Self Assessment. What changes is the timing and format of reporting. Quarterly updates contain income and expenses — they are not payment demands. You still pay your income tax by the normal January and July payment on account deadlines.

It is also worth noting what MTD for Income Tax is not. It is not the same as MTD for VAT, which has been in place since 2019 and affects VAT-registered businesses above the VAT threshold. Many landlords will be familiar with MTD for VAT if they run a separate business. MTD for Income Tax is a separate obligation with its own software, API, and authorisation process, even though some software packages handle both.

Which landlords must comply with MTD?

The rules apply broadly to any individual who receives income from UK property and who files a Self Assessment tax return. Whether you let a single flat, a portfolio of houses, commercial units, or furnished holiday lettings, the same threshold test applies. Here is a practical breakdown.

The income threshold test

The threshold is based on your gross qualifying income in the preceding tax year — not your profit, and not your net income after expenses. If your rental receipts for 2024/25 exceeded £50,000, you will be mandated to use MTD from 6 April 2026. HMRC looks at the prior year's income to determine which taxpayers must join in any given year.

The thresholds confirmed in legislation as of April 2026 are:

HMRC's eligibility guidance sets out the full rules on what counts as qualifying income and the special rules for joint ownership, trusts, and overseas property.

Who is exempt?

Certain categories of landlord are exempt from MTD for Income Tax. These include landlords who only receive income through a trust or personal representative arrangement, non-UK residents in some circumstances, and those for whom HMRC has granted a digital exclusion exemption on the grounds that they cannot reasonably use computers (for example due to age, disability, or location without adequate internet access). Partnerships are also not included in the current rollout — MTD for partnerships is a separate programme with its own timeline.

Furnished holiday lettings

The furnished holiday letting (FHL) regime was abolished from 6 April 2025 following the Spring Budget 2024 announcement. Income from short-term holiday lets is now treated as ordinary UK property income for tax purposes. This means FHL landlords are subject to the same MTD thresholds as residential landlords and report income in the same way on the property pages.

If you rent property jointly with a partner or spouse, each person's share of the income counts separately against the threshold. If your joint rental receipts are £80,000 and you own the property 50/50, each of you has £40,000 of rental income — below the £50,000 threshold for April 2026, but above the £30,000 threshold for April 2027.

MTD quarterly deadlines for landlords

The UK tax year runs from 6 April to 5 April. Each quarterly MTD update covers a three-month period aligned with that tax year. The submission deadline for each quarter is one calendar month after the quarter end. You do not pay tax when you submit a quarterly update — the update simply tells HMRC your income and expenses for that period. Tax payment deadlines remain unchanged: 31 January for balancing payment and first payment on account, 31 July for second payment on account.

HMRC has also confirmed that taxpayers who prefer to submit on calendar-quarter dates (rather than the 6th–5th tax year quarters) may opt for an "alternative quarterly period" that runs from the 1st of the month. Under this option, Q1 runs 1 April – 30 June, due by 31 July; Q2 runs 1 July – 30 September, due by 31 October; Q3 runs 1 October – 31 December, due by 31 January; Q4 runs 1 January – 31 March, due by 30 April. This can make it easier to align with your bank statement dates or your existing bookkeeping routine.

Missing a deadline earns a penalty point under HMRC's new points-based system. If you think you will miss a deadline, contact HMRC or your accountant as soon as possible. HMRC can grant a reasonable excuse for late submission in genuine circumstances — for example, a serious illness or a bereavement.

What records do landlords need to keep digitally?

MTD requires you to keep digital records of every transaction relevant to your property business. "Digital" means recorded in a software system — a spreadsheet updated in real time, an accounting package, or a dedicated MTD tool. Paper records, memory, and annual summaries produced from receipts in a shoebox do not meet the standard.

The specific records you must keep digitally are set out in HMRC's MTD regulations. For landlords, these cover:

Income records

• Rent received — the date and amount of every rent payment for each property. If you have multiple tenants or properties, each must be recorded separately.
• Premiums on leases — if you receive a premium for granting a lease, this counts as property income and must be recorded.
• Other property income — ground rent, service charges you receive, income from licences to occupy, and any other receipts arising from your property business.

