Making Tax Digital for Income Tax (MTD) has been talked about for years. But for some landlords, it is no longer something to prepare for in the future, it is already here.
From 6 April 2026, Making Tax Digital for Income Tax began applying to landlords and sole traders whose qualifying income is above £50,000. Over the next two years, that threshold will reduce, bringing many more landlords into the system.
If you own rental property, now is the time to understand whether MTD applies to you, when you might need to start, and what you will need to do differently.
What is Making Tax Digital for landlords?
Making Tax Digital for Income Tax changes the way certain landlords and sole traders keep their financial records and report information to HMRC.
Rather than relying on one annual Self Assessment process, those within MTD must keep digital records using compatible software. They must also send HMRC quarterly summaries of their income and expenses.
You will still need to finalise your tax position and submit your tax return after the end of the tax year. Therefore MTD does not remove the annual tax return altogether. Instead, it introduces additional digital record-keeping and reporting throughout the year.
When does Making Tax Digital apply to landlords?
MTD for Income Tax is being introduced in stages.
You will need to use it:
- From 6 April 2026 if your qualifying income is more than £50,000.
- From 6 April 2027 if your qualifying income is more than £30,000.
- From 6 April 2028 if your qualifying income is more than £20,000.
This means landlords who aren’t currently affected shouldn’t assume MTD is something they can forget about. As the threshold falls, considerably more people with rental income will come within the rules.
The important bit: it’s income, not profit
This is one of the most important points for landlords to understand. The MTD threshold is based on your qualifying income before expenses, not the profit you make after deducting your allowable costs.
For example, imagine you receive £55,000 in qualifying rental income. After your allowable expenses and other relevant deductions, your eventual taxable property profit could be considerably lower.
For MTD purposes, however, it is the qualifying income before expenses that is important when determining whether you exceed the threshold. It’s therefore possible to fall within MTD even if the amount of profit you ultimately make from your properties is much lower than £50,000.
What if you have property income and you’re self-employed?
Another potential source of confusion is that the thresholds aren’t necessarily looked at separately. Your qualifying income broadly includes your gross income from self-employment and property combined.
For example, if you have £30,000 of qualifying rental income and £25,000 of qualifying self-employment income, your combined qualifying income would be £55,000.
That could bring you within MTD even though neither source of income exceeds £50,000 on its own. Your employment income, pension income, and dividends aren’t simply added to this figure. It’s your qualifying self-employment and property income that matters when determining whether you need to use MTD.
What will landlords need to do under Making Tax Digital?
If MTD applies to you, you’ll need to change the way you manage and report your property finances.
You’ll need to:
- keep digital records of your property income and expenses;
- use software that’s compatible with Making Tax Digital;
- send quarterly updates to HMRC through that software; and
- use MTD-compatible software to complete and submit your tax return.
The quarterly updates are summaries of the information contained in your digital records. They are not four additional tax returns. But, they do mean that keeping your records up to date throughout the year becomes much more important.
Your tax return will still be due by 31 January following the end of the relevant tax year, and your normal tax payment deadline remains.
Do landlords need to use Xero for Making Tax Digital?
Not necessarily. Xero may be an appropriate option for some landlords, particularly where their finances are more complex or they also run a business, but it isn’t the only way to comply with MTD. There are dedicated landlord accounting systems and other MTD-compatible software options available. In some circumstances, bridging software may also form part of the solution.
The important thing isn’t choosing the biggest or most complicated system. It’s choosing software that complies with the MTD requirements and works for the way you manage your properties. Someone with one rental property may have very different requirements from a landlord with a larger portfolio or someone who has both property and self-employment income.
Does MTD only affect professional or full-time landlords?
No.
You don’t have to consider yourself a “professional landlord” for Making Tax Digital to apply. You might have a full-time job and one or more rental properties on the side. If your qualifying property and self-employment income takes you above the relevant threshold, you could still be required to use MTD.
This is why it’s worth checking your position rather than assuming the rules won’t apply because property isn’t your main occupation.
Don’t wait until you’re over the threshold
Even if MTD doesn’t apply to you yet, it’s worth looking ahead. A landlord with qualifying income of £35,000, for example, may not have been included when MTD began in April 2026 but could be required to join from April 2027.
With the threshold falling again to £20,000 from April 2028, many landlords who currently sit comfortably below the limit will eventually be brought into the system. Preparing early gives you time to choose appropriate software, improve your record-keeping and understand what’s expected before your first quarterly update is due.
Need help with Making Tax Digital for your rental property?
Making Tax Digital represents a significant change to the way many landlords manage their tax affairs, but it doesn’t need to become another administrative headache.
If you have rental property and you’re unsure how Making Tax Digital affects you, get in touch with Greystone Advisory and we’ll help you get prepared.
