Making Tax Digital (MTD): a guide to getting ready for landlords

Why is it only some sole traders and landlords?

MTD will be phased in over the next few years according to qualifying income thresholds. The first wave starts in April 2026. This means any sole traders or landlords (who own properties personally) with an income of over £50,000 will become the first tranche of people to use Making Tax Digital. It will be followed by those with income of £30,000 and then £20,000.

So what does Making Tax Digital mean in real terms?

As Making Tax Digital is all about digital transformation of the tax system, people who receive income from self-employment and/or property will need to:

• Keep digital records of their income and expenses

• Use HMRC approved MTD software to manage those records

• Submit quarterly updates to HMRC instead of relying only on an annual Self Assessment tax return

• Submit a final declaration at the end of the tax year through the MTD system

The aim is to improve accuracy, reduce paperwork, and help taxpayers stay on top of their finances throughout the year, not just at year-end.

What are the MTD dates you need to know?

HMRC is introducing MTD in stages, depending on the level of qualifying income.

Qualifying income is defined as your gross income from self-employment and/or property before any expenses are deducted. You will be legally required to use MTD from April 2026 if you have an income over £50,000.

The table below shows the timeline for different income values.

MTD for landlords - how do you know if you qualify?

HMRC is currently writing to landlords to confirm MTD is coming, setting out the timetable and the threshold values (as above). It’s also providing webinars and step by step guides to help sole traders and landlords prepare, including how you should work out your qualifying income.

It’s important you understand how to calculate your qualifying income as this determines whether you will start to use MTD from April 2026.

The three things landlords need to know about qualifying income

• If you receive income from property - whether you rent out a single property or multiple ones - then Making Tax Digital will apply to you.
  Exactly when it will apply, will depend on whether your qualifying income is over £20,000, £30,000 or £50,000.

• Landlords need to look at income not profit for MTD compliance
  For landlords, MTD is calculated on the rental income alone. It has nothing to do with profit, no matter how small the profit is. If the income exceeds the threshold, then you need to legally comply with MTD.

• It’s always about the individual, not the partnership
  If you own rental property with someone else, such as a spouse, family member or business partner, then MTD will apply to you, the individual, not the partnership. This means that the threshold will be determined by your share of the property’s rental income, not the overall income of the property.

So, if your share exceeds the income threshold you will need to do MTD. If your partner’s share exceeds the income threshold then they too will need to do MTD.

However, if your income share is more than the threshold, but your partner’s is less than the threshold then only you will complete MTD.

Getting ready, being compliant

As Making Tax Digital is all about moving people to digital bookkeeping and making people file their accounts digitally, you need to adopt a digital mindset and approach

To recap, you’ll need to:

• Keep digital records of all rental income and allowable expenses.

• Use MTD-compatible software

• Submit quarterly income updates to HMRC through your software.

• Submit a final digital declaration at the end of the tax year.

There are a few of things to prioritise as you go digital:

Prioritise real-time accounting for long-term business success

Keeping digital records might mean you’ll be one of the thousands of people who will be moving from spreadsheets to an accounting package for the first time. If that’s the case then choosing real-time accounting software designed specifically for landlords is well-worth doing.

There are two specific benefits of going digital - firstly, you’ll have a much better view of your property’s overall performance and can better plan for future scenarios eg when to sell a property, or review loans.

And secondly, you’ll be able to see what tax is owed in real-time, which means you’ll have fewer surprise tax bills.

Prioritise HMRC approved software for sustained compliance

Not every landlord accounting package is compliant yet, nor is every one approved by HMRC, so check the status of your package against the approved list on HMRC’s website. The good news is Provestor is fully compliant and approved by HMRC.

Bear in mind that not every approved accounting package is built specifically for landlords. Look for ones that have the accounting rules that landlords need to follow built in as standard. It will make doing your accounts a breeze.

Planning ahead can have a long-term impact on your property business performance

MTD isn’t just about making life easier for HMRC. There are real advantages to going digital anyway. Let’s face it, no one likes being under pressure to get tax returns filed and paid. MTD will help alleviate a lot of stress and give you more clarity about the future.

But it’s vital you make the right software choices now.

Choose software that suits how you manage your properties today and gives you room to flex in the future. Be particular about selecting a package that has been developed to specifically meet the demands of the nuanced taxation regime landlords need to follow.

Think about what you will do if you need help. Find a software package that comes with an accounting service wrap. Better still, find one that knows the ins and outs of running a property business. Your queries will be answered quickly and accurately as a result. They can also tell you when’s a good time to think about moving your property into a limited company.

If you make your move to landlord specific digital bookkeeping now, you’ll have all the processes and systems in place when the new MTD regime kicks in. It will remove the pressures of tax deadlines and ensure accuracy and compliance at all times.