Expense records

• Repairs and maintenance — invoices for any repair work, replacement of like-for-like items, redecorating between tenancies. Note: improvement costs that enhance the property beyond its original condition are capital expenditure, not a revenue expense.
• Letting agent fees — management fees, tenant-finding fees, and any other charges from your letting agent.
• Insurance — landlord buildings insurance, contents insurance for furnished lets, rent guarantee insurance.
• Mortgage interest — recorded separately as finance costs, not as an allowable expense (see Section 24 below).
• Utility bills and council tax — where you as landlord pay these, not the tenant.
• Accountancy and legal fees — fees for preparing tax returns, drawing up tenancy agreements, and similar professional costs.
• Travel costs — reasonable mileage or public transport costs when visiting properties for inspection or maintenance.
• Ground rent and service charges you pay — if you own a leasehold property and pay ground rent to a freeholder.

How long must you keep digital records?

HMRC requires you to keep digital records for at least five years after the 31 January submission deadline for the relevant tax year. For the 2026/27 tax year (Final Declaration due 31 January 2028), you must keep records until at least 31 January 2033. This mirrors the existing Self Assessment record-keeping requirement. Your software should store this data automatically, but it is worth checking that you have a backup or export route in case you change software providers.

The "no manual re-keying" rule is important. If you import bank transactions into a spreadsheet and then retype those figures into your MTD software, that counts as manual re-keying and does not satisfy the digital links requirement. Every step in your record-keeping chain must be digital. Using your bank's CSV export function and uploading it directly to your MTD software is a compliant approach. HMRC's guidance on rental income records provides further detail on what counts as allowable.

HMRC SA105: the property income boxes explained

The SA105 is the supplementary property income page of the Self Assessment return. Under MTD, you no longer fill in the SA105 paper form, but the underlying data categories remain identical. Your MTD software maps your digital records to exactly the same boxes that HMRC uses to calculate your tax liability. Understanding what each box covers helps you categorise transactions correctly throughout the year.

Income boxes

• Box 20 — Total rents and other income from property: This is your gross rental receipts for the year — every pound of rent you actually received from tenants, regardless of whether it was late, in advance, or paid in instalments. If a tenant pays you two months' rent in advance, record the full amount when received.
• Box 22 — Premiums for the grant of a lease: If you grant a lease of less than 50 years and receive a premium, a portion of that premium is treated as property income. The formula is complex and depends on the length of the lease — seek advice if this applies to you.
• Box 23 — Reverse premiums and inducements: If you pay a tenant to take on a lease (for example, to fill a commercial unit), that payment may be allowable.

Expense boxes

• Box 24 — Repairs, maintenance and renewals: Revenue repairs only — fixing a broken boiler, repainting walls, replacing a like-for-like kitchen. If you add a conservatory or extend the property, that is capital expenditure and goes elsewhere.
• Box 25 — Loan interest and other financial costs: For residential landlords, this box now covers mortgage interest under the Section 24 restriction. You record the full amount of mortgage interest paid here, and HMRC applies a 20% tax credit in the tax calculation — it is not a direct deduction from profit. Do not put mortgage interest in Box 24 or Box 27.
• Box 26 — Legal, management and other professional fees: Letting agent management fees, accountancy fees for your property tax return, tenancy renewal legal fees, and similar professional costs. Note: legal fees for buying or selling a property are capital costs, not allowable expenses.
• Box 27 — Cost of services provided, including wages: Gardening services, cleaning, concierge costs, or any wages you pay to people who work in the running of your property business.
• Box 28 — Other allowable property expenses: A catch-all for expenses not covered above — landlord insurance, ground rent, advertising for tenants, and similar costs.

Adjustment boxes

• Box 44 — Residential finance costs: This is the dedicated Section 24 box. It carries forward your residential mortgage interest to the part of the return where HMRC calculates your 20% tax credit. If you have a mix of residential and commercial properties, you need to apportion finance costs carefully.
• Box 45 — Unused residential finance costs brought forward: If your Section 24 tax credit exceeds your tax liability in a given year, the unused amount is carried forward to the following year.

Under MTD, your software will present these categories in its own interface rather than as numbered boxes, but the underlying structure matches SA105 exactly. When you review your quarterly update before submission, you should be able to see which SA105 category each transaction has been mapped to, and correct any misclassifications. HMRC's rental income guidance explains allowable expenses in detail.

