Making Tax Digital for landlords: What you need to know

Understanding Making Tax Digital for Income Tax

The UK’s tax system is undergoing a transformation with the introduction of Making Tax Digital for Income Tax (MTD for IT). Designed to modernise tax administration, MTD for IT replaces the traditional annual Self Assessment process with a digital-first approach. For landlords, this change marks a new era of tax compliance that emphasises efficiency, accuracy, and real-time data.

From April 2026, landlords earning over £50,000 annually must comply with MTD for IT. By April 2027, the threshold will extend to landlords earning between £30,000 and £50,000. A further step to lower the threshold has already been announced, but the details and timeline have not been officially defined yet.

This article unpacks the essentials of MTD for IT, explaining who needs to comply, what the requirements are, and how landlords can benefit from joining this digital transformation.

What is MTD for IT?

Making Tax Digital (MTD) is an HMRC initiative to create a world-leading digital tax system in the UK. The primary objectives are to:

• Reduce errors in tax returns.
• Simplify the process of tax reporting.
• Provide businesses and landlords with better visibility of their tax liabilities.

For landlords, this means a shift from filing one annual Self Assessment return to submitting:

1. Quarterly updates of income and expenses.
2. A Final Declaration to confirm total income and taxes due.

MTD for IT requires landlords to maintain their financial records digitally and use HMRC-recognised software to submit updates.

Who needs to comply?

The rollout of MTD for IT is phased to accommodate different income levels:

• April 2026: Landlords with property (and sole trader) income exceeding £50,000 annually.
• April 2027: Landlords with income between £30,000 and £50,000.
• April 2028: Landlords with income between £20,000 and £30,000.

What are the requirements?

To comply with MTD for Income Tax, landlords must:

• Keep digital records:

  • Maintain up-to-date records of rental income and allowable expenses using software.
  • Retain these records for at least five years after the tax year.

• Use MTD-compatible software:

  • Choose HMRC-recognised software like Hammock to submit updates seamlessly.
  • Pro tip: Ensure the software integrates with bank feeds for real-time transaction tracking.

• Submit quarterly updates:

  • Provide a summary of income and expenses for each quarter.

• File the Final Declaration:

  • File the Final Declaration to confirm total taxable income and pay the tax balance by 31st January.

Qualifying and non-qualifying income streams under MTD

Under MTD for Income Tax, landlords must report certain types of income, while others are excluded from the scheme. The key distinctions are:

• Qualifying income streams:

  • Rental income from UK residential and commercial properties;
  • Income from furnished holiday lets;
  • Overseas property income;
  • Other non-property-related income derived from sole trader activities.

• Non-qualifying income streams:

  • Income received from lodgers under the Rent a Room scheme (if within the tax-free threshold);
  • Non-taxable income, such as grants and certain government allowances;
  • Capital gains from the sale of properties, which are reported separately under Capital Gains Tax;
  • PAYE income from employment;
  • Income from pensions, including state, workplace, and private pensions;
  • Dividends from shares and other investment income;
  • Other non-property-related income that is subject to separate tax reporting requirements.

Landlords should ensure they are accurately categorising their income streams to meet MTD compliance requirements and avoid errors in their tax reporting. Our recommendation is to always check with your accountant or tax advisor.

Treatment of jointly owned properties

For landlords who own properties jointly, income must still be reported separately by each owner based on their share of ownership. Each landlord must meet their individual MTD obligations even if the property is managed collectively.

Hammock simplifies this process by tracking rental income per owner, providing clear and accurate records that can be submitted directly to HMRC.

Benefits of using MTD-compatible software

Hammock is the first accounting software for landlords recognised by HMRC as MTD-compatible. Using MTD-compatible software offers several advantages for landlords:

• Real-time tax estimates – Know how much tax you owe throughout the year, reducing the risk of unexpected bills.
• Automatic record-keeping – Minimise manual data entry and keep all transactions in one place.
• Seamless HMRC submissions – Ensure timely and accurate tax filings directly to HMRC.
• Better financial management – Gain insights into your rental business with digital reporting tools.

Hammock provides an all-in-one MTD solution tailored for landlords, making compliance effortless while keeping track of property income and expenses.

Challenges and how to overcome them

• Transitioning from manual systems: Many landlords still rely on spreadsheets or paper records. Moving to digital accounting can sound daunting, but well-designed software with user-friendly interfaces can make the transition much easier (Getting started with Hammock only takes a few minutes).
• Learning new technology: Adapting to MTD-compatible software may require some time. Landlords should get a head start to familiarise themselves with the new processes and leverage training resources provided by platforms like Hammock.
• Staying on top of deadlines: Nobody wants to miss a tax deadline, and quarterly submissions might trigger higher stress levels. Automating reminders through software helps landlords stay compliant and gives them peace of mind.

Voluntarily enrolling in the MTD for IT pilot

Landlords can voluntarily enrol in HMRC’s MTD for Income Tax pilot programme ahead of the 2026 rollout. This pilot allows participants to familiarise themselves with the new system and experience its benefits without the pressure of mandatory deadlines.

Benefits of joining the pilot:

• Early familiarity: Gain hands-on experience with digital record-keeping and submission processes.
• Smoother transition: Identify and address potential issues in your accounting setup before compliance becomes mandatory.
• Improved financial insights: Start leveraging real-time tax liability tracking and streamlined reporting early.
• Proactive compliance: Avoid last-minute adjustments by aligning your processes with MTD standards ahead of time.

Hammock, the first HMRC-recognised software for landlords, makes it easy for landlords to join the pilot. By integrating digital processes early, landlords can get ahead of the curve and ensure a seamless transition to MTD for Income Tax compliance.

Key deadlines and next steps

MTD for Income Tax is set to be introduced in April 2026 for landlords earning over £50,000 annually, with further expansion planned for lower income thresholds in subsequent years. Landlords should start preparing now by choosing MTD-compatible software, digitising their records, and familiarising themselves with the new reporting requirements.

Steps to take now:

• Check your income level – Determine whether you will need to comply from April 2026.
• Contact your accountant – Ask them about their plans for landlord MTD.
• Select MTD-compatible software – Choose a platform like Hammock to simplify compliance.
• Start keeping digital records – Transition early to digital record-keeping to avoid last-minute challenges.
• Stay informed – Keep up with HMRC updates regarding MTD requirements.

Conclusion

MTD for Income Tax represents a significant change for landlords, but it also offers an opportunity to optimise the processes to manage rental income and expenses more efficiently. By understanding the requirements and benefits, landlords can take the right steps to prepare for the transition to MTD. Trying your hand at a new software early will take much of the pressure away and allow you to start reaping the benefits well ahead of schedule.

Join the Hammock community

• Sign up for a free 30-day Hammock trial and experience the difference a user-friendly, MTD-compatible platform can make.
• Follow our blog for regular updates on MTD for landlords, property tax news, and valuable tips for managing your rental income and expenses.

Try Hammock for free for 30 days

By working together, we can navigate the transition to MTD for IT. Don’t hesitate to contact us if you have any questions or require further assistance.

The information contained in this blog post is for general informational purposes only and does not constitute professional tax advice. Always consult a qualified tax advisor for personalised guidance on your specific situation.