Making Tax Digital is changing how landlords report property income to HMRC, and early preparation is essential to avoid confusion, missed deadlines, and unnecessary costs. As the rules are phased in, landlords meeting the income criteria will move from one annual submission to a much more frequent reporting cycle, and understanding this shift now will make the transition far smoother.
Which Landlords Will Need to Comply, and When
Making Tax Digital for Income Tax is being introduced in three stages, based on gross qualifying income from property and self employment combined.
Landlords earning more than £50,000 a year must keep digital records and submit quarterly updates from 6 April 2026, using HMRC recognised software. Those earning between £30,000 and £50,000 join a year later, from April 2027. A further threshold reduction to £20,000 is set to apply from April 2028, bringing a significantly larger number of landlords into scope.
HMRC identifies who falls into each wave using the qualifying income reported on the Self Assessment return two years prior, so the 2024/25 return determines who is mandated from April 2026. Certain groups, including those with power of attorney arrangements in place and non resident taxpayers with limited UK income, are deferred or permanently exempt, so it is worth checking individual circumstances carefully.
Understanding Quarterly Reporting
Once mandated, landlords must submit four quarterly updates each tax year, each covering a rolling three month period, followed by a final declaration.approved-accounting+1
| Update | Period Covered | Submission Deadline |
|---|---|---|
| Quarter 1 | 6 April to 5 July | 7 August |
| Quarter 2 | 6 July to 5 October | 7 November |
| Quarter 3 | 6 October to 5 January | 7 February |
| Quarter 4 | 6 January to 5 April | 7 May |
| Final Declaration | Full tax year | 31 January |
These quarterly updates are cumulative summaries of income and expenses rather than full tax returns, and figures from earlier quarters can be adjusted in later submissions if corrections are needed. The purpose is to keep HMRC records current throughout the year, rather than compressing everything into a single year end exercise.
How Self Assessment Fits In During the Transition
Landlords already within Making Tax Digital will still need to complete a form of annual reporting, but this now takes the shape of a final declaration rather than a traditional Self Assessment return. During the transition period, some landlords may temporarily need to manage both systems, particularly if they have income sources that fall outside the scope of property and self employment income covered by Making Tax Digital.
This overlap means landlords need to stay organised. The Self Assessment return for the 2024/25 tax year remains due by 31 January 2026, while returns for later years increasingly give way to the new quarterly and final declaration structure as landlords are brought into the regime.
Digital Records and Approved Software
Digital record keeping is central to Making Tax Digital. Landlords must maintain digital records of income and expenses using approved software, rather than spreadsheets alone, unless that spreadsheet is linked to bridging software capable of submitting data directly to HMRC.
Options fall into three broad categories. Full accounting software built for small businesses, such as Xero, QuickBooks, and Sage, suits landlords who also run other business activities. Software built specifically for landlords, such as Hammock and Landlord Vision, is designed around rental income and property expense categories from the outset. Bridging software allows landlords to continue using familiar spreadsheets while still submitting compliant digital updates to HMRC. Records must be retained for at least five years after the end of the relevant tax year.
New Points Based Penalty System
Making Tax Digital brings a new points based penalty regime for late submissions, replacing the previous flat penalty approach.
Landlords submitting quarterly reach their penalty threshold at four points, at which stage a £200 fixed penalty applies, followed by a further £200 for every additional late submission until the points reset. The final declaration is treated as an annual submission for these purposes, meaning the threshold there is lower, at two points. Separate penalties apply for late payment of tax, including a percentage charge after 30 days and a daily accruing charge from day 31 until the balance is settled.
Costs Landlords Should Plan For
Government estimates suggest landlords earning around £50,000 could face an average one off transitional cost of approximately £285 as they move to the new system, along with an ongoing annual cost of roughly £115 for software and administration. These figures will vary depending on the complexity of a landlord’s portfolio and the software chosen, but they highlight the value of planning for this cost ahead of the relevant mandation date rather than absorbing it under time pressure.
Why Early Preparation Matters
Industry bodies have warned that the shift from one annual return to multiple in year submissions could catch many landlords off guard if left until the last moment. Landlords who begin digitising their records early, choose suitable software in good time, and understand exactly which quarter deadlines apply to them are far better placed to avoid errors, missed submissions, and penalty points once the regime takes effect.
How UK Property Tax Accountants Can Help
UK Property Tax Accountants supports landlords through every stage of the Making Tax Digital transition, from confirming whether and when the rules apply based on individual qualifying income, to setting up compliant digital record keeping systems from day one. The team helps landlords select and configure MTD compatible software suited to their portfolio, manages the quarterly update process on their behalf, and ensures the final declaration reconciles cleanly with prior submissions.
For landlords straddling the transition period, UK Property Tax Accountants also coordinates any outstanding Self Assessment obligations alongside new quarterly filings, reducing the risk of duplication, missed deadlines, or penalty points as the rules are phased in.
Frequently Asked Questions
What income counts toward the Making Tax Digital threshold?
The threshold is based on gross qualifying income from property and self employment combined, not net profit after expenses. Landlords should check their total gross income across both sources when assessing whether they are close to a threshold.
Do I still need to file a Self Assessment return once I am in Making Tax Digital?
Once fully within the regime, the annual Self Assessment return is replaced by a final declaration submitted through compatible software, though some landlords may still need to report other income types separately during the transition.
Will jointly owned properties be reported differently under Making Tax Digital?
Each individual landlord is assessed against the threshold based on their own share of qualifying income, so joint owners may find themselves mandated at different times depending on their personal income levels.