How to submit a quarterly MTD update step by step

Submitting a quarterly update is a straightforward process once your software is set up and authorised. The steps below describe the typical workflow for a landlord using a dedicated MTD software tool. The exact screen names vary between products, but the underlying process is the same for all HMRC-compatible software.

1. Authorise your software with HMRC. Before your first submission, you must grant your MTD software permission to send data to HMRC on your behalf. This is a one-time OAuth authorisation through the Government Gateway. You log in to Government Gateway, confirm the permissions, and the software receives a secure access token. You do not repeat this for each quarterly update — the token is renewed automatically.
2. Import your transactions for the quarter. Export a CSV statement from your rental bank account covering the quarter period. Upload this to your MTD software. The software reads each transaction row — date, description, amount — and assigns it to an SA105 category. Some transactions (for example a direct debit labelled "Barclays Mortgage") are categorised automatically with high confidence. Others are flagged for review.
3. Review and approve each transaction. Work through the flagged transactions. For each one, confirm the suggested category or change it. Common corrections include: separating a single invoice that covers both repairs and improvements; reclassifying a finance cost that was placed in the wrong expense bucket; or splitting a payment that covered two properties.
4. Check the quarterly summary. Once all transactions are categorised, your software shows you a summary: total rent received, total allowable expenses by category, finance costs, and estimated profit or loss. Review these figures against your own expectations. If rent received looks too low, you may have missed a payment or a transfer between accounts.
5. Submit to HMRC. When you are satisfied the figures are correct, click Submit (or equivalent). Your software sends the quarterly update to HMRC's MTD API. You receive a confirmation with a unique submission reference. HMRC's system processes the update and sends back an acknowledgement — typically within seconds.
6. Review HMRC's tax estimate. After submission, HMRC's system generates an in-year tax liability estimate based on your cumulative quarterly figures. This is an estimate, not a bill. It helps you plan your January payment on account. If the estimate looks wrong — for example, much higher than expected — review your categorisation of mortgage interest and make sure finance costs are not being double-counted.
7. Repeat for each quarter. The process is identical for Q2, Q3, and Q4. After Q4 you submit your End of Period Statement (EOPS), make any year-end adjustments, and then file your Final Declaration.

The whole process — from CSV upload to submission confirmation — takes most landlords between 15 and 45 minutes per quarter, depending on transaction volume. If your portfolio is small (one or two properties), you might have fewer than 50 transactions per quarter to review. A larger portfolio with 10 or more properties and frequent maintenance costs may require more careful checking.

Section 24 mortgage interest and MTD

Section 24 of the Finance Act 2015 is the single most common source of errors in landlord tax returns, and the risk of getting it wrong is just as present under MTD as it was under Self Assessment. Understanding how Section 24 interacts with your quarterly updates is essential.

What Section 24 changed

Before Section 24 was phased in (from 2017/18 to 2020/21), residential landlords could deduct 100% of their mortgage interest from their rental income before calculating their tax liability. If you had £20,000 of rental income and £15,000 of mortgage interest, you were taxed on only £5,000 of profit.

Under Section 24, which has now been fully in force since 2020/21, residential landlords can no longer deduct mortgage interest as an expense at all. Instead, you declare your full rental income, deduct your other allowable expenses, and then receive a tax credit equal to 20% of your finance costs. The effect depends on your marginal tax rate:

• Basic-rate taxpayers (20%): The 20% tax credit effectively gives back the full tax on your mortgage interest, so the net position is similar to the old regime.
• Higher-rate taxpayers (40%): You pay 40% tax on the income that used to be sheltered by mortgage interest, then reclaim 20% as a credit. You still pay an effective extra 20% tax on that portion of income compared to the old system.
• Additional-rate taxpayers (45%): The difference is even more pronounced.

How this affects your MTD quarterly updates

In your MTD quarterly update, mortgage interest on residential properties must be recorded in the finance costs field — not in the general expenses field. If your software has auto-categorised a "Mortgage Payment" bank transaction as a repair or a general expense, change it. Mortgage interest in the wrong field will reduce your apparent profit, produce an incorrect in-year tax estimate from HMRC, and create a mismatch when you file your EOPS and Final Declaration.

