What Is Making Tax Digital for Landlords?

When does making tax digital apply to you?

It applies from the tax year after your qualifying income crosses the threshold, tested against the return you filed for an earlier year. For the first wave that meant qualifying income over £50,000 on the 2024 to 2025 return.

How the thresholds phase in

The test is your total, not each property on its own. Add every rental property and any self-employment turnover together, then compare the total against the threshold.

Why qualifying income means gross rent

HMRC defines qualifying income as your total income from self-employment and property before expenses, which it also calls turnover. A landlord collecting £52,000 of rent and paying £20,000 in mortgage interest, insurance and agent fees is inside the regime, even though the taxable rental profit is nowhere near £52,000.

Employment income, dividends, pensions and your share of a partnership’s profits are all left out of the sum. So are one-off land transactions and income from a UK REIT.

How joint ownership is counted

Your share of the rent counts, not the whole property’s rent. A couple who jointly and equally own a property producing £50,000 of rent each have £25,000 of qualifying income from it.

If you only ever get notice of your share after expenses have been taken off, HMRC assesses that net figure instead. Check which of the two applies to you before you assume you sit under the line.

What do you have to send hmrc each quarter?

Four quarterly updates of your property income and expenses, then one final declaration that settles the year. The quarterly updates are running year-to-date totals, not four separate three-month snapshots.

The four deadlines and the final declaration

You choose standard or calendar periods for each income source in your software before the first update of the year. Once that update is sent you cannot switch until the next tax year.

Why every update is cumulative

HMRC is explicit that each update covers from the start of the tax year to the end of that period, not just the previous three months. Get a figure wrong in July and you correct it inside the November total.

That takes the fear out of the first filing, because most errors fix themselves at the next update. It also means the fourth update restates the whole year, so it is the one worth checking twice.

The final declaration and your 31 january bill

After the fourth update you add any other income, claim your reliefs and submit a final declaration. It does the job the Self Assessment return used to do and is due by 31 January after the end of the tax year.

Payment dates have not moved at all. Your balancing payment and any payments on account still fall due on 31 January and 31 July.

What records do you have to keep digitally?

Every item of rental income and every property expense, recorded digitally with its amount, its date and its category. Other income such as dividends or a pension does not need digital records, but it still goes on the final declaration.

What each digital record must show

• The amount received or spent, entered line by line rather than as a monthly lump sum.
• The date the rent came in or the cost was incurred.
• The category, which is what maps the entry to the right box on your return.

Original paperwork still matters. HMRC expects you to keep the bank statements and invoices sitting behind those digital entries.

The expenses landlords log most often

• Landlord insurance premiums, including the 12% Insurance Premium Tax charged on them, are deductible in full against rental income.
• Legal expenses cover and home emergency cover premiums sit in the same expense category as the rest of the policy.
• Ground rent, service charges and the buildings premium recharged through a block of flats policy on a leasehold flat.
• Repairs and maintenance, but not improvements, which are capital and count against Capital Gains Tax instead.
• Interest on a buy-to-let mortgage, logged separately because relief is a basic rate 20% tax reduction rather than a deduction from income.

The government’s guidance on paying tax when you rent out a property sets out which costs are revenue and which are capital. Categorise as you go, because sorting twelve months of receipts the week before a deadline is where landlords lose money.

Premiums being deductible does not make them free, so £80 off a renewal is £80 of real cost saved. It is worth taking twenty minutes to compare landlord insurance cover before you record the next one.

How long you have to keep them

Five years after the 31 January submission deadline for the tax year in question. For 2026 to 2027 that means holding everything until 31 January 2033.

Which software counts as mtd compatible?

Software HMRC recognises, meaning it can create and store your digital records, send quarterly updates and file the final declaration. HMRC does not supply software itself, although free products exist for simple tax affairs.

What the software has to do

It has to hold the digital records, submit the four updates, and carry your other income through to the return by 31 January. Anything that does only one of those three leaves you with a gap to fill by hand.

Using spreadsheets and bridging software

You can keep the numbers in a spreadsheet if bridging software links it to HMRC and files for you. The link has to be digital, so retyping totals into a submission screen does not count.

