Making Tax Digital for Income Tax for landlords: Common FAQs addressed
From April 2026, landlords will need to adapt to Making Tax Digital for Income Tax (MTD for IT), a new system replacing traditional annual Self Assessment tax returns for property income. To help you prepare, we’ve answered 12 of the most common questions about MTD for IT in detail.
1. What does Making Tax Digital for Income Tax mean for landlords?
Landlords with overall property income exceeding £50,000 annually will need to comply with MTD for IT from April 2026. This threshold will decrease to £30,000 in April 2027 and is expected to drop further to £20,000 by 2029. The system applies to income from both UK and overseas properties, requiring landlords to maintain digital records and submit regular updates to HMRC.
2. What steps must landlords take to comply with MTD for Income Tax?
If your property and other income exceeds the threshold, here’s what you’ll need to do:
Use compatible software: You must use HMRC-approved software to maintain digital records and submit updates.
Submit quarterly updates: Landlords must provide HMRC with quarterly updates on income and expenses.
Finalise your tax position: By 31 January following the tax year end, you must submit a final declaration and pay any tax due.
Retain digital records: All income and expense records must be stored digitally and kept for at least five years.
Failure to comply with these requirements could result in penalties, so it’s essential to prepare in advance.
3. How should landlords calculate their income for MTD for Income Tax?
For landlords who are not sole traders, income is calculated by adding up rental income from all properties. This includes:
- Rent from UK or overseas properties
- Income from letting furnished rooms
- Earnings from holiday lettings
- Premiums from leasing land
- Reverse premiums
- Income from any other businesses or self employment.
If your total rental income and any other income, exceeds £50,000 (or £30,000 from April 2027), you must comply with MTD for IT. Sole traders must combine rental and business income to determine eligibility.
Subscribe to the Affinity Associates blog
Receive critical industry analysis and timely advice to power your business decisions and fuel growth.
We’ll only use your email ID to send you blog updates.
See our privacy policy.
4. What details do landlords need to submit under MTD for Income Tax?
The information required is similar to what you currently provide in a Self Assessment tax return. This includes:
- Details of your rental income and its sources
- Details of other business income or self employment income
- Allowable expenses
- Any other relevant financial information
5. How can landlords register for MTD for Income Tax?
While the full scheme isn’t yet open for registration, landlords can join the pilot program to familiarise themselves with the system. Registration for the full scheme is expected to open closer to the April 2026 deadline. If you’re already registered for Self Assessment or MTD for VAT, you won’t be automatically enrolled in MTD for IT.
6. Is it beneficial for landlords to join the MTD for Income Tax pilot?
Joining the pilot can be beneficial as it allows you to get accustomed to the new system before it becomes mandatory. However, the pilot is currently limited to landlords with UK property income or a single sole trader income. Software support is also limited, so check with your provider before joining.
By participating in the pilot, you can identify any challenges early and ensure your systems are ready for the full rollout.
7. Does MTD for Income Tax apply if I only rent out one inherited property?
Yes, if your annual rental income exceeds £50,000 (or £30,000 from April 2027). HMRC considers renting out property a business, regardless of whether you have other self employment or consider it a side activity. Even if you’re employed full-time and pay taxes through PAYE, you’ll still need to comply with MTD for IT if your rental income takes you over the threshold.
8. Do buy-to-let landlords need to comply with MTD for Income Tax regulations?
Yes, if your rental income exceeds the threshold, which is £50,000 starting April 2026 or £30,000 from April 2027. However, if your properties are owned by a limited company, MTD for IT does not apply. Instead, corporation tax rules will govern your income.
For individual landlords, MTD for IT will require you to maintain digital records and submit quarterly updates, even if you only own one or two properties.
9. Are earnings from Furnished Holiday Lettings (FHLs) included in MTD for Income Tax?
Yes. However, the FHL scheme was abolished from April 2025, meaning FHL income will be treated as standard property income under MTD for IT. This change aligns holiday lettings with other types of rental income, simplifying the tax treatment.
10. Does rental income from overseas properties fall under MTD for Income Tax?
Yes, if you’re UK-domiciled and your total rental income exceeds the threshold. Foreign income must be reported separately from UK income. If you’re not UK-domiciled, only UK property income counts toward the threshold.
For landlords with overseas properties, ensure you document all income and expenses in the local currency and convert them to GBP for reporting purposes.
11. What happens if I sell or dispose of a property? Does it count towards MTD for Income Tax?
No. Income earned from the sale or disposal of a property is usually subject to Capital Gains Tax (CGT), not Income Tax. Therefore, it does not count towards your MTD for IT calculations. However, you must still report the sale to HMRC and pay any CGT due.
12. What are the consequences of missing a quarterly update deadline under MTD for Income Tax?
Missing a quarterly update deadline could result in penalties from HMRC. While the updates do not need to be 100% accurate, they must be submitted on time to avoid fines. HMRC has rolled out a points-based penalty system for MTD for IT, where penalties are only issued after a certain number of missed deadlines
How do you get started with MTD for IT?
Sign up early – Ensure you’re registered before the April 2026 deadline.
Join the pilot – Familiarise yourself with the system ahead of time.
Upgrade your software – Use HMRC-approved software for seamless compliance.
Stay organised – Keep digital records of all income and expenses.
Final thoughts
While Making Tax Digital for Income Tax brings significant changes for landlords, with proper preparation, it doesn’t have to be overwhelming. By understanding the requirements, upgrading your systems, and seeking professional advice if needed, you can achieve a seamless transition and keep your property business running smoothly. Start preparing now to avoid last-minute stress and make the most of the benefits that digital tax reporting can offer.
Author
Mukund Amin
Co-Founder & Director
Mukund is a founding member of the Affinity Associates Group and has been with the practice for nearly 40 years. After completing his degree in Accounting and Finance, he went on to qualify with both ACCA and ICAEW in 1991. Over the years, he’s built deep expertise in consultancy, tax, business development, and corporate group structures. Mukund is known for helping clients make sense of complex financial challenges and turning them into opportunities for sustainable growth.