Note also that only the interest portion of your mortgage payment is relevant — not the capital repayment element. Most landlords with repayment mortgages need to check their annual mortgage statement to split interest from capital. Your bank CSV statement typically shows only the total monthly payment. You should record only the interest figure in your MTD update.

Commercial properties and Section 24

Section 24 applies only to residential property in the UK. If you own commercial property (offices, shops, warehouses), you can still deduct 100% of mortgage interest on those properties as an allowable expense. If you have a mixed portfolio — some residential, some commercial — you must apportion your finance costs correctly between the two categories. Getting this wrong in either direction will produce an incorrect tax position.

Properties you let to companies under commercial terms may also be treated differently. If you are unsure whether Section 24 applies to a specific property in your portfolio, consult a qualified tax adviser before submitting your first MTD quarterly update.

MTD for landlords with multiple properties

HMRC treats all your UK residential property as a single property business for tax purposes. You do not file a separate tax return for each property — you report the combined income and expenses of the whole portfolio. This principle carries through into MTD: your quarterly updates report aggregate figures for your UK property business, not property-by-property breakdowns.

Internal property-level records

Although HMRC requires only aggregate figures in your quarterly submission, it is strongly advisable to maintain property-level records internally. This gives you a clear audit trail if HMRC queries a figure, helps you calculate per-property profitability for your own business decisions, and makes it much easier to prepare your End of Period Statement accurately.

Good MTD software lets you tag each transaction to a specific property address. When you upload your bank CSV, you can split transactions that cover multiple properties — for example, a single invoice from an agent managing several properties. The software then aggregates these property-level figures for the HMRC submission.

Overseas property

Overseas property income is reported separately from UK property income. Under MTD, you may need to submit separate quarterly updates for your UK property business and your overseas property business if both are above the relevant thresholds. The overseas property income pages (previously the SA106 form) follow a similar structure to the UK property pages but have different expense categories and treatment of foreign tax credits. Check the current HMRC guidance for overseas property landlords before setting up your software.

Loss relief across a portfolio

If your property business as a whole makes a loss in a quarter — perhaps because you had a large repair bill — that loss is carried forward within the property business. It offsets future quarters' profits. Because MTD reports the portfolio as a whole, a loss on one property in Q1 can naturally offset income from another property in Q2 within the same quarterly update cycle. This is no different from Self Assessment, but it is important to understand when reviewing your in-year tax estimate from HMRC.

Company landlords

If you own property through a limited company, MTD for Income Tax does not apply. Companies file Corporation Tax returns, not Income Tax returns, and the Corporation Tax equivalent of MTD (Making Tax Digital for Corporation Tax) is a separate programme with a later timeline. If you are a director of a property company who also personally owns property, the MTD Income Tax rules apply to your personal rental income only.

MTD penalties: what happens if you miss a deadline?

HMRC has introduced a new points-based penalty system for MTD for Income Tax. The old fixed-penalty regime for Self Assessment (£100 for a late return, escalating to £10 per day after three months) does not apply to MTD quarterly updates. The new system is designed to be proportionate — occasional lateness is tolerated, but persistent non-compliance triggers financial penalties. Full details are on gov.uk.

How the points system works

Each time you miss a quarterly submission deadline, HMRC adds one penalty point to your account. The penalty threshold for quarterly filers is four points. When your points total reaches four, HMRC issues a £200 financial penalty. Every subsequent late submission beyond that point attracts a further £200 penalty, without any requirement to first accumulate more points.

How points expire

Penalty points expire when you have submitted all required returns on time for a continuous compliance period of 24 months. This means if you are at three points and then meet every deadline for two years, your points are reset to zero. Points can also be appealed if you have a reasonable excuse for the late submission — for example, a serious illness, bereavement, or a HMRC systems failure that prevented submission.

Late payment penalties

In addition to late submission penalties, HMRC charges a separate late payment penalty on unpaid tax. The new late payment penalty regime (also introduced alongside MTD) works as follows: tax unpaid after 15 days attracts a penalty of 2% of the unpaid amount; after 30 days this rises to a further 2% (4% total); for amounts still unpaid after 31 days, a daily rate of 4% per annum applies. These rates are in addition to HMRC's standard interest charge on late payments.

