Making Tax Digital. What landlords need to know.

For many landlords, managing a rental property already involves a considerable amount of administration. From maintenance and safety requirements to financial records and annual tax returns, there is plenty to keep track of. Now, changes to the way rental income is reported to HMRC are introducing another responsibility.

Making Tax Digital for Income Tax is being introduced in stages, with the next phase arriving in April 2027. For landlords who have traditionally relied on an annual Self Assessment return, it represents a significant change in how income and expenses are recorded and reported.

So, what does it mean in practice, who will be affected, and what should landlords be doing to prepare?

What is Making Tax Digital?

Making Tax Digital, often shortened to MTD, is HMRC’s programme to move tax administration towards digital record-keeping and more regular reporting.

For landlords within its scope, this means using compatible software to maintain records of rental income and allowable expenses, submitting quarterly updates to HMRC, and completing an annual tax return through the new system.

Which landlords are affected?

The introduction of Making Tax Digital for Income Tax is being phased in according to qualifying annual income.

Making Tax Digital · Implementation timetable

Thresholds relate to combined gross property and self-employment income, before expenses are deducted.

The distinction between income and profit is particularly important.

The thresholds relate to gross qualifying income, before expenses are deducted. A landlord receiving £2,750 per month in rent, for example, has annual rental income of £33,000. Even if repairs, management fees and other expenses substantially reduce the rental profit, that gross income could bring them within Making Tax Digital from April 2027.

Qualifying income can also include earnings from self-employment. Someone receiving £20,000 in rental income alongside £15,000 from a self-employed business could therefore exceed the £30,000 threshold, even though neither activity does so individually.

Employment income taxed through PAYE, pensions and dividends are not included when calculating the threshold.

For jointly owned rental properties, each owner’s share of the rental income is generally considered separately, although specific rules can apply depending on how that income is reported.

HMRC determines when an individual needs to enter the system using information from an earlier Self Assessment return. For the April 2027 introduction, the relevant return is for the 2025–26 tax year.

Certain exemptions are available, including for people who cannot reasonably use digital systems. Landlords who believe they may qualify should check HMRC’s guidance or speak to their tax adviser.

What will actually change?

For landlords accustomed to gathering together a year’s worth of rental statements, invoices and receipts shortly before completing a tax return, the most noticeable change will be the requirement to keep financial records digitally throughout the year.

Income and expenses will need to be recorded using software compatible with Making Tax Digital. This doesn’t necessarily mean purchasing an expensive accounting package: HMRC recognises different software options, including solutions that connect to existing spreadsheets.

The second change is quarterly reporting.

Rather than providing financial information to HMRC only once a year, landlords within the system will submit updates every three months. These are summaries of income and expenses, not four separate tax returns.

At the end of the tax year, an annual tax return will still be required, allowing adjustments to be made and other sources of income to be included.

The existing 31 January deadline for submitting the annual return and paying any tax due remains unchanged.

What if a letting agent manages the property?

For landlords using a managing agent, much of the information needed to maintain accurate financial records may already be readily available.

Regular landlord statements typically detail rent received, management fees, maintenance expenditure and other transactions handled by the agent. These provide a useful foundation for digital record-keeping.

The landlord remains responsible for meeting their tax obligations, although an authorised accountant or tax adviser can maintain the necessary records and make submissions to HMRC on their behalf. Expenses paid directly by the landlord, rather than through the managing agent, will also need to be accounted for.

At Nash, we provide our managed landlords with regular financial statements detailing the transactions we handle on their behalf. These can be shared with an accountant or used alongside the landlord’s own records when preparing for Making Tax Digital.

What should landlords do now?

For those who have not yet entered the system, the first step is to establish whether, and when, Making Tax Digital will apply.

Reviewing gross rental income, together with any income from self-employment, should provide an initial indication. Landlords with jointly owned properties, several sources of income or more complicated tax arrangements should seek advice on how the rules apply to their circumstances.

It’s also worth speaking to an accountant sooner rather than later. They can advise on suitable software, the information that needs to be recorded and whether they will handle quarterly submissions on the landlord’s behalf.

Those already maintaining organised electronic records may find the transition relatively straightforward. Others may need to make changes to the way they collect and retain financial information.

Either way, preparation is preferable to discovering the requirements shortly before a reporting deadline.

A more digital approach to property income

Making Tax Digital is another administrative change for landlords to accommodate, but it need not be an unnecessarily complicated one.

For many, the essential information is already being collected. The difference lies in how that information is recorded, maintained and reported.

Understanding the requirements, choosing an appropriate system and obtaining professional advice where needed should make the transition considerably more manageable.

For further information, including HMRC’s eligibility checker and guidance on compatible software, visit Making Tax Digital for Income Tax.

This article provides general information based on HMRC guidance available in October 2026. It is not tax or financial advice. Landlords should consult their accountant or tax adviser about their individual circumstances.

THE LETTINGS OFFICE AT NASH · JOURNAL