Making Tax Digital for Landlords: Complete Guide & Free Eligibility Checker

MTD for landlords is being phased in over three years. April 2026 for gross income over £50,000 (based on your 2024-25 tax return), April 2027 for income over £30,000 (based on 2025-26), and April 2028 for income over £20,000 (based on 2026-27). The threshold uses your combined gross property and self-employment income before expenses are deducted. HMRC will send you a letter if you need to comply, but registration is your responsibility.

The threshold is based on gross rental income (total rent received before deducting any expenses like mortgage interest, repairs, or management fees). For joint owners, only your share counts toward your personal threshold. Married couples splitting 50/50 would each have half the property's gross income count toward their individual MTD threshold. Income from employment (PAYE) or pensions does NOT count toward this threshold — only property and self-employment income.

No. If your rental properties are owned through a limited company, you are NOT affected by Making Tax Digital for Income Tax. Your company pays Corporation Tax through the existing system. MTD for Income Tax only applies to unincorporated landlords (individuals) who pay tax via Self Assessment. However, if you personally own any properties outside your company, that income may still bring you into MTD scope individually.

You must submit quarterly updates by: 7 August (for 6 Apr-5 Jul), 7 November (for 6 Jul-5 Oct), 7 February (for 6 Oct-5 Jan), and 7 May (for 6 Jan-5 Apr). You can also opt for calendar quarters (Apr-Jun, Jul-Sep, etc.) but the deadlines remain the same. After your Q4 update, the Final Declaration is due by 31 January following the tax year end. These updates are cumulative — if you spot an error in Q1, you can correct it in your Q2 submission.

HMRC uses a points-based penalty system. You receive 1 penalty point for each missed quarterly deadline or Final Declaration. At 4 points, you get a £200 fine. Each subsequent late submission also triggers £200. For late payment, there's a 3% penalty on outstanding tax after 15 days (increasing to 4% from April 2027), another 3% if still unpaid after 30 days, plus 10% annual interest on amounts unpaid beyond 30 days. The penalties stack up quickly — missing just 4 quarters and paying 45 days late on £5,000 tax could cost over £500 in penalties alone.

Yes, several exemptions exist. Automatic exemptions apply to: those without a NI number, trustees, personal representatives of deceased persons, Lloyd's members, and non-resident companies. Application-required exemptions are available for: digital exclusion (age, disability, location making software impractical) and religious beliefs incompatible with electronic communications. If you were exempt from MTD for VAT for similar reasons, you should still apply when the process opens — HMRC will perform checks and may confirm your exemption. Contact us to discuss your eligibility.

Each joint owner's share of gross rental income counts toward their individual MTD threshold. For married couples or civil partners, the default split is 50/50 unless you've submitted Form 17 to HMRC declaring a different beneficial interest. For example, a property earning £100,000 gross rent split 30/70 means Partner 1 has £30,000 qualifying income (MTD from 2027) while Partner 2 has £70,000 (MTD from 2026). Joint owners can each use different MTD software and can both use the three-line accounts simplification if eligible.

You need HMRC-approved MTD-compatible software that can: maintain digital records, submit quarterly updates via HMRC's API, and file your Final Declaration. Options include landlord-specific software like Hammock or general accounting software like Xero, QuickBooks, or Sage (which may need customising for property). If you use spreadsheets, you'll need bridging software to submit to HMRC. HMRC will NOT provide free software. You can check the official list of approved software on GOV.UK. LOYALS Premium clients receive MTD software setup and management included in their monthly fee.

If your gross property income is below the VAT threshold (£90,000), you can use simplified three-line accounts. This means you can record transactions as simply "income" or "expense" without categorising into detailed types like "repairs," "insurance," "utilities," etc. The only exception is residential finance costs (mortgage interest) which must always be recorded separately due to the finance cost restriction rules. This simplification significantly reduces record-keeping burden for smaller landlords while still meeting MTD requirements.

No. If you've just become a landlord (inherited a property, purchased your first buy-to-let, etc.), you won't need to use Making Tax Digital for Income Tax until after you've submitted your first Self Assessment tax return with the rental income. So if you inherit a property in September 2026, you'll file your first tax return by January 2028, and only then would HMRC assess whether you need to join MTD based on that return's figures. This gives new landlords a grace period to get established.

No. Capital gains from selling or disposing of property do NOT count toward the MTD income thresholds. Only ongoing rental income and self-employment turnover count as qualifying income. Capital Gains Tax is reported separately (usually within 60 days of completion for residential property) and is not part of MTD for Income Tax quarterly updates. However, you will need to include capital gains information in your Final Declaration at year-end.

Costs vary depending on your approach. DIY route: MTD-compatible software typically costs £50-£300/year, plus your time maintaining records and submitting quarterly. Accountant-managed route: Expect to pay more than traditional annual filing due to 4x more submissions. LOYALS offers full MTD compliance from £150/month, which includes software setup, all quarterly submissions, Final Declaration filing, and year-round support. This works out to £1,800/year but eliminates all MTD admin burden and penalty risk. Book a free consultation to discuss which approach suits your situation.