Bridging suits landlords who already run a working spreadsheet across a multi-property portfolio and would rather not rebuild it. Most single-property landlords find a dedicated package quicker to learn.

Letting an accountant file for you

An agent can send your quarterly updates through their own software once you authorise them in your HMRC account. You still have to keep the digital records and hand them over each quarter.

Agree who does what well before your first deadline. The NRLA runs tax guidance for members, and most landlord accountants want a quarter closed off a week before the filing date.

Who is exempt from making tax digital?

Landlords with qualifying income of £20,000 or less sit outside the regime, and several groups are exempt automatically without applying. Everyone else has to apply, and the main ground is being digitally excluded.

The automatic exemptions

• Qualifying income of £20,000 or less, which needs no application at all.
• Anyone without a National Insurance number.
• Trustees filing an SA900, personal representatives of someone who has died, and non-resident companies filing an SA700.
• Lloyd’s members, and people who cannot supply the information themselves where a power of attorney or legal deputy is in place.

Ministers of religion and anyone claiming Married Couple’s Allowance or Blind Person’s Allowance have exemptions running past April 2027. Some other groups are exempt only up to that date.

Applying as digitally excluded

You apply to HMRC on the ground that it is not reasonable for you to use compatible software. Age, disability, a health condition, religious belief and having no usable internet connection are all accepted reasons.

Apply early rather than after a missed deadline. You stay in the regime until HMRC decides, and the quarterly clock keeps running while you wait.

The temporary exemptions to april 2027

Landlords who claimed averaging relief or qualifying care relief on their 2024 to 2025 return are exempt until April 2027. The same holds if you reported trust or estate income on an SA107, or used the SA109 residence pages.

What are the penalties if you miss a deadline?

One penalty point per missed submission, a £200 charge once you reach four points, and separate percentage penalties for paying late. Quarterly updates in the 2026 to 2027 tax year carry no points at all.

The points system and the £200 charge

Points build one at a time and the threshold for quarterly filers is four. Reach four and you pay £200, then another £200 for every further late submission until you are back up to date.

Stay below the threshold and each point is removed automatically 24 months after the deadline you missed. Reach it and you have to clear every outstanding submission before the slate is wiped.

Late payment penalties and interest

Interest runs on top of those penalties rather than instead of them. On £6,000 of tax paid two months late that is roughly £360 in penalties before interest is added.

The first year easement

HMRC has confirmed there are no penalties for missing a quarterly update deadline in the 2026 to 2027 tax year. That easement covers the four updates and nothing else.

The final declaration due on 31 January 2028 attracts a point like any other return. You also have to file every outstanding quarterly update before you can submit it.

What should landlords do before their start date?

Work out your qualifying income from gross rent, choose software, and get this year’s records into it. Done six months early it costs an afternoon, and done in the week before a deadline it costs a great deal more.

Check your qualifying income first

Add the gross rent from every property, your share of anything held jointly, and any self-employment turnover. Include short lets, because the furnished holiday lettings regime was abolished on 6 April 2025 and an Airbnb or serviced let is now taxed as ordinary property income.

Run the number again after your next rent review if you are close to a line. Crossing £30,000 of gross rent in 2025 to 2026 pulls you into the April 2027 wave.

If hmrc has signed you up automatically

From September 2026 HMRC has been signing up landlords whose 2024 to 2025 qualifying income was over £50,000 and writing to confirm it. The letter lands in your HMRC online account or comes by post.

Check that every UK property is grouped as one UK property business and every overseas property as one foreign property business. A landlord with a house in multiple occupation and two single lets files one property business, not three.

If a letter arrives and you have already missed updates, file the overdue ones as soon as the software is running. The 2026 to 2027 easement means no points for those.

Get your property and policy records straight

Pull the policy schedules together so premiums, renewal dates and the buildings sum insured all sit in one place. Insurance is one of the cleanest deductible expenses you have, and it is easy to under-claim when the paperwork is scattered.

Landlords with four or more properties should check whether a portfolio policy would fold several renewals into one. One premium a year is far easier to record than six.

Payouts from rent guarantee cover count as rental income, and so does loss of rent cover after an insured escape of water. Insurance receipts belong on the return, not outside it.