MTD for Landlords 2026: What Buy-to-Let and Property Income Owners Need to Know

MTD for landlords: the essential guide

Making Tax Digital for Income Tax affects landlords in the same way it affects sole traders — with one important twist. If you have rental income combined with any self-employment income, it is the combined total that determines whether you are in scope, not just your rental income alone.

This catches some landlords by surprise. If you earn £30,000 from a rental property and £25,000 from freelance work, your qualifying income is £55,000. You are in Phase 1, even if neither source alone exceeds £50,000.

Which landlords are affected?

Phase 1 — from 6 April 2026

Landlords whose qualifying income (gross rental income + gross self-employment income combined) exceeded £50,000 in the 2024/25 tax year.

Phase 2 — from 6 April 2027

Qualifying income over £30,000.

Phase 3 — from 6 April 2028

Qualifying income over £20,000.

Not affected (yet)

• Landlords with qualifying income below the current threshold
• Landlords whose income comes entirely from furnished holiday lettings (FHL) — note that FHL as a separate tax regime ended in April 2025; this is now treated as regular property income
• Companies that own rental properties (limited companies are not in scope for MTD ITSA)

Joint ownership: the rules are more complicated

If you own a property jointly with a spouse or partner, the rental income is split according to your ownership share. HMRC treats each owner's share as their own qualifying income.

Example: A property earns £80,000 in rent. You and your spouse own it equally. Each of you has £40,000 of qualifying income from this property. If neither of you has self-employment income, neither of you is in scope for Phase 1 (though you may be in Phase 2 from 2027).

If you own the property in unequal shares (and you have elected Form 17 to notify HMRC), each person's qualifying income reflects their actual share.

What records do landlords need to keep digitally?

From 6 April 2026, qualifying landlords must keep the following records digitally in MTD-compatible software:

Income records:

• Date and amount of each rent payment received
• Any other income (e.g. pet fees, service charges you collect and pass on, insurance claim receipts)

Expense records (allowable expenses only):

• Letting agent fees
• Management charges
• Property insurance
• Repairs and maintenance (not capital improvements)
• Utility bills you pay as landlord
• Council tax if you pay it
• Accountancy fees related to your property
• Ground rent and service charges (leasehold properties)
• Advertising costs for new tenants
• Travel costs to and from the property for maintenance visits

What you cannot claim (common mistakes):

• Capital improvements (adding a new bathroom, converting a loft) — these are capital expenditure, not revenue
• Personal mortgage payments (you can claim mortgage interest costs as finance costs — claim as a tax credit, not a deduction)
• Depreciation

Which software works best for property income?

Not all MTD-compatible software handles property income equally well. Some are built primarily for self-employed tradespeople and lack property-specific categories.

Good options for landlords:

| Software | Property-specific features | Cost | |----------|---------------------------|------| | FreeAgent | Supports property income, multiple income sources | Free with Mettle account | | QuickBooks Simple Start | Works for property income, decent categorisation | ~£14/month | | Xero | Excellent for multiple properties | ~£16+/month | | Hammock | Built specifically for landlords | ~£9/month | | Landlord Vision | Property management + accounting | ~£12/month | | Sage | General accounting, property income supported | ~£15/month |

Hammock and Landlord Vision are worth mentioning separately because they are designed specifically for landlords. They understand property-specific expenses and make quarterly submissions straightforward. If you have more than one or two properties, tools built for landlords often save significant time.

The HMRC grace period for Year 1

HMRC has confirmed a light-touch approach for the first year of MTD (2026/27 tax year). Landlords who are clearly making an effort to comply but make honest errors will not automatically receive penalty points.

This is relevant for landlords because property income records can be more complex — particularly around correctly categorising repairs vs improvements, and handling finance costs.

From 2027/28, the penalty points system applies fully.

What happens at the January final declaration?

Quarterly updates cover your property income and expenses. The final declaration (replacing Self Assessment, due by 31 January each year) is where you also include:

• Finance costs (mortgage interest relief claimed as a 20% tax credit)
• Wear and tear allowance or replacement relief
• Capital allowances (for furnished commercial properties)
• Any PAYE income, savings interest, pension income
• Capital gains from property disposals (these are reported separately on a capital gains return, not the income tax return)

Note on capital gains: If you sell a UK residential property, you must report and pay capital gains tax within 60 days of completion. This is a separate requirement from MTD.

Setting up for MTD as a landlord: practical steps

1. Add up your qualifying income from 2024/25 to confirm your phase
2. Choose software that explicitly supports property income categories
3. Register for MTD via Government Gateway
4. Connect your software to your HMRC account
5. Set up your properties in the software — most platforms allow you to track income and expenses per property
6. Import or enter your April–July 2026 records before 5 August 2026

The MTD Ready kit

The MTD Ready kit includes a personalised action plan based on your specific situation (landlord, sole trader, or both) plus a software comparison guide showing which tools best fit property income management. One-time £29.

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Frequently Asked Questions

I am a landlord only — no self-employment. What is my qualifying income threshold?

Your qualifying income for MTD purposes is your gross UK property income. If it exceeded £50,000 in 2024/25, you are in Phase 1 from April 2026. £30,000+ from April 2027, £20,000+ from April 2028.

Does the mortgage interest restriction affect my MTD threshold?

No. The mortgage interest restriction limits the tax relief you can claim on finance costs, but it does not change how qualifying income is calculated. You calculate qualifying income on gross rent received, before any expenses or finance costs.

Do I need to report each property separately?

HMRC currently requires landlords to report all UK residential property as a single business for MTD purposes (unless you have a furnished holiday let, which had different rules — now merged with regular property income from April 2025). You do not file separate quarterly returns per property, but your software may let you track income and expenses per property internally.

What about overseas property income?

Overseas property income is treated separately from UK property income for income tax purposes and has its own rules. MTD for Income Tax currently applies to UK property and self-employment income. Speak to a tax adviser if you have overseas property.

I own properties through a limited company. Does MTD apply to me?

No. MTD for Income Tax Self Assessment does not apply to limited companies. Companies have their own Corporation Tax obligations, which are separate. The rental income from your company's properties is not included in your personal qualifying income for MTD.

Do I need to report lodger income under MTD?

If you receive income from taking in a lodger, you may be eligible for the Rent a Room scheme (up to £7,500 tax-free). If your lodger income is within this limit and you use the Rent a Room scheme, it does not count as UK property income and is not included in your qualifying income. If you exceed the limit and are taxed on the excess, that amount does count.