Making Tax Digital for Landlords: Complete Guide 2026

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) represents the biggest change to UK tax reporting in decades. From April 2026, landlords earning over £50,000 gross from property rental will be legally required to keep digital records and submit quarterly updates to HMRC.

The deadline is approaching fast. If you are still using spreadsheets, paper records, or manual bookkeeping, you need to act now. Non-compliance could result in penalty points, financial penalties, and the inability to claim legitimate expenses.

This comprehensive guide covers everything UK landlords need to know about Making Tax Digital: who must comply, what digital records you need to keep, how quarterly submissions work, and how MTD-compatible software like Latch ensures full compliance.

What is Making Tax Digital for Income Tax Self Assessment?

Making Tax Digital (MTD) is HMRC's initiative to modernise the UK tax system by requiring taxpayers to keep digital records and submit tax information electronically using compatible software.

MTD for VAT launched in 2019. MTD for Income Tax Self Assessment extends the same principles to self-employed individuals and landlords who currently file Self Assessment tax returns.

Under MTD for ITSA, you must:

• Keep digital records of all income and expenses using MTD-compatible software
• Submit quarterly updates to HMRC showing income and expenditure for the period
• Make a final declaration after the end of the tax year to finalise your tax liability
• Ensure digital links connect your records to submissions (no manual re-typing)

Who Must Comply with Making Tax Digital?

HMRC is rolling out MTD for ITSA in two phases based on gross income thresholds:

The £50,000 and £30,000 thresholds refer to gross income (total rent received), not net profit. Even if your expenses mean you make little or no profit, you must comply if your rental income exceeds the threshold.

Multiple Income Sources

If you have both property income and self-employment income, HMRC looks at the total across all sources. For example, if you earn £35,000 from rental income and £20,000 from self-employment, your total of £55,000 means you must comply from April 2026.

Partnerships and Joint Ownership

If you own rental property jointly with a partner or spouse, each person's share counts towards their individual threshold. For example, if a property generates £80,000 gross rent and you each own 50%, you both have £40,000 of rental income.

Timeline and Key Dates

The tax year 2026/27 (starting 6 April 2026) is the first year when MTD for ITSA becomes mandatory for landlords above the £50,000 threshold.

Key dates for the 2026/27 tax year:

What Are Digital Records?

Digital records means keeping your income and expense information in a digital format using MTD-compatible software. Paper records, Word documents, and basic spreadsheets do not meet HMRC's requirements.

HMRC requires you to record:

1. Date of transaction: When income was received or expense incurred
2. Description: What the transaction relates to
3. Amount: The full amount in pounds and pence
4. Category: The type of income or expense for tax purposes

What You Cannot Use

• Paper records: Handwritten ledgers and notebooks do not comply
• Basic spreadsheets: Excel and Google Sheets without MTD bridging software do not comply
• Word documents: Not acceptable as digital records
• Photos of receipts alone: You need categorised digital records, not just receipt images

Digital Links Requirement

A crucial MTD requirement is that data must flow digitally from your records to your submission. You cannot manually re-type figures from a spreadsheet into HMRC's system. The software must create a digital link that transfers the data automatically.

Quarterly Reporting Requirements

Under MTD for ITSA, you must submit four quarterly updates each tax year. These updates provide HMRC with a summary of your income and expenses for the quarter.

Each quarterly update must include:

Quarterly updates are not tax returns. They provide HMRC with real-time visibility of your income and expenses throughout the year. Your actual tax liability is calculated after the end of the tax year when you make your final declaration.

What Happens After the Tax Year Ends

After 5 April (end of tax year), you have until 31 January the following year to:

• Review your four quarterly submissions for accuracy
• Make any necessary adjustments or corrections
• Add any additional information (such as property allowances or capital allowances)
• Submit your final declaration to HMRC
• Pay any tax due

This final declaration replaces the traditional Self Assessment tax return for your property income.

What MTD-Compatible Software Must Do

Not all accounting software is MTD-compatible. To meet HMRC's requirements, software must:

• Store digital records with date, description, amount, and category for each transaction
• Maintain digital links (no manual re-typing of data)
• Generate quarterly update summaries in the correct format
• Submit updates directly to HMRC via their MTD API
• Retrieve and display acknowledgment of submissions from HMRC
• Allow adjustments and final declaration submissions

HMRC maintains a list of recognised MTD-compatible software providers. Before choosing software, verify it appears on HMRC's official list and specifically supports MTD for Income Tax Self Assessment (not just MTD for VAT).

How Latch Ensures MTD Compliance

Latch was built specifically for UK landlords and designed from the ground up to meet Making Tax Digital requirements. Here's how Latch ensures you stay compliant:

Step-by-Step Preparation Guide

Follow these steps to prepare for Making Tax Digital before the April 2026 deadline:

Step 1: Calculate Your Gross Rental Income

Add up all rent received across all your properties in the 2024/25 tax year. Include rent, service charges, and any other income from tenants. If the total exceeds £50,000, you must comply from April 2026.

Step 2: Choose MTD-Compatible Software

Research software options from HMRC's list of compatible providers. Consider:

• Does it specifically support landlords and property income?
• Does it integrate with your bank for automatic transaction imports?
• Can it handle multiple properties and allocate shared costs?
• What is the monthly or annual cost?
• Does it include support and training resources?

