How Does Making Tax Digital Affect Landlords?

Making Tax Digital for Income Tax (MTD IT) is transforming the way landlords and business owners report what they earn to HMRC. The new rules are rolling out in stages but even if they don’t quite affect you yet, it’s vital to familiarise yourself with them. Being fully compliant when the time comes is a lot less hassle than getting an awkward letter from HMRC.

This guide explains who is affected by Making Tax Digital, and what to do if you get property income.

What is Making Tax Digital Income Tax?

Making Tax Digital – or MTD for short – is a government initiative which aims to revolutionise the way we manage tax in this country. The government hopes the move to MTD will provide “one of the most digitally advanced tax administrations in the world” by making it easier for taxpayers to get their taxes right.

The initiative is rolling out in stages and the first bit of it, MTD for VAT, is already in place. It means all VAT-registered businesses must keep digital records, and use MTD software to submit this information to HMRC.

When does MTD Income Tax start?

Making Tax Digital for Income Tax (MTD IT) is the next phase of the MTD initiative. It will completely transform the existing process of submitting annual Self Assessment returns, replacing the system as we currently know it. The MTD Income Tax timeline is based on how much you make, and when:

If you earn money from self-employment and property, the threshold applies to the total gross income (what you get before deducting tax and expenses) from those activities combined.

What does a landlord need to do for Making Tax Digital?

First of all, it’s important to be aware that you won’t be automatically registered for MTD IT, even if you already use MTD for VAT, or are already registered for Self Assessment. You’ll need to make sure that you register for MTD Income Tax in plenty of time!

You can volunteer to register early even if you don’t meet the earnings threshold just yet, but you must follow the rules once you sign up.

Start keeping digital records

Many landlords may already be familiar with the idea of keeping digital financial records. Under the new MTD rules, keeping business income and expense records digitally becomes compulsory for all landlords and self-employed people whose income is more than the MTD threshold.

There’s no need to wait around until the MTD for Income Tax changes come into effect in 2026. In fact, finance professionals strongly recommend getting to grips with digital financial recording as soon as possible. It’s honestly not just us saying it.

That way you’ll be well-prepared when the time does come. You’ll also be taking advantage of the many benefits of digital bookkeeping and accounting in the meantime.

Send MTD Income Tax updates to HMRC

The most significant change business owners and landlords will see under MTD is the regularity of financial reporting. Instead of filing an annual Self Assessment tax return, those digital records you’re keeping about all your income and expenses will need submitting to HMRC on a quarterly basis. Then, at the end of the year, you will also need to submit an end of period statement (EOPS) and a final declaration.

When do I need to send quarterly updates for MTD Income Tax?

The deadlines for sending each quarterly update using MTD-compatible software (such as Pandle!) are:

Is an end of period statement (EOPS) separate to a quarterly update?

You’ll need to send quarterly updates throughout the year, and then an end of period statement (EOPS) as the financial year comes to a close.

So, if you own multiple properties or sole trader businesses, you will need to submit an EOPS for each one. You will also need to submit a final declaration along with your EOPS in place of your usual Self Assessment return. This is how you will pay any National Insurance or tax that is due.

Do I still need to make payments on account with MTD Income Tax?

Even though the process of reporting your income and expenses is changing with MTD Income Tax, the requirement for making payments on account isn’t.

Payments on account are made by self-employed people whose tax bill for the previous year was £1,000 or more. The payments are made in two instalments, each of which is half of the previous year’s bill:

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.