Making Tax Digital for Landlords — The Complete 2026 Guide

By RentVault Team · Published 2026-06-24 · 12 min read

Everything UK landlords need to know about Making Tax Digital for Income Tax — who is affected and when, the thresholds, quarterly submissions, Section 24, penalties, and how to get compliant.

Making Tax Digital is the biggest change to landlord tax in a generation. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) replaces the annual self assessment return with digital record-keeping and quarterly online submissions to HMRC. It is being phased in by income threshold from April 2026. This guide explains everything you need to know — who is affected, when, and exactly what to do.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax Self Assessment is HMRC's programme to digitise the tax system for landlords and the self-employed. Instead of filing one self assessment tax return after the end of the tax year, those in scope must:

Keep digital records of all income and expenses
Submit a quarterly update to HMRC four times a year using MTD-compatible software
Submit an end of period statement after the tax year ends
Submit a final declaration confirming the year's figures (replacing the self assessment return)

The aim, according to HMRC, is to reduce errors and give taxpayers a clearer running picture of their tax position throughout the year. For landlords, it means a fundamental shift from once-a-year tax admin to an ongoing quarterly rhythm — and the end of paper records and spreadsheets-only bookkeeping.

Who is affected and when?

MTD ITSA applies based on your gross income from self-employment and property combined. It is being introduced in phases:

From April 2026: Landlords and sole traders with gross income over £50,000 per year
From April 2027: Those with gross income between £30,000 and £50,000 per year
From April 2028: Those with gross income between £20,000 and £30,000 per year (subject to confirmation)
Below £20,000: Not currently in scope — but expected to follow in future

The threshold is based on gross income — your total turnover before any expenses or allowances are deducted — across all your property and self-employment income combined. If you have £30,000 of rental income and £25,000 of self-employment income, your combined gross income is £55,000 and you are in scope from April 2026.

The threshold is gross, not profit. A common and costly misunderstanding is that the threshold applies to profit. It does not. It applies to gross income before any deductions. A landlord with £55,000 of rental income but only £8,000 of profit after mortgage interest and expenses is still in scope, because gross income exceeds £50,000.

How the quarterly cycle works

Once you are in MTD, your tax year follows a quarterly reporting cycle. The standard quarterly periods and deadlines are:

Quarter 1: 6 April – 5 July — submit by 7 August
Quarter 2: 6 July – 5 October — submit by 7 November
Quarter 3: 6 October – 5 January — submit by 7 February
Quarter 4: 6 January – 5 April — submit by 7 May
End of Period Statement & Final Declaration: submit by 31 January following the tax year

Each quarterly update is a cumulative summary of income and expenses for the period. It is a reporting update only — no tax is paid at the quarterly stage. Tax remains payable annually, by 31 January after the end of the tax year, exactly as under the old self assessment system.

The end of period statement reconciles the quarterly figures and applies any tax adjustments, reliefs, and allowances. The final declaration confirms that the figures are complete and correct and replaces the old self assessment return.

What records you must keep digitally

Under MTD, you must keep digital records of your property business. These include:

All rental income, recorded by property
All allowable expenses, categorised correctly
Finance costs (mortgage interest), recorded separately for Section 24 treatment
Any other property income — short lets, service charges, parking

The records must be kept in functional compatible software — either dedicated MTD software like RentVault, or a combination of spreadsheets plus bridging software that connects them to HMRC's API. Paper records alone are no longer sufficient for anyone in scope.

Understanding Section 24 in the MTD context

Section 24 of the Finance Act 2015 is critical for landlords with mortgages, and MTD does not change how it works — but it does require you to record it correctly.

Under Section 24, mortgage interest is no longer a deductible expense against rental income. Instead, landlords receive a basic rate (20%) tax credit on their finance costs. In practical terms this means:

Mortgage interest must NOT be entered as an allowable expense
Mortgage interest must be recorded separately as a finance cost
Only the interest element counts — capital repayments are never deductible and never recorded as a finance cost
The 20% credit is applied when your annual tax is calculated, not in the quarterly updates

Recording mortgage interest as an ordinary expense instead of a finance cost is one of the most common MTD errors. It overstates your deductions and misrepresents your tax position. Good MTD software handles the Section 24 treatment automatically when expenses are categorised correctly — RentVault does this for you.

What MTD-compatible software needs to do

To be MTD-compatible, software must be able to:

Keep your digital records in the required format
Submit quarterly updates directly to HMRC through their API, or via bridging software
Submit the end of period statement and final declaration
Maintain a digital link between your records and your submissions

When choosing software, landlords should look for tools designed specifically for property income — handling per-property tracking, Section 24 finance costs, and the SA105 property pages — rather than generic accounting software built for businesses. The right tool removes almost all of the manual work.

Working with your accountant under MTD

If you use an accountant, MTD changes how you work together. Your accountant can submit quarterly updates and the final declaration on your behalf — but only if they have your records in a usable format and in good time.