The most effective way to avoid penalties is to set calendar reminders for each quarterly deadline, keep your digital records updated throughout the quarter rather than in a rush at the end, and use software that alerts you when a deadline is approaching. The deadlines — 5 August, 5 November, 5 February, and 5 May — are fixed, so you can schedule them as recurring annual events in your diary from day one.

Choosing MTD software for landlords

You cannot submit MTD quarterly updates using HMRC's own website — unlike Self Assessment, there is no online form to fill in manually. You must use HMRC-compatible software. The HMRC software list is the official registry of products that have passed HMRC's compatibility testing and received recognition. Choosing a product from this list gives you confidence that the submission mechanics are correct.

Types of MTD software available

Software for landlords broadly falls into three categories:

• Full accounting packages (for example Xero, QuickBooks, FreeAgent, Sage): Comprehensive double-entry bookkeeping tools that also handle MTD submissions. Well-suited to landlords who run other businesses alongside their property portfolio, or who want full profit-and-loss and balance sheet reporting. These tend to be more expensive (£25–£50/month or more) and have a steeper learning curve. They can be excessive for a landlord who simply needs to report rental income and expenses.
• Property-specific MTD tools: Software built specifically for landlords, with pre-loaded SA105 expense categories, bank CSV import, and direct HMRC submission. Examples include LandlordTaxAi, GoSimpleTax, and Hammock. These are typically simpler to use, cheaper, and require less accounting knowledge.
• Bridging software: Tools that connect your existing spreadsheet to HMRC's MTD API. You keep your records in a spreadsheet, and the bridging software reads the data and handles the technical submission. Suitable for landlords already using detailed spreadsheets who do not want to change their record-keeping method. Requires careful discipline to maintain digital links and avoid manual re-keying.

What to look for in landlord MTD software

When evaluating MTD software for your property portfolio, consider the following questions:

• Is the software on HMRC's recognised software list, or does it clearly state launching direct submission with a credible timeline?
• Does it support CSV import from your specific bank? Most UK banks export in slightly different CSV formats.
• Does it understand Section 24 — i.e., does it correctly separate finance costs from allowable expenses?
• Can you tag transactions to individual properties within your portfolio?
• Does it handle the End of Period Statement and Final Declaration, not just quarterly updates?
• What support is offered if you have a categorisation question or a submission error?
• Is pricing transparent and proportionate — flat monthly fee, or per-submission charges?

About LandlordTaxAi

LandlordTaxAi is designed specifically for UK residential landlords completing MTD for Income Tax. direct HMRC API submission is launching soon. The product works as follows: you upload a CSV bank statement for the quarter, the AI categorises each transaction against HMRC SA105 rules, you review and approve the categorised list, and then you submit the quarterly update directly to HMRC's API — all within a single interface.

The AI categorisation engine is trained on UK landlord transaction patterns — common mortgage lender names, letting agent payment references, utility company identifiers, and maintenance contractor payment descriptions. Where the AI is confident, it categorises automatically. Where it is uncertain, it shows you a suggested category with a confidence level and asks you to confirm. This "human in the loop" approach means you remain responsible for the accuracy of your submission, but the volume of manual work is dramatically reduced.

LandlordTaxAi is offered at flat monthly rates starting from £19/month, with no per-submission charges and no lock-in. You can cancel at any time from your account settings. If you want to assess your current MTD readiness before committing to any software, use our free MTD readiness checker — a ten-question self-assessment that identifies gaps in your current record-keeping and preparation.

We display our HMRC recognition status prominently and link to the official HMRC software list so you can make a fully informed choice. We do not claim capabilities we do not have. If you have questions about whether LandlordTaxAi is right for your specific situation, please contact us — we respond to all enquiries within two working days.

For the avoidance of doubt: LandlordTaxAi is a software tool, not a tax adviser. We help you organise and submit your data correctly. For complex situations — multiple income sources, overseas property, property held in trust, Section 24 with higher-rate tax exposure — we recommend consulting a qualified accountant alongside using any MTD software. Our privacy policy explains how we handle your financial data in full.

Frequently Asked Questions