Step 3: Migrate Your Records

Transfer your existing property records into the new software. You will need:

• Property details (addresses, purchase dates, mortgage information)
• Current tenant information and lease agreements
• Opening balances for any deposits held
• List of regular income and expenses
• Contact details for contractors, agents, and suppliers

Step 4: Connect Bank Accounts

Set up bank feeds to automatically import transactions. This creates the digital links HMRC requires and eliminates manual data entry.

Step 5: Categorise Historical Transactions

Import and categorise transactions for the current tax year to date. This gives you a clean starting point and helps you learn the software before quarterly deadlines begin.

Step 6: Sign Up for MTD with HMRC

You must formally sign up for Making Tax Digital via your HMRC online account. Your software provider will guide you through this process and help you obtain the necessary credentials to submit updates.

• Calculate gross rental income to confirm if above threshold
• Choose and purchase MTD-compatible software
• Migrate property and tenant records into software
• Connect bank accounts for automatic transaction imports
• Categorise all transactions for current tax year to date
• Sign up for MTD via HMRC online account
• Test quarterly update submission with software provider

Common Mistakes to Avoid

Based on the MTD for VAT rollout, these are the most common mistakes landlords make when transitioning to Making Tax Digital:

• Waiting until the last minute: Software setup, data migration, and learning take time. Start at least 3 months before your first deadline.
• Using non-compliant software: Not all accounting software is MTD-compatible. Verify your chosen software appears on HMRC's official list.
• Breaking digital links: Manually re-typing figures from spreadsheets into software breaks the digital link requirement. Use bank feeds and imports instead.
• Forgetting about the final declaration: Quarterly updates do not replace your end-of-year tax return. You must still make a final declaration by 31 January.
• Mixing personal and business transactions: Use dedicated bank accounts for rental income and expenses. Mixed accounts create categorisation headaches.
• Not keeping receipts: HMRC can still ask for proof of expenses. Store digital copies of all receipts linked to expense records.
• Missing deadlines: Penalty points accumulate quickly. Set reminders well before quarterly deadlines to allow time for review and submission.
• Incorrect categorisation: Expenses in the wrong category can trigger HMRC queries or reduce your allowable deductions. Learn the correct categories for common landlord expenses.

Penalties for Non-Compliance

HMRC operates a points-based penalty system for late or missing quarterly submissions, plus separate penalties for late payment of tax.

Points-Based Penalties for Late Submissions

Each late or missing quarterly update earns you a penalty point. The number of points depends on how you submit:

When you reach the threshold (4 points for quarterly submissions), HMRC issues a £200 penalty. Each subsequent late submission while at the threshold earns another £200 penalty.

Points expire 12 months after the deadline for the submission that earned them, provided you have submitted that update (even if late).

Late Payment Penalties

Separate penalties apply if you do not pay tax owed by the deadline:

• Day after deadline: Interest starts accumulating on unpaid tax
• 15 days late: First late payment penalty (amount varies)
• 30 days late: Second late payment penalty
• 6 months late: Additional penalty of 5% of tax outstanding
• 12 months late: Further 5% penalty

Frequently Asked Questions

Can I still use my accountant?

Yes. Your accountant can act as your agent and submit quarterly updates on your behalf using MTD-compatible software. However, you remain legally responsible for the accuracy of submissions and meeting deadlines.

What if my income drops below the threshold after I join MTD?

Once you are in MTD for ITSA, you must continue making quarterly submissions even if your income later falls below the threshold. There is no automatic exit from MTD.

Do I need separate software for each property?

No. Your MTD-compatible software should handle multiple properties within a single account. Latch allows unlimited properties on all plans.

What happens if I make a mistake in a quarterly update?

You can correct errors in later quarterly updates or when you make your final declaration. The important thing is to submit on time, even if you later need to adjust the figures.

Can I get an exemption from MTD if I am not tech-savvy?

HMRC offers exemptions only in very limited circumstances, such as religious objections or if you live in a remote area with no internet access. Age or lack of technical skills do not qualify for exemption. Consider using an accountant or bookkeeper if you need assistance.

Do I need to keep paper receipts if I have digital records?

Digital copies of receipts are acceptable provided they are legible and stored securely. However, some landlords prefer to keep paper originals for high-value items for additional peace of mind. HMRC accepts digital-only records.

What if I earn just over the £50,000 threshold?

There is no grace period or allowance. If your gross property income is £50,001, you must comply. Consider whether any income could be legitimately excluded (such as deposit receipts, which are not rental income) to potentially fall below the threshold.

Getting Started with Latch

Latch makes Making Tax Digital compliance straightforward. Our platform is built specifically for UK landlords and handles all MTD requirements automatically.

With Latch, you can:

• Connect your bank and automatically import all transactions
• Categorise income and expenses with AI-powered suggestions
• Store digital receipts linked to expense records
• Track rent payments and chase late payers
• Generate quarterly updates with one click
• Submit directly to HMRC via the MTD API
• Receive automatic reminders before deadlines
• Access your records anytime on mobile or desktop