The most efficient arrangement is for you to keep your digital records throughout the year and provide your accountant with a clean export at each quarter end. This gives them:

Your income and expenses, categorised, for the quarter
Finance costs separated for Section 24
Per-property breakdowns where you hold multiple properties
Your quarterly submission deadlines so they can schedule their review time

One-click accountant pack. RentVault includes a one-click accountant MTD pack — a complete export of your quarterly figures, expense categories, finance costs, and SA105 data that you can send directly to your accountant. It means they receive everything they need in one document, in the correct format, without you manually compiling spreadsheets.

Practical steps to become MTD compliant

Check if and when MTD applies to you. Calculate your gross property and self-employment income. If it exceeds £50,000, you are already in scope for April 2026. Use our free MTD Readiness Checker if unsure.
Choose your MTD software. Select a compatible platform that suits how you manage your properties. RentVault includes MTD as part of its core functionality from the Solo tier upwards. Bridging software is available if you prefer to keep existing records and just need a compliant submission tool.
Register for MTD ITSA with HMRC. Do this through your Government Gateway account or through your software provider. Have your UTR (Unique Taxpayer Reference) to hand.
Set up your digital records. Start recording all income and expenses digitally from the first day of your MTD period. Retroactively adding records is possible but harder — start clean.
Set quarterly reminders. Add the four quarterly deadlines to your calendar now. Missing submissions means penalty points. RentVault sends automatic reminders before each quarterly deadline.
Inform your accountant. Brief your accountant on your chosen software and your MTD timeline. Agree on who will submit the quarterly updates — you or them.

Penalties for non-compliance

MTD uses a points-based penalty system for late quarterly submissions. Each late submission earns one penalty point. Points accumulate, and a financial penalty is triggered when the threshold is reached:

Quarterly filers reach the penalty threshold at 4 points
The financial penalty at the threshold is £200
Each further late submission earns another £200 penalty
Points expire after 24 months of full compliance

Separately, late payment of the tax due (by 31 January) attracts late payment penalties and interest, as under the existing system. The points system relates to the submission deadlines; the payment penalties relate to paying your tax bill.

Frequently asked questions

Q: Do I need to pay tax quarterly under MTD?

No. Quarterly updates are reporting updates only — you report your income and expenses to HMRC four times per year. You do not pay tax quarterly. Tax is still calculated annually and paid by 31 January following the end of the tax year, exactly as before.

Q: Can I still use a spreadsheet for my records?

You can use a spreadsheet to keep your records but you cannot submit directly from a spreadsheet to HMRC. You would need bridging software that links your spreadsheet to HMRC's MTD API. Many landlords use this approach to minimise disruption to their existing bookkeeping habits.

Q: My properties are in a limited company. Does MTD apply?

MTD ITSA does not apply to limited companies. Your company files Corporation Tax returns and is not subject to MTD ITSA. If you also have personal income above the threshold from other sources (salary, dividends, personally-held properties), you may still be personally within scope.

Q: What if I miss a quarterly deadline?

You receive one penalty point for each late submission. Points accumulate — four points triggers a £200 financial penalty. Submit as soon as possible after a missed deadline to stop further points accruing.

Q: Does MTD change how much tax I pay?

No. MTD changes the reporting mechanism, not the underlying tax rules. The same income, allowable expenses, finance cost restrictions, and reliefs apply. Your total annual tax liability should be the same as under self assessment, calculated using the same rules.

Q: I rent out a room in my home under Rent a Room scheme. Does MTD apply?

If your gross income from Rent a Room is below the £7,500 Rent a Room relief threshold, no tax is due and MTD does not apply. If it exceeds the threshold and combined with other income takes you above the MTD income threshold, you should take advice on your specific position.

Q: How does RentVault handle MTD?

RentVault tracks your income and expenses throughout the year, automatically applies the correct Section 24 treatment to finance costs, excludes mortgage capital repayments from deductible figures, and generates a quarterly MTD export and SA105 summary ready for submission. The one-click accountant pack includes everything your accountant needs. Available from the Solo tier.

MTD compliance built into every RentVault account

RentVault tracks your income and expenses, applies Section 24 correctly, excludes mortgage capital automatically, and generates your quarterly MTD export in one click. No spreadsheets. No scrambling at quarter-end.

HMRC-compliant MTD quarterly export
SA105 figures — Section 24 correctly applied
Mortgage capital excluded automatically
One-click accountant MTD pack
Quarterly deadline reminders
Live bank feed — AI auto-categorised transactions

Start your free 14-day trial →

Sources: HMRC Making Tax Digital for Income Tax guidance (GOV.UK) · Finance Act 2021 · Finance (No.2) Act 2017 (Section 24) · HMRC MTD ITSA compatible software list · ICAEW · CIOT.

This article is for general information purposes only and does not constitute tax advice. Your tax position depends on your individual circumstances. Consult a qualified accountant or tax adviser for advice specific to your situation.